FIN202

3. Financial markets in which equity and debt instruments with maturities greater than one year are traded are called A. money markets. B. capital markets. C. stock markets. D. none of the above.

b

12. Cash dividends are paid out of: A. residual cash. B. liquidated assets. C. long-term debt. D. all of the above.

a

10. Which of the following is not a method of "benchmarking"? A. Conduct an industry group analysis B. Utilize the DuPont system to analyze a firm's performance C. Evaluating a single firm's performance over time D. Identify a group of firms that compete with the company being analyzed

b

2. Cash flows from financing activities include all but one of the following: A. cash payments on the principal of long-term debt. B. issuing and paying out on insurance contracts. C. cash purchases of treasury stock. D. cash proceeds from a bank loan.

b

2. If you have loaned capital to a firm, then you could be: A. a shareholder. B. a stakeholder. C. a partner. D. all of the above.

b

5. Which of the following business organizational forms is easiest to raise capital? A. sole proprietorship B. partnership C. corporation D. a and b

c

7. Which of the following is an appropriate goal for the firm? A. profit maximization B. revenue maximization C. shareholder wealth maximization D. tax minimization

c

1. Which one of the following is NOT a cash flow from operating activities? A. cash payments on the principal of long-term debt. B. payments for utilities and rent. C. payments to purchase raw materials. D. cash receipts from selling goods and services.

a

11. Which of the following factors or activities can be controlled by the management of a firm? A. Capital budgeting. B. The level of economic activity. C. The level of interest rates. D. Stock market conditions.

a

2. Gateway Corp. has an inventory turnover ratio of 5.6. What is the firm's days' sales in inventory? A. 65.2 days B. 64.3 days. C. 61.7 days. D. 57.9 days. [WU1]Days' sales in inventory = 365 / inventory turnover ratio

a

6. Trident Manufacturing Company's treasurer identified the following cash flows during this year as significant. It had repaid existing debt to the tune of $425,110, while raising additional debt capital of $750,000. It also repurchased stock in the open markets for a total of $63,250. It paid $233,144 in dividends to its shareholders. What is the net cash provided (used) by financing activities? A. $28,496 B. $91,746 C. -$28,496 D. -$91,746 [WU1]Cash inflows from financing activities = $750,000Cash outflows from financing activities = $425,110 + $63,250 + $233,144 = $721,504Net cash flows from financing activities = $750,000 - $721,504 = $28,496

a

8. One reason for the existence of agency problems between managers and shareholders is that A. there is a separation of ownership and control of the firm. B. managers know how to manage the firm better than shareholders. C. shareholders have unreasonable expectations about managerial performance. D. none of the above

a

9. In the latest year, Photon, Inc. reported $276,000 in net income. The firm maintains a debt ratio of 30% and has total assets of $3,000,000. What is Photon's return on equity? A. 13.1%. B. 14.6%. C. 22.5%. D. 18.7% [WU1]Total equity = 70% x total assets ROE = Net income / Total equity

a

3. Jet, Inc., has net sales of $712,478 and accounts receivables of $167,435. What are the firm's accounts receivables turnover and days' sales outstanding? A. 0.24 times; 78.5 days. B. 4.26 times; 85.7 days. C. 5.2 times; 61.3 days. D. None of the above. [WU1]Accounts receivables turnover = net sales / accounts receivables DSO = 365 / accounts receivables turnover

b

5. Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio? A. 0.60. B. 1.47 C. 1.74 D. 0 [WU1]Equity multiplier = 1 + Debt to equity Debt to equity = Equity multiplier -1 = 2.47 - 1 = 1.47

b

7. Super Grocers, Inc., provided the following financial information for the quarter ending September 30, 2006: What is the cash flow from operating activities generated during this quarter by the firm? A. $308,458 B. $374,468 C. -$374,468 D. -$308,458 [WU1]2008 Statement of Cash Flows ($ thousands)Operating ActivitiesNet income $341,463Additions (sources of cash)Depreciation and amortization 133,414Increase in accounts payable 62,411Decrease in marketable securities 31,225Subtractions (uses of cash)Increase in accounts receivable (112,709)Increase in inventories (81,336)Net cash provided by operating activities $374,468

b

9. An example of a direct agency cost is A. a manager turning down a value-contributing project because of its risks. B. a manager expensing a large dinner on the company expense report. C. a manager using too little debt within the firm's capital structure because of the additional risk associated with debt. D. all of the above

b

1. Capital budgeting involves A. how a firm's day-to-day financial matters should be managed. B how the firm should finance its assets. C. which productive assets the firm should employ. D. all of the above.

