FIN 303

If Kalium Motors has an EBIT of $28 million, interest of $8 million and is taxed at an average rate of 32%, what is its net income? $13.6 million $20 million $6.4 million $19 million

$13.6 million

Tre-Bien Bakeries generated net income of $233,412 this year. At year end, the company had accounts receivables of $47,199, inventory of $63,781, and cash of $21,461. It also had accounts payables of $51,369, short-term notes payables of $11,417, and accrued taxes of $6,145. The net working capital of the firm is $68,931. $63,510. $69,655. None of these.

$63,510.

Shane, Inc., has completed its fiscal year and reported Total Assets of $1,000,000 and Total Liabilities of $300,000. Calculate the value of common equity. $1,300,000 $600,000 $800,000 $700,000

$700,000

Kelvy & Sons has a current ratio of 1.2, current assets of $508,315, and inventory of $98,666. What is the firm's quick ratio? 1.10 0.67 0.81 0.97

0.97

Fahr Company has depreciation expenses of $630,715, interest expenses of $112,078, and an EBIT of $1,542,833 for the year ended June 30, 2006. What are the times interest earned and cash coverage ratios for this company? (Round your final answers to one decimal place.) 19.4 times; 12.7 times 17.3 time; 11.4 times 13.8 times; 19.4 times None of these

13.8 times; 19.4 times

What will be a firm's equity multiplier given a debt ratio of 0.65? 3.35 2.86 2.28 1.53

2.86

Which of the following is an example of current liabilities? Accounts payable Bank term loans Loss on sale of a fixed asset Pension obligations

Accounts payable

Which of the following business organizational form(s) create(s) a tax liability on income at the personal income tax rate? Sole proprietorship Partnership Corporation Both Sole proprietorship and Partnership

Both Sole proprietorship and Partnership

Which of the following is a primary investment vehicle for the funds in which life insurance companies must invest? Both equity securities and long-term corporate bonds. CDs. Equity securities. Long-term corporate bonds.

Both equity securities and long-term corporate bonds.

Which of the following is NOT true of common-size balance sheets? Common-size balance sheets allow us to make meaningful comparisons between the balance sheets of two firms that are different in size. Each asset and liability item on the balance sheet is standardized by dividing it by total assets. Each asset and liability item on the balance sheet is standardized by dividing it by sales. Balance sheet accounts are represented as percentages of total assets.

Each asset and liability item on the balance sheet is standardized by dividing it by sales.

Crane Jewelers management announced that the company had net earnings of $6,596,000 for this year. The company has 3,181,000 shares outstanding, and the year-end stock price is $49.45. What are Crane's earnings per share and P/E ratio?

Earning per share = Net Earning/ Share outstanding = 2.07 P/E Ratio = Price per share/ Earning Per share = 23.89 times

When companies are making financial investment decisions, they use the average tax rate. True False

False

Which of the following is NOT true about goodwill? It represents the value of all unrecorded assets acquired in a merger. It equals the premium paid over the fair market value of the assets acquired in a merger. It reduces the firm's net worth by that amount. It is an intangible asset.

It reduces the firm's net worth by that amount.

Which of the following transactions is a secondary market transaction? Johnny Appleseed buying 1,000 shares of Dell through NYSE Mary receiving dividends from IBM IBM issuing 100,000 shares on the NYSE for the first time MicroChip Computers selling $1,000,000 worth of bonds directly to AIG Corp.

Johnny Appleseed buying 1,000 shares of Dell through NYSE

A commercial bank wants to determine if an applicant for a loan is likely to be able to pay its bills as they come due. Which type of ratio is most appropriate? Liquidity ratio Profitability ratio Efficiency ratio Leverage ratio

Liquidity ratio

Which of the following is true of an efficient market? All information contained in past prices of a security is reflected in its current price but that there is both public and private information that is not. Market prices of securities of companies in the same industry are all same. Securities have no systematic risk. Market prices adjust quickly to new information as it becomes available.

Market prices adjust quickly to new information as it becomes available.

Which of the following organizational forms is subject to the Securities and Exchange Commission (SEC) regulations? Partnership Private corporation Sole proprietorship Public corporation

Public corporation

Which of the following is responsible for rolling back many of the rules against commercial banks offering investment banking activities? The Glass-Steagall Act of 1933. The Securities Exchange Act of 1934. The Securities Act of 1933. The Financial Services Modernization Act of 1999.

