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Corporate Finance Questions and Correct Answers & Latest Updated £10.24   Add to cart

Exam (elaborations)

Corporate Finance Questions and Correct Answers & Latest Updated

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  • Module
  • Corporate Finance
  • Institution
  • Corporate Finance

The higher the degree of financial leverage employed by a firm, the o :## Higher the probability that the firm will encounter financial distress. When net working capital is negative o :## The PE ratio falls within which of the following classifications of financial ratios? o :## Market value...

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  • August 25, 2024
  • 26
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • Corporate Finance
  • Corporate Finance
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1|Page: 2024/2025 Grade A+




Corporate Finance Questions and Correct
Answers & Latest Updated
The higher the degree of financial leverage employed by a firm, the


o :## Higher the probability that the firm will encounter financial distress.



When net working capital is negative


o :##



The PE ratio falls within which of the following classifications of financial ratios?


o :## Market value measures



In corporate finance the term dilution is used for


o :## Determine the loss in existing shareholder value.



A firm has total debt of $4,850 and a debt-equity ratio of 0.57. What is the value of the total

assets?


o :## Total equity = $4,850/0.57 = $8,508.77Total assets = $4,850 + $8,508.77 = $13,358.77



A firm generated net income of $911. The depreciation expense was $47 and dividends

were paid in the amount of $25. Accounts payables increased by $15, accounts receivables

increased by $28, inventory decreased by $14, and net fixed assets decreased by $8. There

was no interest expense. What was the net cash flow from operating activity?


o :## Net cash from operating activities = $911 + 47 + 15 - 28 + 14 =$959



Master01: DO NOT COPY AND PASTE!! August 25, 2024 Latest Update

,2|Page: 2024/2025 Grade A+


Outdoor Living needs $14.6 million to finance updates and additions to its production

equipment. The underwriters estimate that the firm could sell additional shares of stock at

$23.50 a share with an underwriting spread of 7.75 percent. This would be a firm

commitment underwriting. The estimated issue costs are $368,000. How many shares of

stock will Outdoor Living need to sell to finance this project? (Round up to the next whole

share.)


o :## 690,446 shares



Total value of issue = ($14,600,000 + 368,000) / (1 - .0775) = $16,225,474.25

Number of shares needed = $16,225,474.25 / $23.50 = 690,445.71, or 690,446 shares




In 2015, a firm has sales revenue of $2,525, a cost of goods sold of $1,010, other expenses

of$552,depreciation of $25, interest of $10, and taxes of $220. What's the firm's profit

margin?


o :## 28.04 percent



Which one of the following functions should be the responsibility of the controller rather

than the treasurer?


o :## Income Tax Returns



Suppose that a corporation has a taxable income of $325,000. Using the following table,

what's the firm's average tax rate?


o :## 33.846 percent



Master01: DO NOT COPY AND PASTE!! August 25, 2024 Latest Update

, 3|Page: 2024/2025 Grade A+


How is return on equity measured?


o :## Net Income divided by Total Equity



If a firm has $8,750 in earnings before interest and taxes, $725 in depreciation expense, and

$3,062 in taxes, what's the firm's operating cash flow?


o :## $6,413



Alberto currently owns 2500 shares of southern tools. he has just been notified that the firm

is issuing additional shares and he is being given a chance to purchase some of these shares

prior to the shares being offered to the general public. what is this type of an offer called?


o :## Rights Offer



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?


o :## Net working capital = current assets - current liabilities



141,000(0.6) + 218,700 - 209,800 = 93,500




A firm has sales of $3340, net income of $274, net fixed assets of $2600, and current assets

of $920. The firm has $430 in inventory. What is the common-size statement value of

inventory?


o :## 12.22%




Master01: DO NOT COPY AND PASTE!! August 25, 2024 Latest Update

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