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kaplan mt482 unit 1,4,5,7,8,9 quizes

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Question;Question 1. Question:Which of the following statements regarding the intrinsic value of a company is correct?It can be calculated as book value plus the present value of future expected dividends, discounted at the cost of equity capital.It can be calculated as present value of future expected dividends, discounted at the cost of debt.It can be calculated as present value of future expected residual income, discounted at the cost of equity capital.It can be calculated as book value plus the present value of future expected residual income, discounted at the cost of equity capitalQuestion 2. Question:Which of the following statistics would be the most useful in determining the efficiency of a car rental company?Inventory turnoverNumber of employees per car rentalAverage length of car rentalNumber of days cars are rented as a percentage of number of days available for rentQuestion 3. Question:Following is some financial information for Dell Inc.What is Dell's P/E ratio for 2006?\ 27.6312.8123.659.70Question 4. Question:A common size income statement would typically be prepared by dividing:all items on income statement in Year t by their corresponding value in Year t-1.all items on income statement in Year t by their corresponding balance sheet accounts in Year t.all items on income statement in Year t by net income in Year t-1.all items on income statement in Year t by sales in Year t.Question 5. Question:Given the following information, calculate the inventory turnover for ABC Co. for 2006 (pick closest number).8.967.226.936.18Question 6. Question:You have been provided the following information about High Inc.Working Capital for 2005 is:$56,000$20,000$151,000$207,000Question 7. Question:You are analyzing a large stable company. For the year ending 12/31/05 the company reported earnings of $58,900K and book value at the end of 2005 was $371,700K. You expect earnings to grow at 5% a year in perpetuity, and the dividend payout ratio of 70% to continue. The company borrows at 8%, and has a cost of equity of 12%. The company has 25,000K shares outstanding.What is your estimate of price using the residual income valuation model at 12/31/05?$20.62$21.65$23.56$24.72 ()s:Question 8. Question:If a company receives an unqualified audit opinion it means the auditors:did not complete a full audit and therefore do not feel qualified to give an opinion on financial statements.are providing assurance that the company will remain financially viable for at least the next year.are providing assurance that the company's financial statements fairly present company's financial performance and position.are providing assurance that the company's financial statements are free from misstatement, fraudulent accounting and fairly indicate future performance.Question 9. Question:Which of the following ratios is not generally considered to be helpful in assessing short-term liquidity?Acid test ratioCurrent ratioDays to collect receivablesDays goodwill held:Question 10. Question:Two otherwise equal companies have significantly different dividend payout ratios. Which of the following statements is most likely to be correct? The company with higher the dividend payout ratio:will have a higher inventory turnover ratio.will have a lower inventory turnover ratio.will have higher earnings growth.will have lower earnings growth.Which of the following steps are required to adjust LIFO to FIFO?Inventory needs to be calculated as reported LIFO inventory plus LIFO reserve.Increase deferred tax payable by LIFO reserve times Tax rate.Retained earnings need to be calculated as reported retained earnings plus LIFO reserve times (1 - Tax rate).All of the above.Question 2. Question:The following information can be found in Manufacturer Company's financial statements.If Manufacturer used FIFO its retained earnings as of the end of fiscal 2006 would be:$ 540,000$ 440,000$ 524,000$ 506,000Question 3. Question:Below is selected information taken from the balance sheet of Huy Corporation as of 12/31/06.The average age of Huy's depreciable assets as of 2006 is:2 years7 years14 years34 yearsQuestion 4. Question:The following information can be found in Manufacturer Company's financial statements.If Manufacturer used FIFO its Net Income for fiscal 2006 would be:$ 165,000$ 149,000$ 135,000CORRECT $ 131,000Question 5. Question:Under current US GAAP, goodwill is:I. amortized over a period not to exceed 40 years.II. tested annually for impairment.III. exclusive of separately identifiable intangible assets.IV. recorded only upon purchase of another entity.I, II, III and IVII, III and IVI, II and IIIII and IVQuestion 