The Financial Services Modernization Act of 1999.

Which of the following is an appropriate benchmark in ratio analysis? The average stock price for industry The average dividend payment for a peer group of firms The average collection period for a peer group of firms The average market share for the industry

The average collection period for a peer group of firms

An investment banker is responsible for assisting the company in preparing the financial statements. taking deposits from investors. preparing a security issue for sale. making loans to needy businesses.

preparing a security issue for sale.

According to the realization principle, revenue from a sale of a firm's products are recognized when the: buyer orders the goods. cash is collected from the sale of the products. sale occurs whether or not cash is actually received. products are shipped to the buyer.

sale occurs whether or not cash is actually received.

Arco Steel, Inc. generated total sales of $45,565,200 during fiscal 2010. Depreciation and amortization for the year totaled $2,278,260, and cost of goods sold was $27,339,120. Interest expense for the year was $9,641,300 and selling, general, and administrative expenses totaled $4,556,520 for the year. What is Arco's EBIT for 2010? $13,275,030 $9,641,300 $11,391,300 $18,490,000

$11,391,300

Tumbling Haven, a gymnastic equipment manufacturer, provided the following information to its accountant. The company had net fixed assets of $356,190, and other assets of $4,176. The firm has current liabilities of $94,792, long-term debt of $76,445, common stock of $200,000, and retained earnings of $134,461. What amount of current assets did this firm have? $145,332 $505,698 $171,217 $237,332

$145,332

Chandler Sporting Goods produces baseball and football equipment and lines of clothing. This year the company had cash and marketable securities worth $335,485, accounts payables worth $1,159,357, inventory of $1,651,599, accounts receivables of $1,488,121, short-term notes payable worth $313,663, and other current assets of $121,427. What is the company's net working capital? $3,596,632 $2,123,612 $1,801,784 $1,673,421

$2,123,612

United Brands Corp. just completed their latest fiscal year. The firm had sales of $16,650,000. Depreciation and amortization was $832,500, interest expense for the year was $825,000, and selling general and administrative expenses totaled $1,665,000 for the year, and cost of goods sold was $9,990,000 for the year. Assuming a federal income tax rate of 34%, what was the United Brands net income after-tax? $3,505,100 $2,813,000 $2,202,750 $1,745,325

$2,202,750

Water Inc.'s net sales last year were $315,000, and its year-end total assets were $355,000. The average firm in the industry has a total assets turnover ratio of 2.4. The firm's new CFO believes the firm has excess assets that can be sold so as to bring the total assets turnover ratio down to the industry average without affecting sales. By how much will the need assets be reduced to bring the total assets turnover ratio to the industry average, holding sales constant? $201,934 $223,750 $212,563 $234,938

$223,750

Pedro & Co. has $720,000 of assets and is all-equity financed. The new CFO wants to use enough debt to raise the total debt to total capital ratio to 40%, using the proceeds from borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio? $273,600 $288,000 $302,400 $317,520

$288,000

Natural Lite, Inc. reported the following items during fiscal 2010. The firm purchased marketable securities of $87,500, paid down a long-term loan in the amount of $650,000, purchased $4,250,000 of new equipment. The firm also issued $6,250,000 of common stock, paid $350,225 in dividends to its common shareholders, and repurchased $1,250,000 of common stock in the open market. What is the net cash provided by financing activities? $1,733,285 $3,999,775 $2,467,915 $4,575,210

$3,999,775

Shane, Inc., has completed its fiscal year and reported Total Assets of $1,000,000 and Total Liabilities of $300,000. Calculate the value of common equity. $700,000 $800,000 $600,000 $1,300,000

$700,000

Teakap, Inc., has current assets of $1,456,312 and total assets of $4,812,369 for the year ending September 30, 2016. It also has current liabilities of $1,041,012, common equity of $1,500,000, and retained earnings of $1,468,347. What is the value of long term debt? $803,010 $1,844,022 $2,123,612 $2,303,010

$803,010

Simplex Healthcare had net income of $5,411,623 after paying taxes at 34 percent. The firm had revenues of $20,433,770.Its interest expense for the year was $1,122,376, while depreciation expense was $2,079,112. What was the firm's operating expenses excluding depreciation? (Round your intermediate calculations and final answer to the nearest dollar.) $8,199,429 $9,032,853 $9,321,805 None of these

$9,032,853

The Cullumber Timber Company has the following ratios: Net sales/Total assets = 2.19; ROA = 9.31%; ROE = 16.7%. What are Cullumber's profit margin and debt ratios?

