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