Business Finance: Test 2, Chapters 2,3,7,16
Better Plastics is a mature manufacturing firm. The company just paid a $4 annual dividend (D0), but management expects to reduce the payout by 3 percent per year, indefinitely. If you require a 12 percent return on this stock, what will you pay for a share today?
$25.87
Gamma Corp. is expected to pay the following dividends over the next four years: $5, $12, $18, and $1.80. Afterwards, the company pledges to maintain a constant 4 percent growth rate in dividends, forever. If the required return on the stock is 14 percent, what is the current share price?
$37.92
The Pancake House pays a constant annual dividend of $1.45 per share. How much are you willing to pay for one share if you require a 17 percent rate of return?
$8.53
A firm has total assets of $523,100, current assets of $186,500, current liabilities of $141,000, and total debt of $215,000. What is the debt/equity ratio?
0.53
Keller Metals common stock is selling for $37 a share and has a dividend yield of 3.2 percent. What is the dividend amount?
1.18
A firm has net working capital of $3,800 and current assets of $11,700. What is the current ratio?
1.48
Underwood Homes Sales has total assets of $589,900 and total debt of $218,000. What is the equity multiplier?
1.59
A firm has a return on equity of 16 percent, a return on assets of 11 percent, and a 40 percent dividend payout ratio. What is the sustainable growth rate?
10.62 percent
Taylor, Inc. has sales of $13,743, total assets of $8,999, and a debt/equity ratio of 0.55. If its return on equity is 17 percent, what is its net income?
986.99
The operating cycle is equal to which one of the following?
Accounts receivable period plus the inventory period
Mary owns 100 shares of stock. Each share entitles her to one vote per open seat on the board of directors. Assume there are 3 open seats in the current election and Mary casts all 300 of her votes for a single candidate. What is the term used to describe this type of voting?
Cumulative
Which one of the following generally pays a fixed dividend, receives first priority in dividend payment, and maintains the right to a dividend payment, even if that payment is deferred?
Cumulative preferred
The price of a stock at year 5 can be expressed as:
D6 / (R-g).
Which one of the following activities is a source of cash?
Decreasing accounts receivable
The Du Pont identity can be used to help a financial manager determine the:I. degree of financial leverage used by a firm.II. operating efficiency of a firm.III. utilization rate of a firm's assets.
I, II, III, and IV
The Green Fiddle increased its operating cycle from 139 days to 146 days while the cash cycle increased by 3 days. How have these changes affected the accounts payable period?
Increased by 4 days
The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions?
No new equity and a constant debt-equity ratio
Which one of the following defines the cash cycle?
Operating cycle minus the accounts payable period
Kate could not attend the last shareholders meeting and thus she granted the authority to vote on her behalf to the managers of the firm. Which one of the following terms is used to describe the method by which Kate's shares were voted?
Proxy
Which one of the following transactions will increase the liquidity (i.e. cash position ) of a firm?
Sale to a customer on credit (account receivable)
The Du Pont identity can be totally defined by which one of the following?
Total asset turnover, profit margin, and debt/equity ratio
Net working capital is defined as
current assets minus current liabilities.
If shareholders are granted a preemptive right they will:
have priority in the purchase of any newly issued shares.
The dividend yield is defined as:
next year's expected cash dividend divided by the current market price per share.
A firm has an equity multiplier of 1.4. This means that the firm has a:
total debt ratio (D/A) of 0.28.