(1/2.19)*9.31 Profit margin = 4.25% 1-(ROA/ROE) Debt ratio = .44

Thunderbird Amusement Park—Balance Sheet as of June 30Assets20072008 Cash$ 13,221 $ 11,729 Accounts receivables31,323 37,909 Inventory77,244 91,617 Total current assets$121,788 $141,255 Fixed assets444,712 563,323 Less: Accumulated depreciation(100,000) (172,487) Net fixed assets344,712 390,836 Total assets$466,500 $532,091 Liabilities and Stockholders' Equity Accounts payable$ 38,549 $ 42,881 Notes payable12,004 16,753 Deferred taxes21,934 16,788 Total current liabilities$ 72,487 $ 76,422 Long-term debt78,445 61,290 Common stock125,000 175,000 Retained earnings190,568 219,379 Total liabilities and stockholders' equity$466,500 $532,091 The company had a net income of $248,462, and depreciation expenses were equal to $72,487. What is the firm's net cash flow provided by (used in) investing activities? $0 $46,124 -$46,124 None of these

-$46,124 Cash inflows from investing activities = $0 Cash outflows from investing activities = $390,836 − $344,712 = $46,124 Net cash flows from investing activities = -$46,124

Gateway Corp. has an inventory turnover ratio of 5.6. What is its day's sales in inventory? (Round your final answer to nearest day.) 64 days 61 days 57 days 65 days

65 days

ReelTime Video has reported a total asset turnover of 2.3 times and an ROA of 17% and ROE of 25%. What is the firm's net profit margin? 39.1% 10.9% 7.4% 9.2%

7.4%

Sawaya Company had depreciation and amortization expenses of $522,311, interest expenses of $114,077, and an EBITDA of $1,521,087 for the year ended June 30, 2010. What is the times-interest-earned for this company? 0.6 times 8.8 times 13.3 times 2.9 times

8.8 times

____ has (have) a legal responsibility to represent stockholders' interests. A chairman A CEO A corporation's board of directors All of the above

A corporation's board of directors

Which of the following type of owner cannot be engaged in managing the business? A sole proprietor A general partner A limited partner None of the above

A limited partner

The legal system and market forces impose substantial costs on individuals and institutions that engage in unethical behavior. Which of the following would not be an example of these costs? Legal fines Agency conflicts Jail time Financial losses

Agency conflicts

Which one of the following statements is NOT correct? The DuPont system is based on two equations that relate a firm's return on asset (ROA) and return on equity (ROE). The DuPont system is a set of related ratios that links the items of balance sheet and the income statement. Both management and shareholders can use this tool to understand the factors that drive a firm's return on equity (ROE). All of these are correct.

All of these are correct.

Which corporate officer, when he or she is guilty of serious misconduct, can subject the firm to the heavy losses in financial wealth? Chief Risk Officer Marketing Manager CFO Chief Technology Officer

CFO

Which of the following is responsible for performing an independent audit of a firm's financial statements? Audit committee CPA firm CEO CFO

CPA firm

Which of the following factors or activities can be controlled by a firm's managers? The level of market interest rates Stock market conditions Capital budgeting The level of economic activity

Capital budgeting

Financial markets in which equity and debt instruments with maturities greater than one year are traded are called: Money markets. Capital markets. Over the counter exchange. None of the above.

Capital markets.

Which of the following would not make up a major part of a pension fund's investment portfolio? Long-term corporate bonds. none of these. Commercial paper. Stocks.

Commercial paper.

