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finance questions 1-40

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Question;finance questions1-4020. Shop-Til-You-Drop Inc. recently reported net income of;$5.2 million and depreciation of $600,000. What is its net cash flow? Assume it;has no amortization expense.;a);$5,400,000;b);$5,600,000;c);$5,800,000;d);$6,000,000;e);$6,200,000;21. Companies generate income from their ?regular?;operations and from things like interest on securities they hold, which is call;non-operating income. Mitel Metals recently reported $9,000 of sales, $6,000 of;operating costs other than depreciation, and $1,500 of depreciation. The;company had no amortization charges and no non-operating income. It had issued;$4,000 of bonds that carry a 7% interest rate, and its federal-plus-state;income tax rate was 40%. What was the firm?s operating income, or EBIT?;a);$1,100;b);$1,200;c);$1,300;d);$1,400;e);$1,500;22. Temple Square Inc. reported that its retained earning;for 2005 were $490,000. In its 2006 financial statements, it reported $60,000;of net income, and it ended 2006 with $510,000 of retained earnings, How much;were paid as dividends to shareholders during 2006?;a);$20,000;b);$25,000;c);$30,000;d);$35,000;e);$40,000;23. Which of the following statements is CORRECT?;a);Four key financial statements are the balance;sheets, the income statement, the statement of cash flows, the statements of retained;earning.;b);The balance sheet gives us a picture of the;firm?s financial situation over a period of time.;c);The income statement gives us a snapshot of what;is happening at a point in time.;d);The statement of cash flows tells us how much;cash the firm has in the form of currency and demand deposits.;e);The statement of cash needs tells us how much;cash the firm will require during some future period, generally a month or a;year.;24. Which of the following items is NOT included in current;assets?;a);Accounts payable.;b);Inventory;c);Accounts receivable;d);Cash.;e);Short-term highly liquid, marketable securities.;25. A start-up firm is making an initial investment in new;plant and equipment. Assume that currently its equipment must be depreciated on;a straight-line basis over 10 years, but Congress is considering legislation;that would require the firm to depreciate the equipment over 7 years. If the;legislation becomes law, which of the following would occur in the year;following the change?;a);The firm?s tax payments would increase.;b);The firm?s reported net income would increase.;c);The firm?s taxable income would increase.;d);The firm?s net cash flow would increase.;e);The firm?s operating income (EBIT) would;increase.;26. Ramala Corp?s sales last year were $48,000, and its;total assets were $25,500. What was its total assets turnover ratio (TATO)?;a);1.88;b);1.99;c);1.10;d);1.21;e);1.32;27. Ruby Corp?s sales last year were $435,500, its operating;costs were $350,000, and its interest charges were $10,000. What was the firm?s;times interest earned (TIE) ratio?;a);8.29;b);8.42;c);8.55;d);8.68;e);8.81;28. Roberts Corp?s sales last year were $300,000, and its;net income after taxes was $25,000. What was its profit margin on sales?;a);7.65%;b);7.82%;c);7.99%;d);8.16%;e);8.33%;29. Reynolds Corp?s total assets at the end of last year were;$300,000 and its net income after taxes was $25,000. What was its return on;total assets?;a);8.15%;b);8.33%;c);8.51%;d);8.69%;e);8.87%;30. Rollins Corp?s total assets at the end of last year were;$300,000 and its EBIT was $75,000. What was its basic earning power (BEP);a);17.50%;b);20.00%;c);22.50%;d);25.00%;e);27.50%;31. Raleigh Corp?s total common equity at the end of last;year was $300,000 and its net income after taxes was $55,000. What was its ROE?;a);18.33%;b);18.67%;c);19.00%;d);19.33%;e);19.67%;32. Rutland Corp?s stock price at the end of last year was;$30.25 and its earnings per share for the year were $2.45. What was its P/E;ratio?;a);11.65;b);12.00;c);12.35;d);12.70;e);13.05;33. Rand Corp?s stock price at the end of last year was;$40.00, and its book value per share was $24.50. What was its Market/Book;ratio?;a);1.03;b);1.18;c);1.33;d);1.48;e);1.63;34. Midwest Lumbar had a profit margin of 5.1%, a total;assets turnover of 1.6, and an equity multiplier of 1.8. What was the firm?s;ROE?;a);14.39%;b);14.69%;c);14.99%;d);15.29%;e);15.59%;35. An investor is considering starting a new business. The;company would require $500,000 of assets, and it would be financed entirely;with common stock. The investor will go forward only if she thinks the firm can;provide a 15.0% return on the invested capital, which means that the firm must have;an ROE of 15.0%. How much net income must be expected to warrant starting the;business?;a);$45,000;b);$55,000;c);$65,000;d);$75,000;e);$85,000;36. Which of the following would indicate an improvement in;a company?s financial position, holding other things constant?;a);The current and quick ratios both decline.;b);The EBITDA coverage ratio increases.;c);The total assets turnover decreases.;d);The TIE declines.;e);The DSO increases.;37. A firm wants to strengthen its financial position. Which;of the following actions would INCREASE its current ratio?;a);Borrow using short-term debt and use the;proceeds to repay debt that has a maturity of more than one year.;b);Reduce the company?s day?s sales outstanding;ratio to the industry average and use the resulting cash savings to purchase;plant and equipment.;c);Use cash to increase inventory holdings.;d);Use cash to repurchase some of company?s own;stock.;e);Issue new stock and use some of the proceeds to;purchase additional inventory and hold the remainder of the funds received as;cash.;38. If 10-year T-bonds have yield of 5.2%, 10-year corporate;bonds yield 7.5%, the maturity risk premium on all 10-year bonds is 1.1%, and;corporate bonds have a 0.2% liquidity premium versus a zero liquidity premium;for T-bonds, what is the default premium on the corporate bond?;a);1.0%;b);1.1%;c);1.2%;d);2.0%;e);2.1%;39. The real risk-free rate is 3%, inflation is expected to;be 2% this year, and the maturity risk premium is zero. Ignoring any;cross-product terms, what is the equilibrium rate of return on a 1-year;Treasury bond?;a);4.90%;b);5.00%;c);5.10%;d);5.20%;e);5.30%;40. Suppose 1-year Treasury bonds yield 3.0% while 2-year;T-bonds yield 4.5%. Assuming the pure expectations theory is correct and thus;the maturity risk premium is zero, what should the yield be on a 1-year T-bond;one year from now?;a);5.91%;b);6.02%;c);6.13%;d);6.24%;e);6.35%

 

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