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FINC330 MIDTERM

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Question;1);Managerial finance;A) involves tasks such as budgeting;financial forecasting, cash management, and funds procurement.;B);involves the design and delivery of advice and financial products.;C);recognizes funds on an accrual basis.;D);devotes the majority of its attention to the collection and presentation of;financial data.;2);High cash flow is generally associated with a higher share price whereas higher;risk tends to result in a lower share price.;A) True;B);False;3);When considering each financial decision alternative or possible action in;terms of its impact on the share price of the firm's stock, financial managers;should accept only those actions that are expected to increase the firm's;profitability.;A);True;B) False;4);The wealth of corporate owners is measured by the share price of the stock.;A) True;B);False;5);The profit maximization goal ignores the timing of returns, does not directly;consider cash flows, and ignores risk.;A);True;B) False;6;Stockholders expect to earn higher rates of return on investments of lower risk;and lower rates of return on investments of higher risk.;A);True;B) False;7);The primary goal of the financial manager is;A);minimizing risk.;B);maximizing profit.;C) maximizing wealth.;D);minimizing return.;8);Profit maximization as a goal is not ideal because it does NOT directly;consider;A) risk and cash flow.;B);cash flow and stock price.;C);risk and EPS.;D);EPS and stock price.;9);An effective ethics program can;A);weakened corporate value.;B);had no effect on a corporation's value;C) enhance a corporation's value.;D);be thought of as unimportant to corporate owners.;10);Johnson, Inc. has just ended the calendar year making a sale in the amount of;$10,000 of merchandise purchased during the year at a total cost of $7,000.;Although the firm paid in full for the merchandise during the year, it has yet;to collect at year end from the customer. The net profit and cash flow from;this sale for the year are;A) $3,000 and $10,000, respectively.;B);$3,000 and -$7,000, respectively.;C);$7,000 and -$3,000, respectively.;D);$3,000 and $7,000, respectively.;11);Marginal analysis states that financial decisions should be made and actions;taken only when;A);demand equals supply.;B);benefits equal costs.;C) added benefits exceed added costs.;D);added benefits are greater than zero.;12);One way often used to insure that management decisions are in the best interest;of the stockholders is to;A);threaten to fire managers who are seen as not performing adequately.;B);remove management's perquisites.;C) tie management compensation to the;performance of the company's common stock price.;D);tie management compensation to the level of earnings per share.;13);The Sarbanes-Oxley Act of 2002 was passed in response to;A);insider trading activities.;B) false disclosures in financial;reporting.;C);the decline in technology stocks.;D);all of the above;14);The key participants in financial transactions are individuals, businesses, and;governments. Individuals are net ________ of funds, and businesses are net;of funds.;A);demanders, suppliers;B);users, providers;C) suppliers, demanders;D);purchasers, sellers;15);An efficient market is a market that allocates funds to their most productive;use as a result of competition among wealth-maximizing investors.;A) True;B);False;16);The primary risk of mortgage-backed securities is;A);that the prices of housing will go down.;B);that the prices of housing will increase.;C);that the government will not be able to meet the guarantees on the cash flows.;D) that homeowners may not be able;to, or choose not to, repay their loans.;17);The marginal tax rate represents the rate at which additional income is taxed.;A);True;B) False;18);Retained earnings represent the cumulative total of all earnings retained and;reinvested in the firm since its inception.;A) True;B);False;19);The stockholder's annual report must include;A);a statement of cash flows.;B);an income statement.;C);a balance sheet.;D);a statement of retained earnings.;E) all of the above.;20);Gross profits are defined as;A);operating profits minus depreciation.;B);operating profits minus cost of goods sold.;C);sales revenue minus operating expenses.;D) sales revenue minus cost of goods;sold.;21);A firm had the following accounts and financial data for 2005.;The;firm's earnings available to common shareholders for 2005 were;A);-$224.25;B);$195.40;C) $302.40;D);$516.60;22);A firm had the following accounts and financial data for 2005.;The;firm's net profit after taxes for 2005 was ________.;A);-$206.40;B);$213.80;C) $320.40;D);$206.25;23);The firm's creditors are primarily interested in the short-term liquidity of;the company and its ability to make interest and principal payments.;A) True;B);False;24);Ratio analysis merely directs the analyst to potential areas of concern, it;does not provide conclusive evidence as to the existence of a problem.;A) True;B);False;25);In ratio analysis, the financial statements being used for comparison should be;dated at the same point in time during the year. If not, the effect of;seasonality may produce erroneous conclusions and decisions.;A) True;B);False;26);analysis involves the comparison of different firms' financial ratios;at the same point in time.;A);Time-series;B) Cross-sectional;C);Marginal;D);Quantitative;27);The primary concern of creditors when assessing the strength of a firm is the;firm's;A);profitability.;B);leverage.;C) short-term liquidity.;D);share price;28);The analyst should be careful when conducting