6. Question:Look Good Corporation has current assets of $1.1M and current liabilities of $1M. It is close to year-end and it would like to increase its current ratio. Which of the following will achieve this?Encourage customers to pay their bills more quickly.Increase short-term borrowings by $0.1M.Sold building for $0.2M in cash.Liquidate some of its trading marketable securities.Question 7. Question:LIFO liquidation occurs when:a firm changes from LIFO to another inventory method.a firm experiences an increase in cost of raw materials.the LIFO reserves decline in value.the quantity of goods sold is greater than the quantity produced.Question 8. Question:The following information can be found in ABC Co.'s financial statements.Assume a tax rate of 35%. Inventories valued using the LIFO method represented approximately 80% of consolidated inventories.What will be the retained earnings for 2005 if ABC used FIFO valuation?CORRECT 3,205,2713,566,9183,893,0004,096,430Question 9. Question:A firm has a current ratio greater than 1.0. If the firm's ending inventory is understated by $3,000 and beginning inventory is overstated by $5,000, the firm's net income (before taxes) and current ratio will be:Option AOption BOption COption DQuestion 10. Question:For Control Furniture Co.,LIFO Reserve in Year 2006 $91 millionLIFO Reserve in Year 2005 $82 millionTax Rate is 35%.To restate Year 2006 LIFO inventories to a FIFO basis, we use the following analytical entry:Option AOption BCORRECT Option COption DWhich of the following is incorrect?An analyst should be aware of the following when analyzing a company that has significant investments recorded using the equity method:Cash flow received from investee may be substantially different from investment income recorded.As investee's liabilities are not recorded on the company's balance sheet, there may be significant off-balance-sheet financing.They must mark investment in investee to market even though there may be no ready market in which they can sell their investment.Company must record pro rata share of investee's earnings, which may not be well correlated with changes in market value of investee.Question 2. Question:Guido Inc. buys 2,000 shares of Weiner Company for $30 per share on January 1, 2006. At the end of 2006, Weiner shares are trading at $33 per share. Weiner has a total of 200,000 shares outstanding and reported net income of $3,000,000 and paid dividends of $1,000,000 for fiscal 2006.Determine the amount Guido Inc. will record as an investment on its balance sheet under the three scenarios: Weiner is considered trading marketable equity security (MES), available for sale (AFS) MES or using cost method.Choice AChoice BChoice CChoice DQuestion 3. Question:Constant Corp. bought Steady Company on June 30, 2005 in a pooling-of-interests transaction. Both companies are in stagnant markets. Steady had total assets of $50,000 and total liabilities of $30,000 with fair market values of $60,000 and $30,000, respectively. Constant issued 1,000 shares, valued at $45 per share. Both companies operate in tax-free havens and take a half-year's depreciation in the year acquired using ten-year lives. Monthly operating results are as follows:Assume revenue and earnings remain same for the next year. Company is following SFAS 142.Feedback:It can be either $42,000 or $48,000. Under GAAP for purchase accounting, there are two alternatives. Although income is always reported from the acquisition date forward, it is permitted to report 12 months sales of the acquired company, as long as 12 months expenses are included and pre-acquisition earnings are backed out. The simpler (and easier for the reader) approach is to only report post-acquisition (i.e., six months in this example) sales and expenses.If accounted for as a purchase, 2005 consolidated earnings are reported as$10,700$11,900$12,700$13,200 ()Question 4. Question:Parent Company Inc. successfully bids for Child Company Inc. in year X1. Parent Company Inc. has purchased all of Child's shares outstanding for $8,500. Following are excerpts from both companies' financial statements for year X1, prior to the acquisition.Also assume the following information: the acquisition was accounted for using the purchase method. $1,500 of the excess price relates to depreciable assets, and those assets have an additional useful life of 10 years at the time of the acquisition. Parent Company Inc. uses the straight line depreciation method and has a 34% tax rate. The combined net income for both companies for year X2 (excluding any expenses that need to be recorded as a result of the purchase method accounting for the merger) was $1,560.What would be total assets in the consolidated financial statements for the date on which the merger became effective, assuming any excess purchase price relates to goodwill?