FIN 325 Test 1 UMKC Forrest

HiWay Furniture has sales of $316,000, depreciation of $47,200, interest expense of $36,400 and a decrease in net working capital of $14,300. What is the cash flow from assets for the year? -$120,810 -$129,068 -$145,985 -$119,655 -$135,585

$129,068

A firm has common stock of $6,200, paid-in surplus of $9,100, total liabilities of $8,400, current assets of $5,900, and fixed assets of $21,200. What is the amount of the shareholders' equity? -$35,500 -$18,700 -$6,900 -$23,700 -$15,300

$18,700

Lani's generated net income of $911, depreciation expense was $47, and dividends paid were $25. Accounts payables increased by $15, accounts receivables increased by $28, inventory decreased by $14, and net fixed assets decrease by $8. There was no interest expense. What was the net cash flow from operating activity? -$865 -$959 -$776 -$985 -$922

$959

The Two Sisters has a return on assets of 9% and a dividend payout ratio of 75%. What is the internal growth rate? -2.30% -2.25% -3.97% -4.05% -3.24%

-2.30%

High Mountain Foods has an equity multiplier of 1.72, a total asset turnover of 1.16, and a profit margin of 4.5%. What is the return on assets? -8.98% -2.00% -7.74% -6.94% -5.22%

5.22%

When developing a financial plan for a corporation you should consider which of the following? I. How much net working capital will be needed? II. Will additional fixed assets be required? III. Will dividends be paid to shareholders? IV. How much new debt must be obtained? -I, II, III, and IV -I, III, IV only -II, III, IV only -II and III only -I and IV only

I, II, III, and IV

Which one of the following is a correct formula for computing the return on equity? -profit margin x total asset turnover x debt-equity ratio -ROA x equity multiplier -net income/total assets -profit margin x ROA -debt-equity ratiox ROA

ROA x equity multiplierWhen

The planning horizon is a long time period on which the financial planning process focuses. -true -false

True

balance sheet identity

assets = liabilities + equity

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date? -creditor's statement -dividend statement -balance sheet -income statement -statement of cashflows

balance sheet

Financial managers should strive to maximize the current value per share of the existing stock to: -provide managers with shares of stock as part of their compensation -increase employee salaries -guarantee the company will grow in size at the maximum possible rate -increase the current dividends per share -best represent the interests of the current shareholders

best represent the interests of the current shareholders

cash flow from assets

cash available to distribute to the creditors and to the stockholders.

The cash flow that is available for distribution to a corporation's creditors and stockholders is called the: -net capital spending -operating cash flow -net working capital -cash flow to stockholders -cash flow from assets

cash flow from assets

A business created as a distinct legal entity and treated as a legal "person" is called a(n): -limited partnership -corporation -sole propritership -general partnership -unlimited liability company

corporation

A firm's external financing need is met by: -net income and retained earnings -retained earnings -debt or equity -owners' equity, including retained earnings -net working capital and retained earnings

debt or equity

According to the statement of cash flows, an increase in inventory will ____ the cash flow ____ activities. -decrease; operating -increase; operating -increase; investment -increase; financing -decrease; financing

decrease; operating

liquid asset

easily converted to cash with little cash lost

Noncash items refer to: -sales that are made using store credit -expenses that do not directly affect cash flows -the ownership of intangible assets such as patents -inventory items purchased using credit -fixed expenses

expenses that do not directly affect cash flows

NASDAQ is an example of an auction market. -true -false

false

The balance sheet reflects account balances during a period of time while the income statement reflects balances at a point in time. -true -false

false

standardize balance sheet

financial statement where all account balances are divided by total assets

intangible assets

good management, skilled workers, good reputation

If a company produces a return on assets (ROA) of 14% and also a return on equity (ROE) of 14%, then the firm: -has no net working capital -has an equity multiplier of 1.0 -is using its assets efficiently as possible -may have short-term, but not long-term debt -has debt-equity ratio of 1.0

has an equity multiplier of 1.0

Which one of the following is an expense for accounting purposes but is not an operating cash flow for financial purposes? -interest expense -labor costs -costs of goods sold -taxes -administrative expenses

interest expense

A pro forma statement indicates that both sales and fixed assets are projected to increase by 7% over their current levels. Given this, you can safely assume the firm: -currently has excess capacity -is projected to grow at the sustainable rate of growth -is currently operating at full capacity -is projected to grow at the internal rate of growth -retains all of its net income

is currently operating at full capacity

The sustainable growth rate of a firm is best described as the ___ growth rate achievable _____. -maximum; excluding external financing of any kind -minimum; if the firm maintains a constant equity multiplier -maximum; with unlimited debt financing -maximum; excluding any external equity financing while maintaining a constant debt-equity ratio -minimum; assuming 100% retention ratio

maximum; excluding any external equity financing while maintaining a constant debt-equity ratio

board of directors

overseer of management

The financial planning method that uses the projected sales level as the basis for determining changes in balance sheet and income statement account values in referred to as the ___ method. -sales reconcilliation -percentage of sales -common-size -sales dilution -trend

percentage of sales

As the degree of financial leverage increases, the: -number of outstanding shares of stock increases -less debt a firm has per dollar of total assets -accounts payable balance decreases -probability a firm will encounter financial distress increases -amount of a firm's total debt decreases

probability a firm will encounter financial distress increases

financial planning

process that formulates how goals are to be achieved

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as ___ ratios. -turnover -short-term solvency -profitability -asset management -long-term solvency

profitability

broker

receives commission for bringing a buyer and seller together

Which one of the following parties has ultimate control of a corporation? -chief executive officer -chairman of the board -shareholders -chief operating officer -board of directors

shareholders

Ratios that measure a firm's liquidity are known as ___ ratios. -long-term solvency -asset management -book value -short-term solvency -profitability

short-term solvency

agency problem

the goals of management and ownership diverge

cash

the most liquid asset on the balance sheet

Financial ratios are relationships derived from a firm's financial information used for financial comparisons. -true -false

true

In a primary market transaction the issuing firm receives the proceeds less floatation cost of newly issued stock while in a secondary market transaction does not. -true -false

true

When evaluating the timing of a project's projected cash flows, a financial manager is analyzing: -only the start-up costs that are expected to require cash resources -only the date of the final cash flow related to the project -when each cash flow is expected to occur -the amount of cash expected cash flow -the amount by which cash receipts are expected cash outflows

when each is expected to occur

A firm's short- term asset and its short-term liabilities are referred to as the firm's: -debt -working capital -net capital -investment capital -capital structure

working capital