FIN200 multiple choice questions use it as a guide only1
FIN200 multiple choice questions use it as a guide only1
Popular in Course
verified elite notetaker
Popular in Department
This 16 page Study Guide was uploaded by expert Notetaker on Wednesday November 18, 2015. The Study Guide belongs to a course at a university taught by a professor in Fall. Since its upload, it has received 100 views.
Reviews for FIN200 multiple choice questions use it as a guide only1
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 11/18/15
1) Maximization of shareholder wealth is a concept in which A . profits are maximized on a quarterly basis. B optimally increasing the longterm value of the firm is emphasized. . C increased earnings is of primary importance. . D . virtually all earnings are paid as dividends to common stockholders. 2) Regarding risk levels, financial managers should A . avoid higher risk projects because they destroy value B evaluate investor's desire for risk . C pursue higher risk projects because they increase value . D focus primarily on market fluctuations . 3) One of the major disadvantages of a sole proprietorship is A . the simplicity of decision making. B low operating costs. . C . that there is unlimited liability to the owner. D low organizational costs. . 4) The statement of cash flows does NOT include which of the following sections? A . cash flows from sales activities B cash flows from financing activities . C . cash flows from operating activities D cash flows from investing activities . 5) Which account represents the cumulative earnings of the firm since its formation, minus dividends paid? A Common stock . B . Accumulated depreciation C Paidin capital . D Retained earnings . 6) Which of the following would represent a use of funds and, indirectly, a reduction in cash balances? A a decrease in marketable securities . B the sale of new bonds by the firm . C an increase in inventories . D an increase in accounts payable . 7) Which of the following is not considered to be a profitability ratio? A times interest earned . B return on assets (investment) . C . profit margin D return on equity . 8) If a firm has both interest expense and lease payments, A times interest earned will be greater than fixed charge coverage. . B . fixed charge coverage cannot be computed. C times interest earned will be smaller than fixed charge coverage. . D times interest earned will be the same as fixed charge coverage. . 9) In examining the liquidity ratios, the primary emphasis is the firm's A overall debt position. . B ability to earn an adequate return. . C . ability to effectively employ its resources. D ability to pay shortterm obligations on time. . 10) A firm has current assets of $75,000 and total assets of $375,000. The firm's sales are $900,000. The firm's fixed asset turnover is A 12.0x . B 5.0x . C . 3.0x D 2.4x . 11) Refer to the figure above. Megaframe's current ratio is A 1.625:1 . B 3.2:1 . C 1.9:1 . D 1.5:1 . 12) Refer to the figure above. The firm's inventory turnover ratio is A . 8x. B 0.1x. . C . 10x. D 2.7x. . 13) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced A is lower. . B . can be either higher or lower. C is higher. . D is the same. . 14) The percentofsales method of financial forecasting A requires more time than a cash budget approach. . B . is more detailed than a cash budget approach. C assumes that balance sheet accounts maintain a constant relationship to sales. . D . provides a monthtomonth breakdown of data. 15) The need for an increase or decrease in shortterm borrowing can be predicted by A trend analysis. . B ratio analysis. . C a cash budget. . D . an income statement. 16) A firm has beginning inventory of 300 units at a cost of $11 each. Production during the period was 650 units at $12 each. If sales were 700 units, what is the cost of goods sold (assume FIFO)? A . $8,000 B $9,000 . C . $7,700 D $8,100 . 17) The pro forma income statement is important to the overall process of constructing pro forma statements because it allows us to determine a value for: A . gross profit. B change in retained earnings. . C . interest expense. D prepaid expenses. . 18) A firm utilizing LIFO inventory accounting would, in calculating gross profits, assume that A all sales were from beginning inventory. . B all sales were from current production. . C sales were from current production until current production was depleted, and then . use sales from beginning inventory. D all sales were for cash. . 19) When a firm employs no debt A . it has a financial leverage of zero. B it has a financial leverage of one. . C . its operating leverage is equal to its financial leverage. D it will not be profitable. . 20) The degree of operating leverage is computed as A percent change in volume divided by percent change in operating profit. . B . percent change in operating profit divided by percent change in net income. C percent change in EPS divided by percent change in operating income. . D percent change in operating income divided by percent change in volume. . 21) The concept of operating leverage involves the use of __________ to magnify returns at high levels of operation. A variable costs . B fixed costs . C . marginal costs D semivariable costs . 22) In breakeven analysis, the contribution margin is defined as A . price minus fixed cost. B price minus variable cost. . C . variable cost minus fixed cost. D fixed cost minus variable cost. . 23) Refer to the figure above. This firm's breakeven point is A . 14,634 units B 4,800 units . C 7,142 units . D . 18,000 units 24) If TechCor has fixed costs of $80,000, variable costs of $1.20/unit, sales price/unit of $6, and depreciation expense of $25,000, what is their cash breakeven in units? A . 11,458 B 9,167 . C 21,875 . D . 45,833 25) Kuznets Rental Center requires $1,000,000 in financing over the next two years. Kuznets can borrow longterm at 9 percent interest per year for two years. Alternatively, Kuznets can borrow shortterm and pay 7 percent interest in the first year. Then, Kuznets projects paying 10 percent interest in the second year. Assuming Kuznets pays off the accrued interest at the end of each year, which of the following statements is true? A Kuznets will definitely end up paying less under the longterm financing plan. . B Kuznets will definitely end up paying more under the longterm financing plan. . C . Kuznets will probably pay more under the shortterm financing plan. D Kuznets will probably pay less under the shortterm financing plan. . 