$50,008$49,498$41,508$44,113Question 5. Question:The following information is from L&H's 2004 income statement:Feedback: Pre-tax income in 2005 is $3,900 ($2,600 x 1.5), an increase of $1,300. Starting with 2004, add back amortization expense no longer permitted by SFAS 142 (income increases by $2,000) less the impact of the sales decline of $1,400 (at 50% gross margin = $700 real economic income decrease).Based upon your analysis, you reflect that L&H managementis more than holding its own in a tough economic environment.needs to strengthen its marketing.is achieving growth in its new product line.has adroitly managed its asset portfolio.Question 6. Question:Constant Corp. bought Steady Company on June 30, 2005 in a pooling-of-interests transaction. Both companies are in stagnant markets. Steady had total assets of $50,000 and total liabilities of $30,000 with fair market values of $60,000 and $30,000, respectively. Constant issued 1,000 shares, valued at $45 per share. Both companies operate in tax-free havens and take a half-year's depreciation in the year acquired using ten-year lives. Monthly operating results are as follows:Assume revenue and earnings remain same for the next year. Company is following SFAS 142.Feedback:It can be either $42,000 or $48,000. Under GAAP for purchase accounting, there are two alternatives. Although income is always reported from the acquisition date forward, it is permitted to report 12 months sales of the acquired company, as long as 12 months expenses are included and pre-acquisition earnings are backed out. The simpler (and easier for the reader) approach is to only report post-acquisition (i.e., six months in this example) sales and expenses.If accounted for as a pooling-of-interests, 2005 consolidated earnings are reported as:$12,000$13,200$14,400It cannot be determined without further information ()Question 7. Question:A U.S. company has a subsidiary located in Great Britain. If the British pound is the functional currency and is appreciating relative to the dollar, what will happen to the following ratios after translation?Choice AChoice BChoice CChoice DQuestion 8. Question:Constant Corp. bought Steady Company on June 30, 2005 in a pooling-of-interests transaction. Both companies are in stagnant markets. Steady had total assets of $50,000 and total liabilities of $30,000 with fair market values of $60,000 and $30,000, respectively. Constant issued 1,000 shares, valued at $45 per share. Both companies operate in tax-free havens and take a half-year's depreciation in the year acquired using ten-year lives. Monthly operating results are as follows:Assume revenue and earnings remain same for the next year. Company is following SFAS 142.It can be either $42,000 or $48,000. Under GAAP for purchase accounting, there are two alternatives. Although income is always reported from the acquisition date forward, it is permitted to report 12 months sales of the acquired company, as long as 12 months expenses are included and pre-acquisition earnings are backed out. The simpler (and easier for the reader) approach is to only report post-acquisition (i.e., six months in this example) sales and expenses.If accounted for as a purchase, 2006 consolidated earnings are reported as$10,700$13,400$11,950$14,400Question 9. Question:Parent Company Inc. successfully bids for Child Company Inc. in year X1. Parent Company Inc. has purchased all of Child's shares outstanding for $8,500. Following are excerpts from both companies' financial statements for year X1, prior to the acquisition.Also assume the following information: the acquisition was accounted for using the purchase method. $1,500 of the excess price relates to depreciable assets, and those assets have an additional useful life of 10 years at the time of the acquisition. Parent Company Inc. uses the straight line depreciation method and has a 34% tax rate. The combined net income for both companies for year X2 (excluding any expenses that need to be recorded as a result of the purchase method accounting for the merger) was $1,560.What would be total liabilities in the consolidated financial statements for the date on which the merger became effective, assuming any excess purchase price relates to goodwill?