Total Assets = Total Liabilities + Shareholder's Equity

Common Equity = Shareholder's Equity

Which of the following would appear as part of equity on a company's balance sheet? Buildings Inventory Common stock Accounts receivable

Common stock

Jared is retiring after 15 years in his position in a large, publicly traded food service company. For the next six weeks, he will be working with and training Charlene,who will take over his position. Jared is planning on training Charlene in both preparing taxes and running the firm's cost accounting systems. Charlene will be the company's new ______. Audit director CEO Risk manager Controller

Controller

A small business is on the brink of bankruptcy after its first year. To maximize profits over the next year, the owner could _______ costs by reducing cash outlays related to operations and advertising.

Decrease

What is the difference between FIFO (first in, first out) and LIFO (last in, first out) accounting? FIFO refers to the practice of firms, when making sales, assuming that the inventory that came in first (at a higher price) is being sold first. During a period of rising prices, LIFO implies that a firm is selling the higher cost, newer inventory first, leaving the lower cost, older inventory on the balance sheet. During a period of falling prices, LIFO implies that a firm is selling the higher cost, newer inventory first, leaving the lower cost, older inventory on the balance sheet. LIFO refers to the practice of firms, when making sales, assuming that the inventory that came in last is being sold first (at a higher price).

During a period of rising prices, LIFO implies that a firm is selling the higher cost, newer inventory first, leaving the lower cost, older inventory on the balance sheet.

Which of the following is NOT true of common-size income statements? Each income statement item is standardized by dividing it by total assets. Income statement accounts are represented as percentages of net sales. Each income statement item is standardized by dividing it by net sales. Common-size income statements analysis is a specialized application of ratio analysis.

Each income statement item is standardized by dividing it by total assets.

National City Bank has 681,300,000 shares of common stock outstanding that are currently selling for $57.34 per share on the New York Stock Exchange. If National City's net income was $4,155,930,000 in the year that just ended, what was its earnings per share and what is its current price-earnings ratio?

Earnings per share = 6.1 Price-earnings ratio = 9.4 The market is less optimistic about National City's prospects than it is about the prospects of the typical bank.

Which of the following does NOT belong to an income statement? Amortization expense Depreciation expense Goodwill Extraordinary items

Goodwill

Crane reported the following information for its fiscal year end: On net sales of $45.000 billion, the company earned net income after taxes of $5.850 billion. It had a cost of goods sold of $22.050 billion and EBIT of $8.775 billion. What are the company's gross profit margin, operating profit margin, and net profit margin?

Gross profit margin = Sales - cost of goods sold / Sales * 100 Gross profit margin = 51% Operating profit margin = EBIT / Sales * 100 Operating profit margin = 19.5% Net profit margin = Net income after taxes / Sales * 100 Net profit margin = 13%

Hillary is a financial manager at Mountain Top Enterprises. She notices that her boss, the CFO of Mountain Top, is skimming money from some of the accounts. Which of the following options would have the greatest financial impact on the company in the long run? Hillary reports the CFO's actions to the CEO and board of directors. Hillary asks the CFO if she can help with the skimming in exchange for some of the profits. Hillary decides she should not say or do anything for fear of losing her job. Hillary shares her information with her coworkers.

Hillary asks the CFO if she can help with the skimming in exchange for some of the profits.

Joe Busch has outside auditors monitor the performance of his managers, most of whom are the top talent in their field. The ratio of their benefit for the company and the company's benefit for them is off balance. What should the auditors suggest to reduce the agency conflicts they find? Set up an internal audit committee. Hire a different external auditor. Institute a pay for performance program. Increase the management's wages.

Institute a pay for performance program.

Which of the following is a tax-deductible expense for a corporation? Interest paid Loan principal paid Preferred stock dividends paid Common stock dividends paid

Interest paid

Which of the following is a tax-deductible expense for a corporation? Loan principal paid Preferred stock dividends paid Common stock dividends paid Interest paid

Interest paid

Which of the following balance sheet items generally takes the longest time to convert to cash? Accounts receivable Inventory Treasury bills Accounts payable

Inventory

Which of the following is NOT true about the inventory turnover ratio? The more times a firm can turn over its inventory, the better. It is calculated by dividing inventory by cost of goods sold. Too high a turnover or too low a turnover could be a warning sign. It measures how many times the inventory is turned over into saleable products.

It is calculated by dividing inventory by cost of goods sold.

