finance 2022 summer. exam 1

Girabaldi's Pretzels, general partnership, has net sales of $821,300 and costs of $698,500. The depreciation expense is $28,400 and the interest paid s $8,400. What is the amount of the firm's operating cash flow if the tax rate is 21%?

$104,740

Pacheo's Market had long-term debt of 4638,100 at the beginning of the year compared to $574,600 at year-end. If the interest expense was $42,300, what was the firm's cash flow to creditors?

$105,800

Silvia is employed as a currency trader in the Japanese yen market. Her job falls into which one of the following areas of finance?

international finance

Which one of the following is an advantage of being a limited partner?

losses limited to capital invested

Given a profitable firm, depreciation:

lowers taxes

A limited liability company (LLC):

prefers its profits be taxed as a personal income to its owners.

Which one of the following is contained in the corporate bylaws?

procedures for electing corporate directors

Limited liability companies are primarily designed to:

provide limited liability while avoiding double taxation

Which one of the following is included in the market value of a firm but not in the book value?

reputation of the firm

Net income increases when:

revenue increases

You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the:

secondary market

An employee has a claim on the cash flows of Westlake Machines. This claim is defined as a claim by one of the firm's:

stakeholders

operating cash flow is defined as:

the cash that a firm generates from its normal business activities.

An agency issue is most apt to develop when:

the control of a firm is separated from the firm's ownership

Which one of the following statements about a limited partnership is correct?

there must be at least one general partner

Which one of the following occupations best fits into the corporate area of finance?

chief financial officer

The recognition principle states that:

costs of producing an item should be recorded when the sale of that item is recorded as revenue

Working capital management includes which one of the following?

determining which customers will be granted credit

All else held constant, the book value of owners' equity will decrease when:

dividends exceed net income for a period

The Sarbanes-Oxley Act of 2002 has:

essentially made officers of publicly traded firms personally responsible for the firm's financial statements

Which one of the following is a capital structure decision?

establishing the preferred debt-equity level

When conducting a financial analysis of a firm, financial analysis:

frequently use accounting information

Over the past year, a firm decreased its current assets and increased its current liabilities. A a result, the firm's net working capital:

had to decrease

Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?

increase the protections against corporate fraud

Which one of the following will increase the cash flow from assets for a tax-paying firm, all else constant?

an increase in depreciation

Probably the least effective means of aligning management goals with shareholder interests is:

automatically increasing management salaries on an annual basis

Which of the following situations is most apt to create an agency conflict?

basing management bonuses on the length of employment

The Milwaukee Printing Company has net income of $26,310 for the year. At the beginning of the year, the firm had common stock of $55,000, paid-in surplus of $11,200, and retained earnings of $48,420. At the end of the year, the firm had total equity of $142,430. The firm paid dividends of $32,500. What is the amount of the net equity raised during the year?

$34,000

The balance sheet of a firm shows beginning net fixed assets of $348,200 and ending net fixed assets of $371,920. The depreciation expense for the year is $46,080 and the interest expense is $11,460. What is the amount of the net capital spending?

$69,800

For the year, Movers United has net income of $31,800, net new equity of $7,500, and an addition to retained earnings of $24,200. What is the amount of the dividends paid?

$7,600

The financial statements of the Santa Domingo Marina reflect depreciation expenses of $41,600 and interest expenses of $27,900 for the year. The current assets increased by $31,800 and the net fixed assets increased by $28,600. What is the amount of the net capital spending for the year?

$70,200

Chun industries reports following account balances: inventory of $417,600, equipment of $2,028,300, accounts payable $224,700, cash of $51,900, and accounts receivable of $313,900. What is the amount of the current assets?

$783,400

Sunny Disposition, Incorporated has net working capital of $32,500, current assets of $59,000, equity of $74,500 and long-term debt of $42,500. What is the amount of net fixed assets?

$84,500

The underground cafe has an operating cash flow of $187,000 and cash flow to creditors of $71,400 for the past year. The firm reduced its net working capital by $28,000 and incurred net capital spending of $47,900. What is the amount of cashflow to stockholders for the last year?

$95,700

LaMarcus Photography, a sole proprietorship owes $190,874 in taxes income of $608,606. The company has determined that it will owe $195,246 in tax if its taxable income rises to $620,424. What is the marginal tax rate at this level of income?

37%

Which of the following parties can sell shares of ABC stock in the primary market?

ABC company

The potential conflict of interest between a firm's owner and its managers is referred to as which type of conflict?

Agency

The concept of marginal taxation is best exemplified by which one of the following?

Burke's Grocer increased its sales by $52,000 last year and had to pay an additional $16,000 in taxes.

Nishaa has been promoted and is now in charge of all external financing. In other words, she is in charge of:

Capital structure management

Highly liquid assets:

can be sold quickly at close to full value

Maria is the sole proprietor of an antique store that is located in a rented warehouse. The store has an outstanding loan with the local bank but no other debt obligations. There are no specific assets pledged as security for the loan. Due to a sudden and unexpected downturn in the economy, the store is unable to generate sufficient funds to pay the loan payments due to the bank. Which of the following options does the bank have to collect the money it is owed? I. Sell the inventory and apply the proceeds to the debt II. Sell the lighting fixtures from the building and apply the proceeds to the debt III. Withdraw funds from Maria's personal account at the bank to pay the store's debt IV. Sell any assets Maria personally owns and apply the proceeds to the store's debt

I , III, and IV only

Based on the recognition principle, revenue is recorded on the financial statements when the: I. payment is collected for the sale of a good or service. II. earnings process is virtually complete. III. value of a sale can be reliably determined. IV. product is physically delivered to the buyer.

II and III only

Which one of the following statements is correct?

NASDAQ has more listed stocks than does the NYSE.

GAAP, as they relate to the income statement includes the recognition principle: to recognize revenue when the earnings process is virtually complete, and the value of an exchange of goods or services is known or can be reliably determined. Which of the following statements is true with regard to this principle?

Revenue is recognized at the time of sale. Costs associated with the sale of that product likewise would be recognized at the time.

Vera opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Vera own if she is personally liable for all the store's debts?

Sole proprietorship

The primary goal of financial management is to maximize:

The market value of existing stock

Net working capital decreases when:

a dividend is paid to current shareholders

The market value of:

an assets tends to provide a better guide to the actual worth of that than does the book value.

The term "free cash flow" is another term to describe:

cash flow from assets