$28,221$27,231$27,741$25,462Question 10. Question:Parent Company Inc. successfully bids for Child Company Inc. in year X1. Parent Company Inc. has purchased all of Child's shares outstanding for $8,500. Following are excerpts from both companies' financial statements for year X1, prior to the acquisition.Also assume the following information: the acquisition was accounted for using the purchase method. $1,500 of the excess price relates to depreciable assets, and those assets have an additional useful life of 10 years at the time of the acquisition. Parent Company Inc. uses the straight line depreciation method and has a 34% tax rate. The combined net income for both companies for year X2 (excluding any expenses that need to be recorded as a result of the purchase method accounting for the merger) was $1,560.What would be the net income in the consolidated income statement for year X2 assuming any excess purchase price relates to goodwill, and goodwill was found to be impaired by $830?$1,461$1,560$1,012.2Which of the following ratios best measures the profitability of a company?Return on equityGross marginCurrent ratioNet operating asset turnoverQuestion 2. Question:Under the accrual basis of accounting, which of the following statements is true?I. Reported net income provides a measure of operating performanceII. Revenue is recognized when cash is received, and expenses are recognized when payment is madeIII. Cash inflows are recognized when they are received, and cash outflows are recognized when they are madeI onlyIII onlyCORRECT I and IIII, II and IIIQuestion 3. Question:Compared with firms with capital leases, firms with operating leases generally report:higher cash flow from operationslower cash flow from operationsidentical cash flow from operationslower or higher cash flow from operations depending upon market interest ratesPoints Received: 0 of 2Comments:Question 4. Question:The balance for supplies is $41,000 and $27,000 for 12/31/05 and 12/31/06, respectively. During the 2006, the company recorded $30,500 of supplies expense was recorded. How much new supplies were purchased?$44,500$16,500$14,000$30,500Question 5. Question:Return on operating assets for 2005 is:7.9%7.41%8.78%8.1%Question 6. Question:Which of the following could cause return on net operating assets to increase, allthings equal?A decrease in interest rate on debtIncrease in days accounts receivable are outstandingIncrease in inventory turnoverDecrease in gross marginQuestion 7. Question:Assume all assets are operating assets, all current liabilities are operating liabilities.Return on equity for 2005 is:20.41%19.75%17.54%18.12%Question 8. Question:Below is selected information from Tricrop.Return on Common Equity for Year 1 is:19.0%19.60%21.08&.03%Points Received: 2 of 2Question 9. Question:Which of the following statements is correct?Net operating profit margin divided by net operating asset turnover equals return on net operating assetsReturn on net operating assets can be disaggregated into net operating profit margin and leverageReturn on equity equals return on net operating assets less interest, net of taxReturn on equity can be disaggregated into net operating profit margin, net operating asset turnover and leverage:Question 10. Question:Which of the following statements about the equity growth rate is correct?I. the higher the ROCE the higher equity growth rate, all other things equalII. the higher the dividend payout the higher the equity growth rateIII. the equity growth rate is unaffected by the cost of debtIV. the equity growth rate indicates the expected growth in stock price each periodI, II, III and IVI, II and IIII and IIII onlyThe residual income model defines stock price as book value plus the present value of residual income. What is the effect on stock price in a given period if the firm's cost of capital is greater than its return on equity?Cannot be determinedNo effectStock price increasesStock price decreases:Question 2. Question:Gupta Corporation has forecasted its need for external funding in the following year. It needs to raise $2M in either debt or equity. It would like to minimize its need for external funding without decreasing its projected growth. Which of the following would reduce its need for additional funding?An increase in the dividend payout ratioAn increase in days sales outstandingAn increase in accounts payableA decrease in inventory turnoverQuestion 3. Question:The treasurer of Simmons Corporation, a newly formed software company is trying to ascertain Simmons cash flows for the next three months. Expected sales are:50% of sales are made for cash. Simmons expects to receive 25% in the month following the sale and 20% in the second month following the sale. The remaining 5% are expected to be un-collectible. Gross margin is 20%, and purchases are made one month prior to sale. Purchases are paid one month after received.Cash outflows in March for purchases will be:$240$220$200$176Question 4. Question:Below is selected data for Gertup Corporation as of 12/31/05:If sales increased by 10% per annum for the next 20 years, sales for year 2025 would be closest to:$ 407,000$ 124,459$ 113,000$ 55,500Question 5. Question:What is the correct order of the following steps in preparing a