Finance Test

which of the following are advantages of the corporate form of business ownership? 1. limited liability for firm debt 2. double taxation 3. ability to raise capital 4. unlimited firm life

1,3,4 only

working capital management includes decisions concerning which of the following 1. accounts payable 2. long-term debt 3. accounts receivable 4. inventory

1,3,4 only

Iowa Farm Machine Sales has current assets of $368,450, net fixed assets of $1.23 million, and total liabilities of $674,230. On a common-size balance sheet, current assets will be expressed as _____ percent.

23.1 *** practice this one

your firm has net income of $198 on total sales of $1200. Costs are $715 and depreciation is $145. The tax rate is 34%. The firm does not have interest expenses. What is the operating cash flow?

$383

George and Sam will be partners in 5 years after graduating from USD. George deposits $10,000 at 9% interest for 5 years. john is offered an investment with an 8% rate of return. how much more money must john deposit today to have the same amount as George at the end of 5 years?

$485.09

________ is calculated by adding back non cash expenses to net income and adjusting for changes in current assets and liabilities

cash flow from operations

refers to the firm's interest payments less any net new borrowings

cash flow to creditors

the _____ is a liquidity ratio

cash ratio

common-size BALANCE SHEET

compute all accounts as a percentage of TOTAL ASSETS

common-size INCOME STATEMENT

compute all line items as a percent of SALES

Working capital management is

concerned with the upper portion of the balance sheet

the person generally directly responsible for overseeing the tax management, cost accounting, financial accounting, and information system functions is the

controller

which one of the following business types is best suited to raising large amounts of capital - sole proprietorship - limited liability company - corporation - general partnership - limited partnership

corporation

which one of the following is a source of cash? - increase in accounts receivable - decrease in common stock - decrease in long-term debt - decrease in accounts payable - decrease in inventory

decrease in inventory --> aka this would be an increase in sales

________ ratios are designed to determine a firm's long-run ability to meet its obligations

financial leverage

which of the following is not included in the computation of operating cash flow

interest paid

A business entity operated and taxed like a partnership, but with limited liability for the owners, is called a

limited liability company

the Sarbanes-oxley Act of 2002 is a governmental response to

management greed and abuses

The bylaws

mandate the procedure for electing corporate directors

your ______ tax rate is the amount of tax payable on the next taxable dollar you earn

marginal

**** ON MID TERM the primary goal of financial management is to

maximize the current value per share of the existing stock

the long-term debts of a firm are liabilities

that do not come due for at lease 12 months

Which one of the following statements concerning the current ratio is correct?

the current ratio will always be greater than the quick ratio in companies that carry inventory

a firm has $520 in inventory, $1860 in fixed assets, $190 in accounts receivables, $210 in accounts payable, and $70 in cash. whats the amount of current assets?

$780

suppose you are committed to owning a $140,000 ferrari. you believe your mutual fund can achieve an annual rate of return of 8% and you want to buy the car in 7 years. how much must you invest today to fund this purchase assuming the price of the car remains constant?

$81,688.66

the daily news had net income of $121,600 of which 40 percent was distributed to the shareholders as dividends. during the year, the company sold $75,000 worth of common stock. what is the cash flow to stockholders?

-$26,360

a firm has sales of $3200, net income of $390, total assets of $4500, and total equity of $2750. interest expense is $50. what is the common-size statement value of the interest expense?

1.56%

the meat market has $747,000 in sales. the profit margin is 4.1% and the firm has 7500 shares of stock outstanding. the market price per share is $22. what is the price-earnings ratio?

5.39

Avalon Manufacturing has a cost of goods sold of $680,130 and a net income of $41,409 on total sales of $1,211,407. Total assets are $981,500. A common-sized income statement will show cost of goods sold of ______ percent and a net profit of ______ percent.

56.1; 3.4

penn station is saving money to build a new loading platform. two years ago, they set aside $24,000 for this purpose. today, that account is worth $28,399. what rate of interest is Penn station earning on this investment?

8.78%

the total asset turnover ratio measures the

ability of the combined assets of a firm to generate sales

which one of the following is a working capital management decision? - determining the amount of equipment needed to complete a job - determining weather to pay cash for a purchase or use the credit offered by the supplier - determining the amount of long-term debt required to complete a project - determining the number of shares of stock to issue to fund an acquisition - determining whether or not a project should be accepted

determining weather to pay cash for a purchase or use the credit offered by the supplier

according to the rule 72, you can do which of the following?

double your money in 5 years at 14.4% interest

non cash items refer to

expenses which do not directly affect cash flows

Practice #6 and 7

from other quiz

if a firm produces a 12% return on assets and also a 12% return on equity, then the firm

has an equity multiplier of 1.0

The net income as shown on the common-size income statement for the past three years for Connor and Company is 6.3 percent, 6.9 percent, and 7.1 percent, respectively. This indicates that the firm is

improving its profit per sales dollar

luis is going to receive $20,000 six years from now. Soo lee is going to receive $20,000 nine years from now. Which one of the following statements is correct if both Luis and Son lee apply a 7% discount rate of these amounts?

in todays dollars, Luis' money is worth more than Soo lees.

the earnings per share will

increase as net income increases

depreciation

reduces both taxes and net income

A common-size income statement expresses all accounts as a percentage of

sales

Common-size statements are designed to primarily address the problems encountered when comparing firms from varying

sizes

a business owned by a single individual is called a

sole proprietorship

net capital spending is equal to

the net change in fixed assets

which one of the following statements concerning a sole proprietorship is correct?

the owner of a sole proprietorship may be forced to sell his/her personal assets to pay company debts

a common-size balance sheet expresses accounts as a percentage of

total assets