Corporate Finance E1
anna pays .85% interest
EAR
Which one of the following is a capital structure decision?
Establishing the preferred debt-equity level
Which one of the following is a working capital decision?
How much cash should the firm keep in reserve?
Maria
I, III, IV
Tower Pharmacy pays out a fixed percentage of its net income to its shareholders in the form of annual dividends. Given this, the percentage shown on a common-size income statement for the dividend account will:
Net profit percentage
Letitia borrowed $6,000 from her bank two years ago. The loan term is four years. Each year, she must repay the bank $1,500 plus the annual interest. Which type of loan does she have?
amortized
which will increase cash from assets?
an increase in depreciation
Lee pays 1 percent per month interest on his credit card account. When his monthly rate is multiplied by 12, the resulting answer is referred to as the:
annual percentage rate
travis is buying a car
annuity
janis just won a scholarship
annuity due
PV of an annuity will decrease if
annuity payment decreases
annuity payment
auto loan payment
total tax paid divided by total tax
average tax rate
The Jones Brothers recently established a trust fund that will provide annual scholarships of $12,000 indefinitely. These annual scholarships can best be described by which one of the following terms?
perpetuity
A firm has a current ratio of 1.4 and a quick ratio of .9. Given this, you know for certain that the firm:
positive nWC
firm increases net income
price earnings ratio
Issuer of a security must be involved in all
primary market
Chandler Tire Co. is trying to decide which one of two projects it should accept. Both projects have the same start-up costs. Project 1 will produce annual cash flows of $52,000 a year for six years. Project 2 will produce cash flows of $48,000 a year for eight years. The company requires a 15 percent rate of return. Which project should the company select and why?
project one because PV
leon is the owner of a corner store
quick ratio
negative cashflow to stockholders
receives more from selling stock
market values
reflect expected price
which is included in the market value of a firm but not in book?
reputation of the firm
The Sarbanes Oxley Act
requires CO to personally attest
Net income increases when
revenue increases
One example of a primary market transaction
sale of 1,000 shares
the recognition principle states that
sales should be recorded when earnings process
You contacted your stock broker this morning to sell 300 shraes
secondary market
capital budgeting includes the evaluation of which of the following?
size, timing, and risk of future cash flows
Margie opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Margie own if she is personally liable for all the store's debts?
sole proprietorship
levi had an unexpected surprise
stakeholder
An employee has a claim on the cash flows of Martin's Machines. This claim is defined as a claim by one of the firm's:
stakeholders
production equipment
tangible fixed asset
An agency issue
the control of a firm is separated
which one of the following correctly defines a common chain of comman within a corporation?
the controller reports directly to the CFO
The primary goal of financial management is to maximize
the market value of existing stock
FV of an annuity will increase
time period increases
which distinguishes an ordinary annuity from annuity due
timing of payments
common size financial
total assets
In a general partnership, each partner is personally liable for:
total debts of the partnership even if they were unaware of the debts
assets are listed in descending order of liability
true reg. balance sheet
the daily financial operations of a firm are primarly controlled by managing the
working capital
Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts as referred to as:
working capital management
if a firm has 100% dividend payout
zero percent
Cash flow to stockholders
dividends paid minus NNE
cash flow from assets
operating cash flow minus
dupont identity helps
ALL
Starlite Industries will need $2.2 million 4.5 years from now to replace some equipment. Currently, the firm has some extra cash and would like to establish a savings account for this purpose. The account pays 3.6 percent interest, compounded annually. How much money must the company deposit today to fully fund the equipment purchase?
1876
you won 30,000
23.95 yeras
City Plumbing has inventory of $287,800, equity of $538,800, total assets of $998,700, and sales of $1,027,400. What is the common-size percentage for the inventory account?
28.82%
ST Trucking just signed a $3.8 million contract. The contract calls for a payment of $1.1 million today, $1.3 million one year from today, and $1.4 million two years from today. What is this contract worth today at a discount rate of 8.7 percent?
3,480
highest EAR
6% compounded daily
Your parents opened an investment account in your name
64.9 years
which on of the following parties can sell shares of ABC
ABC co
borrow money 3 years from now
CCR is 2.6
SGR assumes
DER will be constant
Working capital management includes which of the following?
Determining which customers will be granted credit
Donovan and Rosquo increase IRG
dividend payout ratio
Which one of the following is contained in the corporate bylaws?
Procedures for electing corporate directors
One advantage of the corporate form of organization is the
ability to raise larger sums of equity capital than other organizational forms
The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?
agency
Financial statement that summarizes
balance sheet
highly liquid assets
can be sold quickly
Uptown Markets is financed with 45% debt and 55% equity. This mixture of debt and equity is referred to as the firm's:
capital structure
operating cash flow
cash a firm generates
long term solvency
cash coverage ratio
which one of the following occupations best fits into the corporate area of finance?
chief financial officer
Builder's Outlet just hired a new chief financial officer. To get a feel for the company, she wants to compare the firm's sales and costs over the past three years to determine if any trends are present and also determine where the firm might need to make changes. Which one of the following statements will best suit her purposes?
common size income statement
Which one of the following is most apt to align managements priorities with shareholders' interests?
compensating managers
which is an intangible fixed asset?
copyright
Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?
corporation
net income is distributed to dividends or retained earnings
correct
matching principle states that
costs of producing
which increases liquidity of a firm
credit sale
NWC is efined as
current assets minus
best indicates a firm utilizing assets efficiently
decrease capital
Increase profit margin
decrease tax rate
which one of the following can be classified as an annuity not a perpetuity
equal annual payments for life
dupont identity
equity multiplierxROA
Financial Statement Analysis
forecast future performance
when conducting a financial analysis of a firm, financial analysts
frequently use accounting information
Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital:
had to decrease
an auction market
has a physical trading loor
select the account that has
highest EAR
Accounting statement measuring revenues, exp
income statement
financial leverage
increases potential return to stockholders
cash flow to creditors
interest paid minus NNB
stated interest rate is the interest rate expressed as
interest payment made each period
Max growth rate without add'l external financing
internal growth
a high PE ratio may indicate that a firm
is expected to grow significantly
Which one of the following forms of business organization offers liability protection to some
limited partnership
concerning the balance sheet, assets are not
listed in increasing order of liquidity
depreciation can
lower taxes
tax rate determining amount of tax
marginal tax rate
Primary goal of financial management sole proprietorship
maximize market value
concept of marginal taxation is best exemplified by which ?
mitchell's grocer
Shareholders equity is equal to
net fixed assets minus long term debt
sustainable growth rate defined
no new external equity
which decreases net income but does not affect operating cash flow?
non cash item
the market value
of an asset= better guide to worth
equity multiplier
one plus DER