projected balance sheet (not all steps may be shown)?I. Project future cashII. Project future accounts receivableIII. Project future accounts payableIV. Project future property plant and equipmentI, II, IV, IIIII, IV, III, II, III, II, IVI, III, IV, IIQuestion 6. Question:The statement of cash flows for Georgey Company for 2004 and 2005 is as follows:Which of the following statements is correct?Restructuring is a major source of cash for GeorgeyAccounts receivable increased in 2005Depreciation is a major source of cash for GeorgeyMajor use of cash resulted in decreased leverage:Question 7. Question:Hiruit company's sales in December were $5,500. They expect sales to increase 10% in January and February and 15% in March. All of its sales are made on credit. The typical collection pattern is:Gross margin is 30%. Inventory levels at the end of December are $900 and are expected to grow at the same rate as sales. Purchases are paid for the month after they are made. Net accounts receivable at the end of December are $400.In March Hiruit should collect how much cash from sales made in March and previous months:$7,653.25$7,342.5$7,030.1$6,331.3Question 8. Question:Which of the following statements is incorrect?It is possible for a profitable company to go out of business because of short-term liquidity problemsIf a company has a current ratio greater than 2, it will never go out of business because of liquidity problemsThe current ratio is always greater than or equal to the quick ratioThe accuracy of a cash flow forecast is inversely related to the forecast horizon.Question 9. Question:The reliability of a short-term cash forecast depends most heavily on the quality of:Cost of goods sold forecastCurrent ratio forecastSales forecastShares outstanding forecastQuestion 10. Question:Below is selected data for Gertup Corporation as of 12/31/05:Due to competitive pressures, Gertup has had to increase credit terms to customers to maintain sales. This resulted in Gertup's accounts receivable doubling from 12/31/04 to 12/31/05. The average accounts receivable turnover was 30 days. Without the increased credit terms accounts receivable turnover would have remained at 12/31/04 levels. The impact of the change in credit policy was:: None as sales remained the sameDecrease liquidity, and decrease available cashIncreased current ratio and liquidity of the companyCurrent ratio stayed the same and liquidity remained constantPoints Received: 2 of 2Comments:The residual income model defines stock price as book value plus the present value of residual income. What is the effect on stock price in a given period if the firm's cost of capital is greater than its return on equity?Cannot be determinedNo effectStock price increasesStock price decreases:Question 2. Question:Gupta Corporation has forecasted its need for external funding in the following year. It needs to raise $2M in either debt or equity. It would like to minimize its need for external funding without decreasing its projected growth. Which of the following would reduce its need for additional funding?An increase in the dividend payout ratioAn increase in days sales outstandingAn increase in accounts payableA decrease in inventory turnoverQuestion 3. Question:The treasurer of Simmons Corporation, a newly formed software company is trying to ascertain Simmons cash flows for the next three months. Expected sales are:50% of sales are made for cash. Simmons expects to receive 25% in the month following the sale and 20% in the second month following the sale. The remaining 5% are expected to be un-collectible. Gross margin is 20%, and purchases are made one month prior to sale. Purchases are paid one month after received.Cash outflows in March for purchases will be:$240$220$200$176Question 4. Question:Below is selected data for Gertup Corporation as of 12/31/05:If sales increased by 10% per annum for the next 20 years, sales for year 2025 would be closest to:$ 407,000$ 124,459$ 113,000$ 55,500Question 5. Question:What is the correct order of the following steps in preparing a projected balance sheet (not all steps may be shown)?I. Project future cashII. Project future accounts receivableIII. Project future accounts payableIV. Project future property plant and equipmentI, II, IV, IIIII, IV, III, II, III, II, IVI, III, IV, IIQuestion 6. Question:The statement of cash flows for Georgey Company for 2004 and 2005 is as follows:Which of the following statements is correct?Restructuring is a major source of cash for GeorgeyAccounts receivable increased in 2005Depreciation is a major source of cash for GeorgeyMajor use of cash resulted in decreased leverage:Question 7. Question:Hiruit company's sales in December were $5,500. They expect sales to increase 10% in January and February and 15% in