Corporate Finance Multiple Choice Questions and Answers for Practice

Correct Answer is: The proportion of debt and equity used to finance a company

Correct Answer is: When they want to issue debt with a lower interest rate

Correct Answer is: The measure of a stock's volatility relative to the market

Correct Answer is: The idea that money today is worth more than the same amount in the future

Correct Answer is: The difference between a company’s current assets and current liabilities

Correct Answer is: The right to abandon a project and recover some investment

Correct Answer is: It measures how long it takes to recover the initial investment

Correct Answer is: Spreading investments across different assets to reduce risk

Correct Answer is: Capital Asset Pricing Model (CAPM)

Correct Answer is: The residual income after subtracting the cost of capital from operating profit

Correct Answer is: It has a fixed dividend payout

Correct Answer is: The irrelevance of capital structure in perfect markets

Correct Answer is: Current ratio

Correct Answer is: Higher risk is typically associated with higher potential returns

Correct Answer is: Cash flows are discounted to reflect their present value