c

1. Which one of the following is NOT an advantage of using ROE as a goal? A. ROE is highly correlated with shareholder wealth maximization. B. ROE and the DuPont analysis allow management to break down the performance and identify areas of strengths and weaknesses. C. ROE does not consider risk. D. All of the above are advantages of using ROE as a goal.

c

10. If a firm establishes maximizing profits at the most important goal of the firm, which of the following would not be given proper consideration? A. Sales revenues B. Expenses C. Risk D. Cost of goods sold

c

10. Which of the following is a cash flow from investing activities? A. Cash payment of dividends to shareholders. B. Cash from sale of products. C. Purchase of plant, and equipment. D. Rent received from industrial property owned.

c

3. Which one of the following is NOT a cash flow from investing activities? A. buying and selling bonds or stock of other firms. B. buying or selling of land, buildings, and plant and equipment. C. cash payments of dividends to shareholders. D. issuing and paying out on insurance contracts.

c

4. Fahr Company had depreciation expenses of $630,715, interest expenses of $112,078, and an EBIT of $1,542,833 for the year ended June 30, 2006. What are the times interest earned and cash coverage ratios for this company? A. 19.4 times; 12.7 times B. 17.3 time; 11.4 times C. 13.8 times; 19.4 times D. None of the above [WU1]Times interest earned = EBIT / interest expenses Cash coverage = EBITDA / Interest expenses = (EBIT + depreciation) / Interest expenses

c

4. Trident Corporation had the following cash flows in the current year. Which one of the following is a financing activity cash flow? A. Rent on a warehouse amounting to $1.1 million B. Purchase of $125,000 worth of five-year bonds issued by Towson Utilities C. Preferred dividends to the tune of $330,000 paid to shareholders D. Lease income received on a piece of land

c

5. During 2008, Towson Recording Company increased its investment in marketable securities by $36,845, funded fixed assets acquisition by $109,455, and had marketable securities to the tune of $14,215 mature. What is the net cash provided (used) in investing activities? A. $132,085 B. $145,940 C. -$132,085 D. none of the above [WU1] Cash inflows from investing activities = $14,215Cash outflows from investing activities = $36,845 + $ 109,455 = $146,300Net cash flows from investing activities = $14,215 - $146,300 = $(132,085)

c

6. RTR Corp. has reported a net income of $812,425 for the year. The company's share price is $13.45, and the company has 312,490 shares outstanding. Compute the firm's price-earnings ratio? A. 4.87 times B. 8.12 times C. 5.17 times D. None of the above [WU1]Net income = $812,425 Share price = $13.45 EPS = $812,425 / 312, 490 = $2.60 P/E ratio = Share price / EPS

c

7. Juventus Corp has total assets of $4,744,288, total debt of $2,912,000, and net sales of $7,212,465. Their net profit margin for the year is 18 percent. What is Juventus's ROA? A. 25.6% B. 18% C. 27.4% D. None of the above [WU1]Total assets= $4,744,288; Total debt= $2,912,000 Net sales= $7,212,465; Net profit margin= 18% Net profit margin = Net income / Net sales => Net income = Net profit margin x Net sales ROA = Net income / Total assets

c

9. Which of the following presents a summary of the changes in a firm's balance sheet from the beginning of an accounting period to the end of that accounting period? A. The statement of retained earnings. B. The statement of working capital. C. The statement of cash flows. D. The statement of net worth.

c

11. Which of the following best represents cash flows to investors? A. Cash flow from operating activity, plus cash flow generated from net working capital. B. Earnings before interest and taxes times 1 minus the firm's tax rate. C. Net income, minus dividends paid to preferred stockholders. D. Cash flow from operating activity, minus cash flow invested in net working capital, minus cash flow invested in long-term assets.

d

4. Which of the following business organizational forms creates a tax liability on income at the personal income tax rate? A. sole proprietorship B. partnership C. corporation D. a and b

d

6. Which of the following is responsible for performing an independent audit of the firm's financial statements? A. CFO B. CEO C. CPA firm D. audit committee

d

8. GenTech Pharma has reported the following information: Sales/Total assets = 2.89; ROA = 10.74%; ROE = 20.36% What are the firm's profit margin and equity multiplier? A. 7.1%; 0.53 B. 7.1%; 1.90 C. 3.7%; 0.53 D. 3.7%; 1.90 [WU1]Total assets turnover = 2.89 ROA = 10.74% ROE = 20.36% ROA = Profit margin x Total assets turnover => Profit margin = ROA / Total assets turnover ROE = ROA x Equity multiplier => Equity multiplier = ROE / ROA

d

8. Which of the following is an income statement item? A. Accumulated depreciation. B. Accrued taxes. C. Retained earnings. D. Selling and administrative expenses

d