FIN 370 Final Exam (5th Set) 40 Questions with ANSWERS
FIN 370 Final Exam (5th Set) 40 Questions with ANSWERS fin571
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Date Created: 11/11/15
FIN 370 Final Exam PS Your questions will be chosen randomly from a large set of questions Nobody can guarantee that these questions will cover completely your exam If I helped you please leave A feedback I need it very much Thank you and good luck 1Which of the following statements best represents what nance is about aHow political social and economic forces affect corporations b Maximizing profits cCreation and maintenance of economic we d Reducing risk 2Consider the timing of the pro ts of the following certain investment projects Profit L S Year 1 0 3000 Year 2 3000 0 a Proiect S is preferred to Proiect L b Project L is preferred to Project S cProjects S and L are equally desirable d A goal of profit maximization would favor Project S only 3 Which of the following factors enable a public corporation to grow to a greater extent and perhaps at a faster rate than a partnership or a proprietorship aUnlimited liability of shareholders b Access to the capital markets cLimited life d Elimination of double taxation on corporate income eAll of the above 4 How could you compensate an investor for taking on a signi cant amount of risk a Increase the expected rate of return b Raise more debt capital cOffer stock at a higher price d Increase sales 5 If an investor had a choice of receiving 1000 today or 1000 in ve years which would the average investor prefer al000 in five years because they are not good at saving money b 1000 todav because it will be worth more Mn 1000 received in ve ears 10 c1000 in five years because it will be worth more than 1000 received today d Investors would be indifferent to when they would receive the 1000 eNone of the above Which of the following is not a reason why nancial analysts use ratio analysis a Ratios help to pinpoint a firm39s strengths b Ratios restate accounting data in relative terms c Ratios are ideal for smoothing out the differences that may exist when comparing rmLhat use different accounting practices d Some of a firm s weaknesses can be identified through the usage of ratios The question quotDid the common stockholders receive an adequate return on their investmentquot is answered through the use of a liquidity ratios pro tability ratios coverage ratios leverage ratios 9 9 Marshall Networks Inc has a total asset turnover of 25 and a net pro t margin of 35 The rm has a return on equity of 175 Calculate Marshall s debt ratio a 30 b 40 c 50 d 60 The quick ratio is a better measure of liquidity than the current ratio if the rm has current assets composed primarily of a cash b work in process inventory c marketable securities d accruals Which of the following is not a limitation related to the usage of ratios when reviewing a rm s performance a Many firms experience seasonality in their operations b Ratios cannot be used to compare rms that are in the same industry if one rm s sales are higher than another rm s c Some firms operate in a variety of business lines which makes it difficult to make comparisons d Accounting practices differ widely among firms 11 The is the federal agency primarily responsible for regulating the securities industry a FTC b SEC 12 C FRB 1 SCC is a nancial specialist who underwrites and distributes new securities of public corporations The Federal Reserve Board A commercial banker The SEC An investment banker 9199 13 14 15 16 What is the role of the SEC as it relates to the issuance of new securities by US corporations a To guaranty the sale of securities to the public b To ensure QCCHrMHd complete disclosure of information about the issuing firm to the public 0 To reduce the cost of issuing securities to the public 1 To provide investment advice to the purchasing public All of the following are found in the cash budget except a net change in cash for the period inventorv cash disbursements new financing needed 909 A company collects 60 of its sales during the month of the sale 30 one month after the sale and 10 two months after the sale The company expects sales of 10000 in August 20000 in September 30000 in October and 40000 in November How much money is expected to be collected in October 25000 15000 35000 None of the above 999M Which of the following are considered to be spontaneous sources of financing ie they arise naturally during the course of doing business a Notes payable and common stock b Accounts receivable and bonds 0 Fixed assets and inventory 17 18 19 20 21 22 1 Accounts paLable and accrued expenses The first step involved in predicting nancing needs is a projecting the firm s sales revenues and expenses over the planning period b estimating the levels of investment in current and fixed assets that are necessary to support the projected sales 0 determining the firm s financing needs throughout the planning period 1 none of the above At 8 compounded annually how long will it take 750 to double a 65 years b 48 