March. All of its sales are made on credit. The typical collection pattern is:Gross margin is 30%. Inventory levels at the end of December are $900 and are expected to grow at the same rate as sales. Purchases are paid for the month after they are made. Net accounts receivable at the end of December are $400.In March Hiruit should collect how much cash from sales made in March and previous months:$7,653.25$7,342.5$7,030.1$6,331.3Question 8. Question:Which of the following statements is incorrect?It is possible for a profitable company to go out of business because of short-term liquidity problemsIf a company has a current ratio greater than 2, it will never go out of business because of liquidity problemsThe current ratio is always greater than or equal to the quick ratioThe accuracy of a cash flow forecast is inversely related to the forecast horizon.Question 9. Question:The reliability of a short-term cash forecast depends most heavily on the quality of:Cost of goods sold forecastCurrent ratio forecastSales forecastShares outstanding forecastQuestion 10. Question:Below is selected data for Gertup Corporation as of 12/31/05:Due to competitive pressures, Gertup has had to increase credit terms to customers to maintain sales. This resulted in Gertup's accounts receivable doubling from 12/31/04 to 12/31/05. The average accounts receivable turnover was 30 days. Without the increased credit terms accounts receivable turnover would have remained at 12/31/04 levels. The impact of the change in credit policy was:: None as sales remained the sameDecrease liquidity, and decrease available cashIncreased current ratio and liquidity of the companyCurrent ratio stayed the same and liquidity remained constantPoints Received: 2 of 2Comments:Which of the following is least likely to affect analysis of earnings persistence?Managerial compensationChanges in accounting principleCyclicality of businessSeasonality of business:Question 2. Question:Horace Corporation has $200,000 of convertible 5% bonds. Each $500 bond is convertible into 50 shares of common stock. The bonds were sold at par and are currently trading at par, and the required return on nonconvertible bonds of similar risk is 11%. Common stock is trading at $ 23 per share.The total leverage ratio of a company will:increase if operating leases are capitalizedincrease if a company sells its receivablesincrease if a company sells more equityincrease if a company pays suppliers more quicklyQuestion 3. Question:If a firm capitalizes a lease instead of treating the lease as an operating lease, the effect on the current ratio and the debt-to-equity ratio will be to:Option AOption BOption COption DQuestion 4. Question:A primary motivation for a company financing its business activities through debt is notTrading on the equityReducing earnings variabilityTax-deductibility of interestAvoiding earnings dilutionQuestion 5. Question:ABC company is planning a major expansion for which it needs $5 million in external funding. It has various options as how to finance this expansion. Which of the following is correct?Future ROA will be higher if it uses all equity financing than if it uses some debt financingFuture net income will be higher if it uses common stock rather than preferred stock to finance expansionFuture ROA is independent of the form of financingFuture net income is independent of the form of financingQuestion 6. Question:Below is information for year ended 12/31/05 for Company A and Company B.Return on assets for Company A and B for 2005 are:Option AOption BOption COption DQuestion 7. Question:Which of the following statements are correct with respect to the times interest earned ratio?I. It is independent of operating incomeII. It is independent of the interest rate paid on debtIII. It is independent of the tax rateIV. It is independent of the amount of dividends paidI, II and IIII and IIII and IVIII and IVQuestion 8. Question:Hupta CorporationNet income is expected to increase by 10% for the next year, and dividend payout ratio is expected to remain constant. After 2006, residual earnings are expected to decrease to zero. Using the earnings-based valuation method what is the value per share of Hupta stock as of 12/31/05?$33.60$33.27$32.73$30.00Question 9. Question:Which of the following is not included the definition of earnings persistence?: Stability of the earningsMagnitude of the earningsPredictability of the earningsThe earnings' trendQuestion 10. Question:A company has significant uncapitalized operating leases. This company has positive net income. If these were capitalized the effect on the following ratios would be:Option AOption BOption COption D="color:>="color:>

 

Paper#48836 | Written in 18-Jul-2015

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