Reference no: EM132596993

Question 1. Which of the following is true about systematic risk?

a. It is avoidable risk

b. It is verifiable risk

c. It is company specific risk

D. All of the above

Question 2. Which of the following statement is true?

A. The higher the expected risk, the higher is the expected return.

B. Risk is possibility that actual future returns will deviate from expected returns

C. Total risk is the sum of systematic and unsystematic risk and is measured by standard deviation

D. All of the above

Question 3. Suppose you have two securities Security X and Security Y. The expected return of the securities is 20% and 12% respectively. The standard deviation of Security X is 8% and the standard deviation of Security Y is 6%. Which of the following is statement is true if you hold only one security?

a. Security X is a better option for investment.

b. Security Y is a better option for investment.

c. Security Y has less risky than security Y.

d. . None of the above

Question 4. Which of the following is correct about leverage?

A. Combined Leverage = Operating Leverage + Financial Leverage

B. Combined Leverage = Operating Leverage - Financial Leverage

C. Combined Leverage = Operating Leverage × Financial Leverage

D. Combined Leverage = Operating Leverage ÷ Financial Leverage

Question 5. Firm ABC's percentage change in sales is 20%. If firm's degree of operating leverage is 5, what is the percentage change in EBIT?

A. 20%

B. 100%

C. 4%

D. 80%

Question 6. Financial Leverage measures relationship between:

A. Sales and profit before tax (EIBT).

B. Sales and earnings per share (EPS).

C. Earning before interest & tax (EBIT) and profit before tax (PBT).

D. Earning before interest & tax (EBIT) and earnings per share (EPS).

Question 7. Which of the following capital budgeting evaluation method is NOT a discounted cash flow technique?

A. Accounts Rate of Return

B. Net Present Value

C. Payback period

D. All of the above.