Which of the following is NOT true about goodwill? It is an intangible asset. It represents the value of all unrecorded assets acquired in a merger. It equals the premium paid over the fair market value of the assets acquired in a merger. It reduces the firm's net worth by that amount.

It reduces the firm's net worth by that amount.

Which of the following statements is NOT a limitation associated with market valuation of balance sheet accounts? Mark-to-market accounting can become inaccurate if market prices deviate from the "fundamental" values of assets and liabilities. The estimates of market value can involve complex financial modeling, and the resulting numbers can be open to manipulation and abuse. Marking to market provides decision makers with a better chance of making the correct economic decision, given the information available. It can be difficult to identify the market value of an asset, particularly if there are few transactions involving comparable assets.

Marking to market provides decision makers with a better chance of making the correct economic decision, given the information available.

The management of a manufacturing company decides to withhold employee holiday bonuses to have cash available for the firm to pay near term debts. Is this decision to maximize the value of the company's stock consistent with maximizing the interest of the employees? Yes, because the increased cash flows might be used for employee benefit programs. No, because the increased cash is not invested into the employees' skills. Yes, because the increased cash balance is certain to raise the value of the employees' stock. Maybe, because the employees may lose their job if the firm can't pay its debts.

Maybe, because the employees may lose their job if the firm can't pay its debts.

What is the mathematical expression to calculate net working capital? Net working capital = Total current assets - Total current liabilities Net working capital = Total assets + Total liabilities Net working capital = Stockholders' equity + Total liabilities Net working capital = Total assets - Total liabilities

Net working capital = Total current assets - Total current liabilities

Depreciation and amortization expenses are: Long-term liabilities that reduce a firm's net worth. Noncash expenses that cause a firm's after-tax cash flows to exceed its net income. Part of current assets on the balance sheet. After-tax expenses that reduce a firm's cash flows.

Noncash expenses that cause a firm's after-tax cash flows to exceed its net income.

From the owner's perspective, which of the following should be the primary focus of managers? COGS Minimization None of the above should be the primary focus. Profit maximization Revenue maximization

None of the above should be the primary focus.

A firm wants to strengthen its financial position. Which of the following actions would increase its quick ratio? Use some of its cash to purchase additional inventories. Issue new common stock and use the proceeds to increase inventories. Speed up the collection of receivables and use the cash generated to increase inventories. Offer price reductions that would enable the firm to sell some of its inventory.

Offer price reductions that would enable the firm to sell some of its inventory.

Which of the following is a cash flow from investing activities? Cash payment of dividends to shareholders. Purchase of plant and equipment. Cash from sale of products. Rent received from industrial property owned.

Purchase of plant and equipment.

Sandhill Corp. has total current assets of $9,550,000, current liabilities of $5,714,000, and a quick ratio of 0.94. How much inventory does it have?

Quick ratio = (current assets - Inventory)/Current liabilities = 4,178,840

Oriole Enterprises has a total asset turnover of 2.2 and a net profit margin of 8.0%. If its equity multiplier is 1.50, what is the ROE for Oriole Enterprises?

ROE = 26.4%

There are people who believe that the analysis of financial statements has limitations. Which of the statements below would qualify as a limitation of financial statement analysis? Ratio analysis requires the analyst to evaluate a firm's performance over a period of time to be of any value. Proper ratio analysis requires the analyst to rely upon audited financial statements, which can be easily manipulated. Thorough ratio analysis requires the analyst to refer to benchmarking, which is very easy to misinterpret. Ratio analysis requires the analyst to utilize accounting data that is based on historical costs instead of current market values.

Ratio analysis requires the analyst to utilize accounting data that is based on historical costs instead of current market values.

You just purchased a share of IBM stock on the New York Stock Exchange. What kind of transaction was this? Primary market transaction. Futures market transaction. Secondary market transaction. Private placement.

Secondary market transaction.

Which of the following theories states that security prices reflect all public information, but not all private information? Strong-form efficiency. Semistrong-form efficiency. Nominal-form efficiency. Weak-form efficiency.

Semistrong-form efficiency.

The secondary market is the one in which owners of outstanding securities sell their securities to other investors.