26) The theory of the term structure of interest rates which suggests that longterm rates are determined by the average of shortterm rates expected over the time that a longterm bond is outstanding is the A segmentation theory. . B expectations hypothesis. . C liquidity premium theory. . D . market average rate theory. 27) Normally, permanent current assets should be financed by A . shortterm funds. B longterm funds. . C borrowed funds. . D . internally generated funds. 28) Which of the following is not a condition under which a prudent manager would accept some risk in financing? A Inventory is highly perishable . B . Predictable cashflow patterns C Price of inventory is stable . D . Easy access to capital markets 29) An aggressive working capital policy would have which of following characteristics? A . A low ratio of shortterm debt to fixed assets. B A high ratio of longterm debt to fixed assets. . C . A high ratio of shortterm debt to longterm sources of funds. D A short average collection period. . 30) Which of the following combinations of asset structures and financing patterns is likely to create the most volatile earnings? A . Illiquid assets and heavy longterm borrowing B Liquid assets and heavy longterm borrowing . C Liquid assets and heavy shortterm borrowing . D . Illiquid assets and heavy shortterm borrowing 31) The system whereby funds are moved between computer terminals without use of checks is A . float. B a lockbox system. . C . magnetic character recognition. D electronic funds transfer. . 32) The difference between the amount of cash on the firm's books and the amount credited to it by the bank is A interest revenue. . B . extended disbursement. C float. . D . an overdraft. 33) "Float" takes place because A . the level of cash on the firm's books is equal to the level of cash in the bank. B a lag exists between writing a check and clearing it through the banking system. . C a customer writes "hot" checks. . D . a firm is early in paying its bills. 34) Dun & Bradstreet is known for providing A . credit scoring reports that rank a company's payment habits relative to its peer group. B cash management systems to corporate treasurers. . C consumer credit reports to credit card companies. . D . interest rate information to cash managers. 35) The three primary policy variables to consider when extending credit include all of the following except A . the level of inflation. B the terms of trade. . C collection policy. . D . credit standards. 36) When developing a credit scoring report, many variables would be considered. Which of the following best represent the major factors Dun & Bradstreet would examine? A . The age of the company, the number of employees, the level of current assets. B The financial statements, satisfactory or slow payment experiences, negative public . records (suits, liens, judgments, bankruptcies). C The company's cash balances, return on equity, and its average tax rates. . D The age of the management team, the dollar amount of sales, net profits, and longterm . debt. 37) Which of the following is not a true statement about commercial paper? A Finance paper is also referred to as direct paper. . B . Dealer paper is sold directly to the lender by a finance company. C Industrial companies, utility firms or finance companies too small to sell direct paper . sell dealer paper. D Finance paper is sold directly to the lender by the finance company. . 38) Commercial paper that is sold without going through a broker or dealer is known as A dealer paper. . B . bookentry transactions. C term paper. . D . direct paper. 39) Which of the following is not a method for lenders to control pledged inventory? A . Trust receipts B Warehousing . C Factoring . D . Blanket inventory liens 40) From the banker's point of view, shortterm bank credit is an excellent way of financing A permanent working capital needs. . B . repayment of longterm debt. C seasonal bulges in inventory and receivables. . D . fixed assets. 41) Firms exposed to the risk of interest rate changes may reduce that risk by A hedging in the financial futures market. . B hedging in the commodities market. . C pledging or factoring accounts receivable. . D . obtaining a Eurodollar loan. 42) Trade credit may be used to finance a major part of the firm's working capital when A . the firm extends more liberal credit terms than the supplier. B the firm and the supplier both extend the same credit terms. . C neither the firm nor the supplier extends credit. . D . the firm extends less liberal credit terms than the supplier. 43) In determining the future value of a single amount, one measures A the present value of an amount discounted at a given interest rate. . B . the future value of an amount allowed to grow at a given interest rate. C the present value of periodic payments at a given interest rate. . D . the future value of periodic payments at a given interest rate. 44) As the discount rate becomes higher and higher, the present value of inflows approaches A minus infinity . B . plus infinity C need more information . D . 0 45) As the compounding rate becomes lower and lower, the future value of inflows approaches A the present value of the inflows . B infinity . C need more information . D . 0 46) Ali Shah sets aside 2,000 each year for 5 years. He then withdraws the funds on an equal annual basis for the next 4 years. If Ali wishes to determine the amount of the annuity to be withdrawn each year, he should use the following two tables in this order: A future value of an annuity of $1; present value of an annuity of $1 . B . future value of an annuity of $1; present value of a $1 C future value of an annuity of $1; future value of a $1 . D present value of an annuity of $1; future value of an annuity of $1 . 47) If you were to put $1,000 in the bank at 6% interest each year for the next ten years, which table would you use to find the ending balance in your account? A Future value of $1 . B . Present value of an annuity of $1 C Future value of an annuity of $1 . D Present value of $1 . 48) John Doeber borrowed $125,000 to buy a house. His loan cost was 11% and he promised to repay the loan in 15 equal annual payments. How much are the annual payments? A . $9,250 B $13,113 . C . $17,383 D $3,633 .
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'