months c 9 years d 12 years A friend plans to buy a bigscreen TVentertainment system and can afford to set aside 1320 toward the purchase today If your friend can earn 50 how much can your friend spend in four years on the purchase Round off to the nearest 1 a 1444 b 1604 0 1764 d 1283 You have just purchased a share of preferred stock for 5000 The preferred stock pays an annual dividend of 550 per share forever What is the rate of return on your investment a 055 b 010 c 110 d 220 A commercial bank will loan you 7500 for two years to buy a car The loan must be repaid in 24 equal monthly payments The annual interest rate on the loan is 12 of the unpaid balance What is the amount of the monthly payments a 28243 b 39052 c 36982 1 35305 Gina Dare who wants to be a millionaire plans to retire at the end of 40 years Gina s plan is to invest her money by depositing into an IRA at the end 23 of every year What is the amount that she needs to deposit annually in order to accumulate 1000000 Assume that the account will earn an annual rate of 115 Round off to the nearest 1 a 1 497 b 5281 0 75 d 3622 The breakeven model enables the manager of the rm to a calculate the minimum price of common stock for certain situations b set appropriate equilibrium thresholds c determine the GUMtV of output that must be sold to cover all operating 24 25 26 27 28 w 1 determine the optimal amount of debt financing to use Financial leverage means financing some of a rm s assets with a commercial paper b preferred stock 0 corporate bonds 1 all of the above In general as the level of sales rises above the breakeven point the degree of operating leverage a increases b decreases 0 remains constant 1 none of the above Due to a technical breakthrough the xed costs for a rm drop by 25 Prior to this breakthrough xed costs were 100000 and unit contribution margin was and remains at 500 The new amount of breakeven units will be a 25000 b 20000 c 15000 d 10000 The rm should accept independent projects if a the payback is less than the IRR the profitability index is greater than 10 the IRR is positive the NPV is greater than the discounted payback 905 The NPV method 29 30 31 32 33 is consistent with the goal of shareholder wealth maximization recognizes the time value of money uses cash ows all of the above 999 ABC Service can purchase a new assembler for 15052 that will provide an annual net cash flow of 6000 per year for ve years Calculate the NPV of the assembler if the required rate of return is 12 Round your answer to the nearest 1 a 1056 b 4568 c 7621 1 6 577 Given the following annual net cash flows determine the IRR to the nearest whole percent of a project with an initial outlay of 1520 Year Net Cash Flow 1000 2 1500 3 500 a 48 b 40 c 32 d 28 An increase in would increase net working capital a plant and equipment b accounts payable c accounts receivabJ d both b and c Which of the following is most likely to be a temporary source of nancing a Commercial paper b Preferred stock c Longterm debt d All of the above In order to maximize rm value management should invest in new assets when the internal rate of return is a greater or equal to the rm s marginal cost of capital b greater than the cost of debt financing c less than or equal to the accounting rate of return d less than or equal to the firm s marginal cost of capital 34 a b c d 35 a b c d 36 a b c d e 37 In the basic model the optimal inventory level is the point at which total cost is minimized total revenue is maximized carrying costs are minimized ordering costs are minimized The management of inventory is important because carrying too much inventorv can result in a loss of ef ciency m pro tability carrying excessive inventory can result in a loss of sales carrying too little inventory can decrease the average collection period carrying too little inventory will adversely affect the firm s CAPM An operating lease usually is for a shorter length of time than a financial lease is for hightech equipment that might become obsolete rapidly has the income tax advantage that the entire lease payment is a deductible expense both a and c all the above If a lease is extended for a length of time that is equal to the entire useful life of the equipment the lease a b c d is referred to as an operating lease carries no income tax deduction isa nancial lease will be terminated by the IRS 38 Which of the following would decrease free cash flows A decrease in 0909 s 39 An increase in the depreciation expense interest expense incremental sales both a amp c all of the above is likely to encourage a corporation to increase its debt ratio a corporate tax rate b c 1 personal tax rate company s degree of operating leverage expected cost of bankruptcy 40 A merger that is driven by the potentially large reduction in the staf ng of overlapping functions and the integration of the two companies strong similar product lines is referred to as a a conglomerate merger b vertical merger c horizontal merger d diversification merger
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