FIN (3601) Corporate Finance Exam 1

?

Use the following information to calculate the firm's return-on-equity (ROE) as of the end of 2016:

?

Use the following information to calculate this firm's days' sales in inventory as of the end of 2016:

1.2

Use the following information to calculate this firm's fixed asset turnover ratio as of the end of 2016:

1.24

Use the following information to calculate this firm's quick ratio as of the end of 2016:

10.79

Use the following information to calculate this firm's times interest expense (TIE) ratio as of the end of 2016:

I. and IV. only.

Which of the following are expenses for accounting purposes but are not operating cash flows for financial purposes? I. Interest expense II. Tax expense III. Cost of goods sold (COGS) IV. Depreciation expense

Equity multiplier, profit margin, and total asset turnover.

Which one of the following accurately describes the three parts of the DuPont identity?

Increasing current profits when doing so lowers the value of the firm's equity.

Which one of the following actions by a financial manager is most apt to create an agency problem?

Maximize the current market value per share.

Which one of the following best states the primary goal of financial management?

Establishing the preferred debt-equity level.

Which one of the following is a capital structure decision?

decrease in accounts payable

Which one of the following is a use of cash?

Determining whether to pay cash for a purchase or use the credit offered by the supplier.

Which one of the following is a working capital management decision?

Inventory

Which one of the following is included in net working capital?

Reputation of the firm

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

Compensating managers with shares of stock that must be held for three years before the shares can be sold

Which one of the following is most apt to align management's priorities with shareholders' interests?

Income Statement

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

The owner of a sole proprietorship is personally responsible for all of the company's debts

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

Agency Problem

Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?

Capital budgeting

Which one of the following terms is defined as the management of a firm's long-term investments?

Corporation

Which type of business organization has all the respective rights and privileges of a legal person?

It helps to lower firms taxes

Why do accountants include depreciation expense in their calculation of net income despite the fact that no cash actually leaves the firm?

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

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 ratios for your firm. Which set of ratios represents the best target mix considering that you want to obtain outside financing in the relatively near future?

118.59

3M Company's current price is $198.65 per share. Assuming that 3M currently has 597,000,000 shares outstanding, its current market cap is:

General partnership

A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:

$39.19%

A firm has inventory of $11,400, accounts payable of $9,800, cash of $850, net fixed assets of $12,150, long-term debt of $9,500, accounts receivable of $6,600, and total equity of $11,700. What is the common-size percentage for the net fixed assets?

A decrease in total assets

All else equal, which one of the following will increase the internal growth rate?

Decrease in the quick ratio

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.

$93,500

Bonner Automotive has shareholders' equity of $218,700. The firm owes a total of $141,000 of which 40 percent is payable within the next year. The firm has net fixed assets of $209,800. What is the amount of the net working capital? Report your answer with no symbols (i.e. $ or commas)

dividends paid minus net new equity raised.

Cash flow to stockholders is defined as:

free cash flows

Common-size financial statements present all income statement account values as a percentage of:

have limited liability

Corporate shareholders:

41.56%

Downtown Computer has sales of $521,000, a profit margin of 14.8 percent, a total asset turnover rate of 2.16, and an equity multiplier of 1.30. What is the return on equity?

II and III only

Fanny Rose Candy Shop reduced its fixed assets this year without affecting the shop's operations, sales, or equity. This reduction will increase which of the following ratios? I. Interval measure II. Return on assets III. Total asset turnover IV. Return on equity

Depreciation expense

For a tax-paying firm, an increase in _____ will cause the cash flow from assets to increase.

$51,811

GT Metals paid $27,500 in dividends and $28,311 in interest over the past year while net working capital increased from $13,506 to $18,219. The company purchased $42,000 in net new fixed assets and had depreciation expenses of $16,805. During the year, the firm issued $25,000 in net new equity and paid off $21,000 in long-term debt. What is the amount of cash flow from assets?

Has an equity multiplier of 1.0.

If a firm produces a 13 percent return on assets and also a 13 percent return on equity, then the firm:

the size; the cut

In class, we learned that the capital budgeting decisions of managers determine ___________ of the "pie", while capital structure decisions determine __________ of the "pie".

I, II, III, and IV.

Maria is the sole proprietor of an antique store that she has operated at the same location for the past 16 years. The store rents the space in which it is located but does own all of the inventory and fixtures. The store has an outstanding loan with the local bank but no other debt obligations. There are no specific loan covenants or 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 use the cash raised to apply to the debt II. Sell the store fixtures and use the cash raised to apply to the debt III. Take 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

Expenses which do not directly affect cash flows

Non-cash items refer to:

10.53 percent

Suppose IBM has a total asset turnover of 1.46 percent, a profit margin of 8.00 percent, an equity multiplier of 1.20, and a dividend payout ratio of 32.00 percent. What is IBM's sustainable growth rate?

$74,900

The Andersons, Inc. (Ticker: ANDE (Links to an external site.)) is an agriculture company which operates in the grain, ethanol, plant nutrient, and rail sectors in the United States and internationally. Suppose that ANDE currently has $3,600 in cash and that the firm owes $41,800 to suppliers for merchandise and $21,500 to the bank for a long-term loan. Customers, in turn, owe The Andersons, Inc. $18,000 for their purchases. The inventory has a book value of $53,300, but an estimated market value of $61,200. If the company compiled a balance sheet as of today, what would be the book value of the current assets?

$1,400

The Norsk Nook had current assets of $67,200 and current liabilities of $71,100 last year. This year, the current assets are $82,600 and the current liabilities are $85,100. The depreciation expense for the past year is $9,600 and the interest paid is $8,700. What is the amount of the change in net working capital?

7.24%

The Soccer Shoppe has a 9 percent return on assets and a 25 percent payout ratio. What is its internal growth rate?

$69,800

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? Note: Do note include any symbols with your answers (e.g. $ or a comma).

ability of a firm to pay the interest on its debt.

The cash coverage ratio is used to evaluate the:

Maximum growth rate achievable excluding external financing of any kind.

The internal growth rate of a firm is best described as the:

The percentage of net income available to the firm to fund future growth.

The plowback ratio is:

Working capital

The short-run, day-to-day financial operations of a firm are primarily controlled by managing the: