DSST Principles of Finance Exam

Do you know a lot about the financial industry? Maybe you follow corporate finance and stocks in your spare time, or worked as an intern in the finance department of a top company. Whatever the reason, you feel fairly confident that you understand the basics of corporate finance. Why not receive college credit for what you already know?

The DSST Principles of Finance exam is a good way to receive semester credit without ever stepping into a classroom. DSST is a prior learning assessment program accepted by thousands of colleges and universities nationwide. Before you register for the DSST Principles of Finance exam, you should check with your college or university to confirm that it awards credit for the DSST program. You may also want to meet with your academic advisor to discuss whether this exam is right for you.

Once you register for the exam you should plan to spend time studying before test day.

The DSST Principles of Finance Exam covers the following topics:

1. Financial Statements and Planning
2. Time Value of Money
3. Working Capital Management
4. Valuation and Characteristics of Stock and Bonds
5. Capital Budgeting
6. Cost of Capital
7. Risk and Return
8. International Financial Management.

For a more detailed exam outline and other study resources, be sure to get hold of a DSST study guide. You may also want to check out some common finance textbooks for reference.

DSST Principles of Finance Practice Questions

1. A statement of cash flows includes what?
I. Operating activities
II. Investing activities
III. Financing activities

A. I only
B. II only
C. III only
D. I, II, and III

2. Which of the following would be reported as a financing activity on the cash flow statement?

A. Equipment sale
B. Repayment of loan by employee
C. Money paid for land improvement
D. Issuance of common stock

3. Assume that John Smith takes out a loan from First Federal Bank on January 1, 2010. The loan is a one-year note for $150,000 at 10%. How much interest has accrued by July 1, 2010?

A. $1,500
B. $3,000
C. $4,500
D. $7,500

4. Wheels Corporation bought a machine four years ago for $50,000 and the accumulated depreciation on the machine taken by Wheels is $40,000. This year they sold the machine for $5,000. Which of the following is true about the statement of cash flows for Wheels in the year they sold the machine?
I. Wheels must report a $15,000 inflow
II. The inflow must be reported in the cash from operations section
III. The statement must include the original price paid for the machine

A. I only
B. II only
C. III only
D. Neither I, II, nor III

5. Which of the following is true of corporations?

A. Their stock owners have greater legal liabilities than do the owners of a sole proprietorship
B. They are held to higher legal and accounting standards than are other companies
C. They make more revenue and profit than do other companies
D. They are recognized by law as having the rights and responsibilities of a person

6. Which of the following does common stock not provide its owners?

A. The right to vote in corporate matters
B. Priority ahead of preferred stock owners when dividends are distributed
C. A percentage of the corporation’s value should it be liquidated
D. The preemptive right

7. Annual depreciation expense charges the expense of a long-term asset over:

A. a single accounting period.
B. two accounting periods.
C. the accounting periods during the expected life of the asset.
D. the current accounting period.

8. ABC/XYZ Corporation has assets totaling $2,500,000. It has current liabilities of $80,000 and long-term liabilities of $220,000. What is its equity?

A. $2,200,000
B. $2,420,000
C. $2,500,000
D. $2,720,000

9. Which of the following gives a company the best picture into its profitability?

A. Assets
B. Liabilities
C. Inventory
D. Return on assets

10. Which of the following is the most appropriate hedge for a customer expecting a large payment in Japanese yen six months forward?

A. Buy calls on the U.S. dollar
B. Buy puts on the U.S. dollar
C. Buy calls on the Japanese yen
D. Buy puts on the Japanese yen

DSST Principles of Finance Practice Questions Answer Key