ratio analysis to ensure that;A);the overall performance of the firm is not judged on a single ratio.;B);the dates of the financial statements being compared are the same.;C);audited statements are used.;D);the same accounting procedures were used.;E) all of the above.;29);The current ratio provides a better measure of overall liquidity only when a;firm's inventory cannot easily be converted into cash. If inventory is liquid;the quick ratio is a preferred measure of overall liquidity.;A);True;B) False;30);The ________ measures the percentage of each sales dollar remaining after ALL;expenses, including taxes, have been deducted.;A) net profit margin;B);operating profit margin;C);gross profit margin;D);earnings available to common shareholders;Table 3.2;Dana Dairy;Products Key Ratios;Income Statement;Dana Dairy;Products;For the Year;Ended December 31, 2010;Balance Sheet;Dana Dairy;Products;December 31, 2010;31);The current ratio for Dana Dairy Products in 2005 was ________. (See Table 3.2);A);1.58;B);0.63;C);1.10;D) 0.91;32);Since 2009, the liquidity of Dana Dairy Products ________. (See Table 3.2);A) has deteriorated;B);remained the same;C);has improved;D);cannot be determined;33);The inventory turnover for Dana Dairy Products in 2010 was ________. (See Table;3.2);A);43;B);5;C) 20;D);25;34);The average collection period for Dana Dairy Products in 2010 was (See Table;3.2);A) 32.5 days.;B);11.8 days.;C);25.3 days.;D);35.9 days.;35);If Dana Dairy Products has credit terms which specify that accounts receivable;should be paid in 25 days, the average collection period ________ since 2009.;(See Table 3.2);A) has deteriorated;B);remained the same;C);has improved;D);cannot be determined;36);The debt ratio for Dana Dairy Products in 2010 was ________.(See Table 3.2);A);50 percent;B);11 percent;C) 55 percent;D);44 percent;37);Dana Dairy Products' gross profit margin was inferior to the industry standard.;This may have resulted from ________. (See Table 3.2);A);a high sales price.;B) the high cost of goods sold.;C);excessive selling and administrative expenses.;D);excessive interest expense.;38);The gross profit margin and net profit margin for Dana Dairy Products in 2010;were ________. (See Table 3.2);A) 13 percent and 0.9 percent;respectively.;B);13 percent and 1.5 percent, respectively.;C);2 percent and 0.9 percent, respectively.;D);2 percent and 1.5 percent, respectively.;39);The return on total assets for Dana Dairy Products for 2010 was ________. (See;Table 3.2);A);0.9 percent;B);5.5 percent;C) 25 percent;D);2.5 percent;40);The return on equity for Dana Dairy Products for 2010 was ________. (See Table 3.2);A);0.6 percent;B);5.6 percent;C) 0.9 percent;D);50 percent;41);A corporation;A);must use the same depreciation method for tax and financial reporting purposes.;B) must use different depreciation;methods for tax and financial reporting purposes.;C);may use different depreciation methods for tax and financial reporting;purposes.;D);must use different (than for tax purposes), but strictly mandated, depreciation;methods for financial reporting purposes.;42);Given the financial manager's preference for faster receipt of cash flows;A);a longer depreciable life is preferred to a shorter one.;B) a shorter depreciable life is;preferred to a longer one.;C);the manager is not concerned with depreciable lives, because depreciation is a;non-cash expense.;D);the manager is not concerned with depreciable lives, because once purchased;depreciation is considered a sunk cost.;43);A corporation sold a fixed asset for $100,000. This is;A) an investment cash flow and a;source of funds.;B);an operating cash flow and a source of funds.;C);an operating cash flow and a use of funds.;D);an investment cash flow and a use of funds.;44);Pro forma statements are used for;A) cash budgeting.;B);credit analysis.;C);profit planning.;D);leverage analysis.;45);The future value of $100 received today and deposited at 6 percent for four;years is;A) $126.;B);$ 79.;C);$124.;D);$116.;46);The present value of $100 to be received 10 years from today, assuming an;opportunity cost of 9 percent, is;A);$236.;B);$699.;C) $ 42.;D);$ 75.;47);Bill plans to fund his individual retirement account (IRA) with the maximum;contribution of $2,000 at the end of each year for the next 20 years. If Bill;can earn 12 percent on his contributions, how much will he have at the end of;the twentieth year?;A);$19,292;B);$14,938;C);$40,000;D) $144,104;48);The risk free rate of interest is equal to the sum of the real rate of interest;plus an inflation risk premium.;A) True;B);False;49);The tax deductibility of interest lowers the cost of debt financing, thereby;causing the cost of debt financing to be lower than the cost of equity;financing.;A) True;B);False;50);If expected return is less than required return on an asset, rational investors;will;A) buy the asset, which will drive;the price up and cause expected return to reach the level of the required;return.;B);sell the asset, which will drive the price down and cause the expected return;to reach the level of the required return.;C);sell the asset, which will drive the price up and cause the expected return to;reach the level of the required return.;D);buy the asset, since price is expected to increase.;51);Tangshan China Company's stock is currently selling for $80.00 per share. The;expected dividend one year from now is $4.00 and the required return is 13;percent. What is Tangshan's dividend growth rate assuming that dividends are;expected to grow at a constant rate forever?;A);8%;B);9%;C) 10%;D);11%

 

Paper#45462 | Written in 18-Jul-2015

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