Fin. 323 - Exam 1

Ace your homework & exams now with Quizwiz!

Stadford Inc. is financed with 40 percent debt and 60 percent equity. This mixture of debt and equity is referred to as the firm's

Capital Structure

The cash coverage ratio is used to evaluate the

ability of a firm to pay the interest on its debt

The Sarbanes-Oxley Act of 2002 has

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

Which one of the following is the tax rate that applies to the next dollar of taxable income that a firm earns

marginal tax rate

Shareholders' equity is equal to

net fixed assets minus long-term debt plus net working capital

The equity multiplier is equal to

one plus the debt-equity ratio

A limited liability company

prefers its profits be taxed as personal income to its owners

Limited liability companies are primarily designed to

provide limited liability while avoiding double taxation

Blooming Gardens has an inventory turnover of 16. The means the firm

sells its inventory an average of 16 times each year

Delivery trucks are classified as

tangible fixed assets

In a general partnership, each partner is personally liable for

the total debts of the partnership, even if he or she was unaware of the debts

Same wants to invest $5,000 for 5 years. Which one of the following rates will provide him with the largest future value

7 percent interest, compounded annually

Todd and Cathy created a firm that is separate legal entity and will share ownership of that firm on a 50/50 basis. Which type of entity did they create if they have no personal liability for the firm's debt

Corporation

Net working capital is defined as

Current assets minus current liabilities

Lisa has $1,000 in cash today. Which one of the following investment options is most apt to double her money

8 percent interest for 9 years

Which of the following will decrease the future value of a lump sum investment made today assuming that all interest is reinvested. Assume the interest rate is a positive value

Decrease in the lump sum amount and decrease in the investment time period

Which one of the following will increase the profit margin of a firm, all else constant

Decrease in the tax rate

Will and Bill decided to create a business together renting surfboards in California. Will and Bill will equally share in the decision making and in the profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts

General Partnership

Corporate shareholders

Have the ability to change the corporation's bylaws

Terry invested $2,000 today in an investment that pays 6.5 percent annual interest. Which one of the following statements is correct, assuming all interest is reinvested

Terry could have the same future value and invest less than $2,000 initially if he could earn more than 6.5 percent interest

Which one of the following statements is true concerning the price-earnings ratio

A high PE ratio may indicate that a firm is expected to grow significantly

Which one of the following is included in net working capital

Accounts payable

Which one of the following applies to a general partnership

Any one of the partners can be held solely liable for all of the parntership's debts

Which one of the following statements concerning the balance sheet is correct

Assets are listed in descending order of liquidity

You would like to borrow money three years from now to build a new building. In preparation for applying for that loan, you are in the process of developing target rations for you firm. Which set of ratios represents the best target mix considering that you want to obtain outside financing in the relatively near future

Cash coverage ration = 2.6; debt-equity ratio = 0.3

Which one of the following will decrease the liquidity level of a firm

Cash purchase of inventory

Fred is the owner of a local feed store. Which one of the following ratios should he compute if he wants to know how long the store can pay its bills given the amount of cash the store currently has

Cash ratio

Which one of the following is an intangible fixed asset

Copyright

The Sarbanes-Oxley Act in 2002 was prompted by which one of the following from the 1990's

Corporate accounting and financial fraud

Which one of the following transactions will increase the liquidity of a frim

Credit Sale of inventory at cost

Which one of the following is a measure of long-term solvency

Equity Multiplier

The Du Pont identity can be totally defined by which one of the following

Equity multiplier and return on assets

Which one of the following is the correct formula for the future value of $500 invested today at 7 percent interest for 8 years

FV = $500(1+0.07)^8

All else equal, an increase in which one of the following will decrease owners' equity

Increase in Accounts payable

Sara is investing $1,000 today. Which one of the following will increase the future value of that amount

Increasing the interest rate

Which one of the following best matches the primary goal of financial management

Increasing the market value of the firm

If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which of the following financial ares

Investments

which of the following forms of business organization offers liability protection to some of its owners but not to all of its owners

Limited Partnership

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

Losses limited to capital invested

Which one of the following will decrease the net working capital of a firm

Making a Payment on a long-term debt

The T-shirt Hut successfully managed to reduce its general and administrative costs this year. This cost improvement will increase which of the following rations

Profit Margin, Return on Assets, and Return on Equity

Which of the following statements correctly applies to a sole proprietorship

Obtaining additional equity is dependent on the owner's personal finances

Which one of the following is the correct formula for computing the present value of $600 to be received in 6 years. The discount rate is 7 percent

PV = $600/(1+0.07)^6

All else constant, which one of the following will decrease if a firm increases its net income

Price-earnings ratio

Which one of the following statements concerning market and book values is correct

The market value tends to provide a better guide to the actual worth of an asset than does the book value

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

There must be at least one general partner

Common-size financial statements present all balance sheet account values as a percentage of

Total Assets

Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following rations would reflect this relationship

Total asset turnover

Which one of the following terms is defined as the total tax paid dividend by the total taxable income

average tax rate

The financial statement that summarized a firm's accounting value as of a particular date is called

balance sheet

Highly liquid assets

can be sold quickly at close to full value

The goal of financial management is to increase the

current market value per share

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

A firm has a current ratio of 1.4 and a quick ratio of 0.9. Given this, you know for certain that the firm

has positive net working capital

Financial leverage

increases the potential return to the shareholders

The relationship between the present value and the time period is best described as

inverse

Centre Bank pays 2.5 percent interest, compounded annually, on its savings accounts. Country Bank pays 2.5 percent simple interest on its savings accounts. You want to deposit sufficient funds today so that you will have $1,500 in your account 2 years from today. The amount you must deposit today

will be greater if you invest with Country Bank

The daily financial operations of a firm are primarily controlled by managing the

working capital

The ratios that are based on financial statement values and used for comparison purposes are called

Financial ratios


Related study sets

Intro to Business-Chapter 9: Career Planning and Development

View Set

Leadership Hesi Adaptive Quizing

View Set

Chapter 61: Assessment of the Endocrine System

View Set

Network Pro Final Study Set - Part 1

View Set