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CORPORATE FINANCE EXAM WITH CORRECT ANSWERS #18
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CORPORATE FINANCE EXAM WITH CORRECT ANSWERS #18A sole proprietorship:
A. Is taxed the same as a C corporation.
B . Can generally raise large sums of capital quite easily.
C. Has a limited life.
D. Can transfer ownership of the firm more easily than a corporation can.
E. Is the most regulated form of organization. - correct answer C. Has a limited life.
Cash flow from assets is also known as the firm's:
A. Capital structure.
B. Free cash flow.
C. Historical cash flow.
D. Equity structure.
E. Hidden cash flow. - correct answer B. Free cash flow.
At the beginning of the year, Smidovec Plumbing had current liabilities of $15,932 and
total debt of $68,847. By year end, current liabilities were $13,870 and total debt was
$72,415. What is the amount of net new borrowing for the year? - correct answer
(72415-13870) - (68847-15932)
= $5,630
Which one of these is the least important factor to consider when comparingthe financial
situations of utility companies that generate electric power and have the same SIC
code?
A. Methods of power generation
B. Type of ownership
C. Government regulations affecting the firm
D. Fiscal year end
E Number of part-time employees - correct answer E Number of part-time employees
Which one of the following actions by a financial manager is most apt to create an
agency problem?
A. Agreeing to pay bonuses based on the market value of the company's stock rather
than on its level of sales
B. Refusing to borrow money when doing so will create losses for the firm
C. Refusing to lower selling prices if doing so will reduce the net profits
D. Increasing current profits when doing so lowers the value of the company's equity
E. Refusing to expand the company if doing so will lower the value of the equity -
correct answer D. Increasing current profits when doing so lowers the value of the
company's equity
, Hello Robin! Has accounts receivable of $4,511, inventory of $1,810, sales of $138,609,
and cost of goods sold of $64,003. How many days does it take the firm to sell its
inventory and collect the payment on the sale assuming that all sales are on credit? -
correct answer Days in inventory = 365 / ($64,003 / $1,810) = 10.322 daysdays' sales in
receivables = 365 / ($138,609 / $4,511) = 11.879 daystotal days in inventory and
receivables = 10.322 + 11.879 = 22.20 days
Steele Video has sales of $96,400, costs of $53,800, interest paid of $2,800, and
depreciation of $7,100. The tax rate is 21 percent. What is the value of the cash
coverage ratio? - correct answer sales - operating expenses - depreciation. (EBIT +
Depreciation) / Interest
=96400-53800-7100
= 35500
=(35500+7100)/2800
= 15.21428571
Pavlak Surveyors has beginning current assets of $1,360, beginning current liabilities of
$940, ending current assets of $1,720, and ending current liabilities of $1,080. What is
the change in net working capital? - correct answer =(1720-1080)-(1360-940)
= 220
Boutique Marketing has total debt of $4,910 and a debt-equity ratio of .52. What is the
value of the total assets? - correct answer 4910/0.52 then add to original amount
=. $14,352.31
Parsa's Organics currently has $56 in debt for every $100 in equity. If the company
were to use some of its cash to decrease its debt, while maintaining its current equity
and net income, which one of the following would decrease?
A. Return on equity
B. Total asset turnover
C. Equity multiplier
D. Return on assets
E. Net profit margin - correct answer C. Equity multiplier
All other things beings equal, and assuming all ratios have positive values, an increase
in current liabilities will:
A. Decrease the quick ratio.
B. Increase the current ratio.
C. Decrease the cash coverage ratio.
D. Increase the net working capital to total assets ratio.
E. Increase the cash ratio - correct answer A. Decrease the quick ratio.
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