Fundamental Decision of Financial Management

Midterm Exam Part I

Question 2

Which of the following cannot be engaged in managing the business?

a limited partner
a general partner
a sole proprietor
none of these
Question 2 1 / 1 point

One reason for the existence of agency problems between managers and share  holders is that:

managers know how to manage the firm better than shareholders.
there is a separation of ownership and control of the firm.
shareholders have unreasonable expectations about managerial performance.
none of these.
Question 3 1 / 1 point

On June 23, 20X8, Mikhal Cosmetics sold  $250,000 worth of its products  to Rynex Corporation. The goods were shipped to Rynex on July 2. The payment from Rynex was received on September 20.  Under the “cash basis of accounting” revenue should be recorded on:

June 23, 20X8.
July 2, 20X8.
September 20, 20X8.
none of the above
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Question 4 1 / 1 point

During the last year, Sigma Co had Net Income of $156, paid $20 in dividends, and sold new stock for $37. Beginning equity for the year was $600. Ending equity was

Answer:

773
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Question 5 1 / 1 point

The following items are components of a traditional balance sheet. How much are the total assets of the firm?

 

Plant and equipment $42,500
Common stock  15,000
Cash    5,200
Inventory  22,000
Bad debt reserve     6,000
Additional paid-in capital     6,000
Accumulated depreciation  28,800
Accounts receivable  22,000

Answer:

56,900
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Question 6 1 / 1 point

Book value is the value of a company according to its balance sheet. Market value is the value of the company in the eyes of the stock market.

True
False
Question 7 1 / 1 point

When evaluating a Statement of Cash Flows, which of the following would be considered an example(s) of cash flow from financing activities?

Depreciation
Capital Expenditure
Repayment of Bank Loan
All of the Above
Question 8 1 / 1 point

When reviewing a Balance Sheet, which of the following items would you expect to find under Assets?

A. Cash
B. Accounts Payable
C. Inventory
A & B
A & C
Question 9 1 / 1 point

Cameron Balance Sheet

Accounts Payable and Accruals 28
Accounts Receivable 62
Accumulated Depreciation (175)
Cash 39
Common Stock 120
Fixed Assets (gross) 390
Inventory 125
Long-Term Debt 200
Retained Earnings 65

What is Cameron Inc.’s Net Working Capital?

Answer:

198
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Question 10 1 / 1 point

A firm’s current ratio is 1.2, and its quick ratio is 1.0. If its current liabilities are $13,600, what are its inventories?

Answer:

2,720
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Question 11 1 / 1 point

Iris Income Statement

Cost of Goods Sold 340
Depreciation Expense 35
Interest Expense 20
Operating Expense (excluding depreciation) 115
Sales 770
   

What was Iris Inc.’s earnings before interest and taxes (EBIT)?

Answer:

280
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Question 12 1 / 1 point

Iris Balance Sheet

Accounts Payable and Accruals 65
Accounts Receivable 50
 
Accumulated Depreciation (175)
Cash 34
Common Stock 120
Fixed Assets (gross) 390
Inventory 127
Long-Term Debt 200
Retained Earnings 65

What is Iris Inc.’s Total Assets?

Answer:

426
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Question 13 1 / 1 point

If firm A has a higher debt-to-equity ratio than firm B, then

firm A has a lower equity multiplier than firm B.
firm B has higher financial leverage than firm A.
firm B has a lower equity multiplier than firm A.
none of the above
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Question 14 1 / 1 point

Flying Tigers, Inc., has net sales of $744,000 and  accounts receivables of $166,000. What is the firm’s accounts receivables  turnover? (Give your answer upto two decimal places)

Answer:

4.48
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Question 15 1 / 1 point

Reagan Corp. has reported a net income of $811,200 for the year. The company’s share  price is $13.72, and the company has 323,710 shares outstanding. Compute the  firm’s price-earnings ratio upto two decimal places.

Answer:

5.47
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Question 16 1 / 1 point

You purchased a piece of property for $30,000 nine years ago and sold it today for $83,190. What was the annual rate of return on your investment?

9%
10%
11%
12%
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Question 17 1 / 1 point

The First National Bank has agreed to lend you $30,000 today, but you must repay $42,135 in 3 years. What rate is the bank is charging you?

13%
12%
11%
10%
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Question 18 1 / 1 point

The Florida lottery agrees to pay the winner $257,000 at the end of each year for the next 20 years. What is the future value of this prize if each payment is put in an account earning 0.07?

Answer:

10,535,841.53
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Question 19 1 / 1 point

Which of the following is not a “Fundamental Decision of Financial Management”?

The capital budgeting decision
The macroeconomic management decision
The financing decision
Working capital management decision
Question 20 1 / 1 point

Which of the following is least likely to be part of an Annual Report?

financial tables
discussions of the firm’s product lines, its services to its customers, and its contributions to the communities in which it operates
audited financial statements
ratio analysis of other firms in the same industry
Attempt Score:

20 / 20 – 100 %

Overall Grade (highest attempt):

20 / 20 – 100 %

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