The secondary market

Which of the following presents a summary of the changes in a firm's balance sheet from the beginning of an accounting period to the end of an accounting period? The statement of cash flows. The statement of working capital. The statement of retained earnings. The statement of net worth.

The statement of cash flows.

Net Working Capital

Total Current Assets - Total Current Liabilities

Cullumber, Inc., has a debt ratio of 0.46. What are the company's debt-to-equity ratio and equity multiplier?

Total Debt = .46 Total Equity = 1-.46 = .54 Debt Equity Ratio = Debt/Equity = .46/.54 = .85 Equity Multiplier = 1 + Debt/Equity Ratio = 1+.85 = 1.85

Retained earnings

Total stockholders' equity - Common stock

Which of the following is a process by which investment bankers purchase new securities directly from the issuing company and resell them to the investors? Private placement. Agency marketing. Underwriting. Distribution.

Underwriting.

Kanye recently purchased a certified used car from a dealer and paid cash for the transaction. On the drive home, the car stalled and had to be towed. The mechanic noted a crack in the intake manifold, which was covered by a coat of freshly applied epoxy. Was the dealer unethical when selling the car to Kanye? Why or why not? No, because neither party had sufficient opportunity to examine the vehicle. No, because this was a cash transaction, changing the dealer's obligations to disclose information. Yes, because if both parties knew of the crack, the terms of the deal would be materially different. Yes, because this was a cash transaction, and neither party is protected by credit card insurance.

Yes, because if both parties knew of the crack, the terms of the deal would be materially different.

A commercial diver goes to a local doctor who finds the diver has dangerously high blood pressure. The diver is not scheduled for his next company physical for six months, and the diver asks the doctor not to inform anyone about his results. The doctor knows, however, that commercial divers with high blood pressure are not allowed to dive because it is too dangerous. This situation is an example of an agency cost. a conflict of interest. imperfect contracting. an information asymmetry.

a conflict of interest.

You become aware that a friend and co-worker is taking home office and cleaning supplies from the company. Your friend has complained many times that she feels that the company is not paying her fairly and that she cannot afford to buy necessary items for her family. You don't know whether you should report the theft or pretend you don't know. This is an example of an information asymmetry. an agency cost. a conflict of interest. an unethical business culture.

a conflict of interest.

Treasury stock represents stock that: is being held to purchase preferred stock. a firm has purchased back from investors. is being held to purchase treasury securities. a firm has sold to the U.S. Treasury Department.

a firm has purchased back from investors.

If you have loaned capital to a firm, then you could be a manager. a stakeholder. a partner. all of the above.

a stakeholder.

Hanzel Bettenhaus has been hired by a company to present the new internal accounting controls required by the Sarbanes-Oxley Act. During his presentation, he emphasizes that the controls reduce the likelihood of individuals committing accounting fraud and improve the reliability of financial reports and stock prices. the board's financial and hiring decisions. employee work and reports. accounting data and financial reports.

accounting data and financial reports.

When analysts and investors determine the value of a firm's stock, they should consider: the size of the expected cash flows associated with owning the stock. the timing of the cash flows. the riskiness of the cash flows. all of the above.

all of the above.

The creditors of a firm analyze financial statements so that they can better understand the firm's: ability to generate sufficient cash flows to meet its legal obligations first and still have sufficient cash flows to meet debt repayment and interest payments. ability to meet its short-term obligations. amount of debt. all of these.

all of these.

Vincent, the leader for an advertising campaign, presents five ideas to the client. However, he holds back one idea, because, even though it would be well accepted by most of society and could make the client millions, it could potentially offend one outspoken group. If this happens, Vincent knows that he could lose his job. This is an example of a conflict of interest. an agency cost. transparency. an information asymmetry.

an agency cost.

A trademark is an example of: a liquid asset. an intangible asset. a contingent asset. none of the above.

an intangible asset.

The generally accepted accounting principles (GAAP) are rules that outline how a firm can operate ethically. on how the firm will be valued in the event of a merger. and procedures that define how companies are to maintain financial records and prepare financial statements. for how a company can issue stock to raise money.

and procedures that define how companies are to maintain financial records and prepare financial statements.

Accounting statements are: based on current cost data. based on inflation-adjusted data. based on residual-value data. based on historical data.

based on historical data.

