1. Which of the following would improve ROE?
a. Decreasing cost of goods sold while maintaining current level of sales
b. Increasing sales and increasing interest expense by the same amount
c. Issuing common equity to the market
d. Decreasing gross margin
e. There is insufficient information...
MGMT 310 Final Exam || A+ Graded Already.
1. Which of the following would improve ROE?
a. Decreasing cost of goods sold while maintaining current level of sales
b. Increasing sales and increasing interest expense by the same amount
c. Issuing common equity to the market
d. Decreasing gross margin
e. There is insufficient information provided correct answers a. Decreasing cost of goods sold
while maintaining current level of sales
2. You are comparing financial statements of a firm to the pro forma statement for next year. The
pro forma is based on a 4% increase in sales. The firm is currently operating at 85% capacity.
NWC and all costs vary directly with sales. The tax rate and dividend payout ratio are fixed.
What must be true?
a. Projected dividends equal the current cash dividend amount
b. Depreciation will decrease by 4%
c. RE will increase by 85% of the projected income
d. Total assets will increase by less than 4%
e. Total liabilities and equity will increase by 4% correct answers d. Total assets will increase by
less than 4%
3. External Financing need is financed by which of the following?
a. Equity, RE, Debt, Cash Reserves correct answers Equity & Debt
4. Double taxation refers to:
a. A firm pays taxes on earnings and dividends paid
b. A firm pays taxes on earnings and when those earnings are repatriated to the home country of
the firm
c. A firm pays taxes on earnings and the investor pays taxes on dividends received from the firm
d. A firm pays both sales tax and income tax
e. None of the above correct answers c. A firm pays taxes on earnings and the investor pays taxes
on dividends received from the firm
5. Which of the following accounts are included in working capital management?
a. Accounts payable, accounts receivable, fixed assets, inventory correct answers Everything but
fixed assets
6. Zhao has sales of $6000, total assets of $4200, and a debt-equity ratio of 0.4. What is ROE if
net income is $450?
a. 4.29%
b. 26.79%
c. 10.71%
d. 200%
e. 15% correct answers 15%
, 7. What is ROA based on information? ROE= 13.98%, Profit Margin= 15.71%, Total Asset
Turnover= 0.64, EM= 1.39.
a. 10.05%
b. 21.84%
c. 88.96%
d. 12.46%
e. 13.98% correct answers a. 10.05%
8. A firm has 160,000 shares outstanding, sales of $1.94 million, NI = $126,400, price-earnings
ratio of 21.3, BV per share of $12.01. What is the market-book ratio?
a. 1.84
b. 2.12
c. 1.40
d. 2.45
e. 2.69 correct answers 1.40
9. Which of the following individuals have unlimited liability based on ownership interest?
a. General partner, sole proprietor, stockholder, limited partner correct answers General & SP
10. Dietz paid $1300 in dividends and $920 in interest this past year. Common stock increased
by $1200 and RE increased by $310. What is the NI?
a. -$210
b. $990
c. $1610
d. $1910
e. $2190 correct answers $1610
11. Hunter paid $100 in dividends and $511 in interest expense. The addition to RE is $418 and
new net equity is $500. The tax rate is 35%. Sales are $15,900 and depreciation is $680. What is
EBIT?
a. $589.46
b. $1294.46
c. $1307.92
d. $9560.85
e. $15,220.00 correct answers $1307.92
12. Which of the following best describes the primary goal of financial management?
a. Maximize current value per share
b. Maximize current dividend per share
c. Increase cash flow and avoid financial distress
d. Minimize operational costs while maximizing firm efficiency
e. Maintain steady growth while increasing current profits correct answers a. Maximize current
value per share
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