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CORPORATE FINANCE EXAM QUESTIONS AND ANSWERS #7.
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CORPORATE FINANCE EXAM QUESTIONS ANDANSWERS #7
Jenna has been promoted and is now in charge of all external financing. In other words,
she is in charge of: - correct answer Capital Structure Management
Matt and Alicia created a firm that is a separate legal entity and will share ownership of
that firm on a 75/25 basis. Which type of entity did they create if they have no personal
liability for the firm's debts? - correct answer Corporation
Which one of the following statements about a limited partnership is correct? - correct
answer TBD
One advantage of the corporate form of organization is the: - correct answer Ability to
raise larger sums of equity capital than other organizational forms.
The Sarbanes-Oxley Act of 2002 has: - correct answer essentially made officers of
publicly traded firms personally responsible for the firm's financial statements.
Which one of the following situations is most apt to create an agency conflict? - correct
answer Basing management bonuses on the length of employment.
An agency issue is most apt to develop when: - correct answer the control of a firm is
separated from the firm's ownership.
A firm has common stock of $99, paid-in surplus of $360, total liabilities of $455, current
assets of $480, and net fixed assets of $690. What is the amount of the shareholders'
equity? - correct answer $715
Recently, the owner of Martha's Wares encountered severe legal problems and is trying
to sell her business. The company built a building at a cost of $1,270,000 that is
currently appraised at $1,470,000. The equipment originally cost $750,000 and is
currently valued at $497,000. The inventory is valued on the balance sheet at $440,000
but has a market value of only one-half of that amount. The owner expects to collect 98
percent of the $240,200 in accounts receivable. The firm has $10,800 in cash and owes
a total of $1,470,000. The legal problems are personal and unrelated to the actual
business. What is the market value of this firm? - correct answer $963,196
Ivan's, Inc., paid $470 in dividends and $580 in interest this past year. Common stock
increased by $190 and retained earnings decreased by $116. What is the net income
for the year? - correct answer $354
You find the following financial information about a company: net working capital =
$1,140; fixed assets = $6,345; total assets = $8,670; and long-term debt = $4,671. What
are the company's total liabilities? - correct answer $5,856
, You find the following financial information about a company: net working capital =
$963; fixed assets = $7,041; total assets = $11,558; and long-term debt = $4,277. What
is the company's total equity? - correct answer $3,727
At the beginning of the year, Shinedown, Corp., had a long-term debt balance of
$45,630. During the year, the company repaid a long-term loan in the amount of
$11,055. The company paid $3,940 in interest during the year, and opened a new long-
term loan for $9,840. How much is the ending long-term debt account on the company's
balance sheet? - correct answer $44,415
A firm has sales of $1,210, net income of $225, net fixed assets of $542, and current
assets of $298. The firm has $100 in inventory. What is the common-size balance sheet
value of inventory? - correct answer 11.90%
A firm has total debt of $1,410 and a debt-equity ratio of .26. What is the value of the
total assets? - correct answer $6,833.08
Lee Sun's has sales of $3,450, total assets of $3,150, and a profit margin of 6 percent.
The firm has a total debt ratio of 42 percent. What is the return on equity? - correct
answer 11.33 percent
Jupiter Explorers has $8,800 in sales. The profit margin is 4 percent. There are 5,300
shares of stock outstanding, with a price of $1.60 per share. What is the company's
price-earnings ratio? - correct answer 24.09 times
A firm has a return on equity of 23 percent. The total asset turnover is 2.2 and the profit
margin is 6 percent. The total equity is $5,600. What is the net income? - correct answer
$1,288
Windswept, Inc.
2017 Income Statement
($ in millions)
Net sales$12,050
Cost of goods sold 7,800
Depreciation 480
Earnings before interest and taxes $3,770
Interest paid 94
Taxable income $3,676
Taxes 1,287
Net income$2,389
Windswept, Inc.
2016 and 2017 Balance Sheets
($ in millions)
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