WGU C214 ESP Concepts Quiz 65-75

66.  If firm A has greater operating leverage than B, in an increase in sales:

• a.  Firm A's profit will increase less than B's

• b.   No impact on profit

• c.   Firm A's profit will increase more than B's

• d.  A and B will have the same increase in profit.

67.  The addition to retained earnings each year is:

• a.  Net Income

• b.  Net Income minus dividends

• c.  Net Income plus dividends

• d.  Net Income times the Payout Ratio

68.  Why do security dealer motives conflict with investors?

• a. Dealers are paid by corporations

• b. Dealer profits are based bid-ask spreads

• c.  SEC regulations

• d. None of appove

69  If a company produces and sells a product only in the U.S., what international developments may affect its sales?

• a.   Fluctuating exchange ratesv

• b.   Imports of competing products

• c.    Immigration policy

• d.    Inflation in Europe

70.  What causes firm failure?

• a.  Firm is not profitable

• b.  Investors flee due to excess risk

• c.  Firm investments are not diversified

• d.  None of above

71.  The systematic risk in a portfolio is highest if

• a.   Leverage is low

• b.   Average PE is low

• c.   Average Beta is low

• d.  Average Beta is high

72.  Which type of bond is the least risky?

• a.  Debentures

• b.  Secured bonds

• c.  A-rated bonds

• d.  Muni bonds

73.  What is yield?

• a.  Coupon rate

• b.  Dividend rate

• c.  Risk Premium

• d.  Investor profit per year

74  If a company's bonds are downgraded,

• a.  It must buy back the bonds

• b.  Its bond prices will drop

• c.   Bond par value will be reduced

• d.  It is forced into bankruptcy

75.  The long-term success of a firm depends on

• a.  Maximizing profits

• b.  Balancing risk and return

• c.  Minimizing employee costs

• d.  Avoiding risk