DBA Corporate Finance and Financial Management 3

Question 1

What is the 'efficient market hypothesis' (EMH) in its strong form?

Accepted Answer

Stock prices reflect all information, including private (insider) information

Answer

Only publicly available information is reflected in stock prices

Answer

Markets are efficient only in the long run

Answer

Technical analysis can consistently generate excess returns

Question 2

Which risk management technique involves transferring risk to another party through an insurance contract or financial instrument?

Accepted Answer

Risk transfer

Answer

Risk avoidance

Answer

Risk retention

Answer

Risk reduction

Question 3

In financial analysis, what does a high Price-to-Earnings (P/E) ratio typically indicate?

Accepted Answer

Investors expect high future earnings growth relative to current earnings

Answer

The stock is undervalued

Answer

The company has excessive debt

Answer

Earnings are expected to decline

Question 4

What is 'beta' in the Capital Asset Pricing Model (CAPM)?

Accepted Answer

A measure of a security's volatility relative to the overall market

Answer

The risk-free rate of return

Answer

The expected market return

Answer

A measure of dividend yield stability

Question 5

What is the primary goal of 'transfer pricing' policies in multinational corporations operating in the US?

Accepted Answer

Determining the prices at which transactions occur between related entities within the same corporate group

Answer

Setting prices for external customers

Answer

Calculating shipping costs between facilities

Answer

Setting union-negotiated wage rates

Question 6

Which financial metric measures the annual return generated on shareholders' equity investment?

Accepted Answer

Return on Equity (ROE)

Answer

Return on Assets (ROA)

Answer

Return on Investment (ROI)

Answer

Earnings Before Interest and Taxes (EBIT)