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BUS 401 Week 1, Quiz


BUS 401 Week 1, Quiz fin571

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BUS 401 Week 1, Quiz
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This 0 page Study Guide was uploaded by an elite notetaker on Wednesday November 11, 2015. The Study Guide belongs to fin571 at Kaplan University taught by in Fall 2015. Since its upload, it has received 27 views.

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Date Created: 11/11/15
Grade Details 1 Question Student Answer Points Received Comments Question Student Answer Points Received Comments Question Student Answer The income statement for Brit Inc Indicates that tax expense was 20000 The balance sheet indicates that taxes payable for the same year increased by 5000 What amount did Brit Inc actually pay in taxes during this year 15000 if 20000 ET 25000 ET Cannot be determined without the cash balance ET 1 of1 A financial manager is considering two projects A and B A is expected to add 2 million to profits this year while B is expected to add 1 million to profits this year Which of the following statements is most correct The manager should select project A because it maximizes profit Ifquot The manager should select the project that maximizes long term profits not just one year of ET profits The manager should select project A or he is irrational ET The manager should select the project that causes the stock price to increase the most which if could be A or B 1of1 Which of the following statements about depreciation is true Depreciation is a noncash expense but it is important because it affects a corporation s tax if liability Points Received Comments Question Student Answer Points Received Comments Question Student Answer Points Received Comments Depreciation must be calculated the same way for financial reporting and tax purposes if39 The choice of depreciation method had no impact on a firm39s value because the same amount ifquot of depreciation is taken over the life of an asset regardless of the method used A shareholder wealth maximizing corporation prefers to defer depreciation expense in order to in increase current reported profits 1of1 The principle of risk return tradeoff means that Higher risk investments must earn higher returns if An investor who takes more risk will earn a higher return ifquot A rational investor will only take on a higher risk if he expects a higher return 1quot An investor who bought stock in a small corporation five years ago has more money than an if investor who bought US Treasury bonds five years ago 1of1 The quick ratio of a firm would be increased by which of the following 20000 short term bank loan is used to pay current accounts payable 1 quot Equipment is purchased financed by long term debt issue if Inventories are sold for cash it Inventories are sold in exchange for a long term note ifquot 1 of1 6 7 8 Question Student Answer Points Received Comments Question Student Answer Points Received Comments Question Student Answer Common sized income statements Assist in the comparison of companies of different sizes 1 Show each income statement account as a percentage of total assets 1 quot Compare companies with the same level of total sales 1quot Compare companies with the same level of net income ifquot 1 OH The December 31 2007 balance sheet shows net fixed assets of 100000 and the December 31 2008 balance sheet shows net fixed assets of 140000 Depreciation expense for 2007 is 15000 and depreciation expense for 2008 is 20000 Based on the information the cost of fixed assets purchased during 2008 is 60000 if 20000 ifquot 40000 1quot 75000 If 1 of1 Project A is expected to generate positive cash flow of 1 million in 10 years while Project B is expected to generate 500000 in 5 years Therefore Project A is preferred because shareholder value is based on cash flow Iquot Project B is preferred because its cash flow is expected to be received sooner than the cash 1 flow from Project A 9 10 Points Received Comments Question Student Answer Points Received Comments Question Student Answer Points Received Comments Both projects have equal value because they average 100000 per year 11quot Project B may be preferred to Project A if the opportunity cost of money is high enough if 1of1 GlobalCom has cash of 75000 short term notes payable of 100000 accounts receivable of 275000 accounts payable of 135000 inventories of 350000 and accrued expenses of 75000 What is Global s net working capital 390000 1 175000 1quot 700000 1397 210000 1quot 1 of1 Which of the following statements is an example of a futures market transaction An investor purchases 100 shares of IBM hoping to sell it in two years for a profit 1 quot A company purchases an option to buy 1000 barrels of oil anytime between now and the end of 1397 the year A company agrees to purchase 1000 barrels of oil for delivery in six months at a price of 70 it per barrel An executive has a portion of his current year salary deferred until he retires 1397 1 of1


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