The audit committee reports directly to the board of directors. internal auditor. chief executive officer. external auditor.

board of directors.

Interest is a tax-deductible expense. This causes firms to have a preference for financing with: preferred stock. bonds. common stock. retained earnings.

bonds.

The major players in the direct financial markets are: both investment banks and money center banks. investment banks. money center banks. regional banks.

both investment banks and money center banks.

The nominal rate of interest is made up of: both the real rate of interest and compensation for inflation. the real rate of interest. compensation for inflation. a commodity cross-index return.

both the real rate of interest and compensation for inflation.

If a firm needs to finance a new corporate headquarters building, then it would most likely seek the funds in the: money market. capital market. all of the above. futures market.

capital market.

Which of the following are examples of economy wide economic shocks? Select the 4 that apply. changes in taxes unexpected increases in interest rates major marketing campaign by a competitor strike in an industry natural disasters war

changes in taxes unexpected increases in interest rates natural disasters war

Common-size analysis is used in financial analysis to: restate each element in a company's financial statement as a proportion of the similar account for another company in the same industry. compare companies of different sizes or compare a company with itself over time. evaluate changes in a company's operating cycle over time. predict changes in a company's capital structure using regression analysis.

compare companies of different sizes or compare a company with itself over time.

Within the finance function of a large organization, the executive who is responsible for the preparation of financial statements is the internal auditor. controller. treasurer. chief financial officer (CFO).

controller.

Increasing _________ greatly increases the firm's financial risk. capital debt wages equity

debt

Sheridan Company has a debt-to-equity ratio of 1.40, ROA of 13.0 percent, and total equity of $1,497,000. What are the company's equity multiplier, debt ratio, and ROE?

debt-to-equity ratio=debt/equity Hence debt=(1.4*1,497,000)=$2,095,800 Total assets=debt+equity =$2,095,800+1,497,000=3,592,800 ROA=net income/Total assets Net income=3,592,800*13%=467064 equity multiplier=Total assets/equity =3,592,800/1,497,000 =2.40 debt ratio=debt/Total assets =$2,095,800/3,592,800 =0.583(Approx). ROE=Net income/equity =467064/1,497,000 =31.2%

In the DuPont method of financial analysis, a decrease in total asset turnover causes ROE to increase. remain unchanged. be indeterminate. decrease.

decrease.

Investors determine the value of a firm's stock based on the firm's net profit. expected cash flows. market share. industry status.

expected cash flows.

The morning after a complaint was submitted to the office of the CFO, the risk manager and the auditor were arrested and the compliance officer was fired. The complainant had previously called compliance and complained that the treasurer may be sending certain derivatives offshore, so as not to be reported. An investigator in internal audit summarily called the complainant a couple weeks ago with the assurance that the transactions were being accounted for. Seeing evidence to the contrary and dissatisfied with the routine audit, the complainant again raised the issue but was dismissed from the derivatives project and threatened with dismissal. What is the most likely reason for the compliance officer being fired and why? for failing to institute a whistleblower program, which is designed to protect rather than threaten the whistleblower for failing to implement an ethics program, which would have prevented bad actors from carrying out their scheme for failing to implement a fraud program, which would have uncovered the fraud for failing to establish a compliance hotline, where the whistleblower has a voice

for failing to institute a whistleblower program, which is designed to protect rather than threaten the whistleblower

The critical role of the financial system in an economy is to provide managers with incentives to increase capital spending. regulate the operations of the commercial banks. provide the President with information regarding the debt level in the country. gather money from savers and channel it to borrowers.

gather money from savers and channel it to borrowers.

A firm's management analyzes financial statements so that they can: get feedback on their investing, financing, and working capital decisions by identifying trends in the various accounts that are reported in the financial statements and focus on profitability, dividend, capital appreciation, and return on investment. get feedback on their investing, financing, and working capital decisions by identifying trends in the various accounts that are reported in the financial statements. get more stock options. focus on profitability, dividend, capital appreciation, and return on investment.

get feedback on their investing, financing, and working capital decisions by identifying trends in the various accounts that are reported in the financial statements and focus on profitability, dividend, capital appreciation, and return on investment.

One of the main services offered by investment banks to companies is: making loans to companies. taking deposits from companies. all of the above. helping companies sell new debt or equity issues in the security markets.

helping companies sell new debt or equity issues in the security markets.

Underwriting is the process by which an investment banker helps a company sell its new security issue. markets and resells a company's securities to investors. lends funds to new companies. provides seed capital to new start-ups.

helps a company sell its new security issue.

When prices are falling, the value of inventory using the LIFO method rather than FIFO gives inventory a:: lower value and also lowers net income. higher value but lowers net income. lower value and net income a higher value. higher value and net income a higher value.

higher value and net income a higher value.

Savings by _____ in small dollar amounts is the origin of much of the money that funds business loans in an economy. the U.S. government small businesses none of the above households

households

Harold is on the board of directors for Big City Developers. The board recently agreed to purchase Reliable Construction, the largest construction company in the country. The day after the meeting, Harold decides to purchase 100 shares of stock for Reliable Construction. Harold has an advantage over other investors because of a conflict of interest. information asymmetry. agency cost. ethical incentives.

information asymmetry.

Compared to treasurers, who manage risk through derivatives, the risk manager hedges risk through corporate bonds. insurance portfolios. shorted stocks. inverse ETFs.

insurance portfolios.

Cash flows to stakeholders of a firm include impairment of goodwill. equipment contributed by the owner. depreciation expense of an asset. interest and principal payments.

interest and principal payments.

A company makes double in profit compared to the previous year. To avoid paying extra taxes, which type of payments would help bring down the tax bill for next year? cash dividend payments to owners interest payments on a debt dividend payments to stockholders Principal payments on a debt

interest payments on a debt

Compared to public corporations, privately held corporations have stock that cannot be traded with anyone. is traded in public markets. exists only as a proxy stock. is not traded in public markets.

is not traded in public markets.

Net cash flow: is equal to a firm's net income. is the difference between a firm's actual cash receipts and cash payments in a given period. is the difference between a firm's total expenses and total revenues. is the difference between a firm's operating cash flow and its financing cash flow.

is the difference between a firm's actual cash receipts and cash payments in a given period.

Preferred stock is similar to a bond because: it represents ownership in a firm. preferred dividends do not reduce a firm's taxes. it has no maturity date. it pays a fixed periodic amount.

it pays a fixed periodic amount.

A financial system's primary function is funneling money from: lender-savers to borrower-spenders. wealthy individuals to non-wealthy individuals. the government to wealthy individuals. borrower-spenders to lender-savers.

lender-savers to borrower-spenders.

The conventional way of preparing a balance sheet is to list all assets in the order of their: risk. market value. liquidity. historical cost.

liquidity.

Agency conflicts are mainly caused by excessive government regulation. owners not caring about the managers' interests. managers not putting shareholders' interests above their own interest. excessive control being exercised by the owners over their managers.

managers not putting shareholders' interests above their own interest.

When a firm estimates future taxes, it should consider the: combined tax rate. historic tax rate. marginal tax rate. average tax rate.

marginal tax rate.

The main objective of a firm's management should be to maximize its stock value. maximize its profits. reduce its debt level. minimize its risk exposure.

maximize its stock value.

The DuPont equation shows that a firm's (return on equity) ROE is determined by three factors: net profit margin, total asset turnover, the return on assets (ROA). return on assets (ROA), total assets turnover, and the equity multiplier. operating profit margin, return on assets (ROA), and the total assets turnover. net profit margin, total asset turnover, and the equity multiplier.

net profit margin, total asset turnover, and the equity multiplier.

The most useful way to prepare a common size income statement is to express each account item as a percentage of total equity. total assets. net sales. total debt.

net sales.

A highly liquid financial instrument with a maturity of 90 days would be traded in: the stock market. none of the above. the money market. the bond market.

the money market.

Which of the following would be unrelated to analyzing a firm's trend over time? the efficient use of the firm's assets. the sales growth. the relative ratios of the major competitors. the control of the firm's expenses.

the relative ratios of the major competitors.

The capital budgeting decision process can be described as how a firm's day-to-day financial matters should be managed. how a firm should finance its assets. which productive assets a firm should purchase. all of the above.

which productive assets a firm should purchase.