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FIN 534 quiz 2 week 3 30 Questions correct 100%!

Opening Offer: $15.00
Posted by: argument
Date Posted: 3/24/12 4:27 AM
Due Date: 12/31/69

Question 1

Which of the following statements is CORRECT?

a. Since companies can deduct dividends paid but not interest paid, our tax system favors the use of equity financing over debt financing, and this causes companies' debt ratios to be lower than they would be if interest and dividends were both deductible.

Question 2

Which of the following statements is CORRECT?

The four most important financial statements provided in the annual report are the balance sheet, income statement, cash budget, and the statement of retained earnings.

Question 3

For managerial purposes, i.e., making decisions regarding the firm's operations, the standard financial statements as prepared by accountants under Generally Accepted Accounting Principles (GAAP) are often modified and used to create alternative data and metrics that provide a somewhat different picture of a firm's operations. Related to these modifications, which of the following statements is CORRECT?

The standard statements make adjustments to reflect the effects of inflation on asset values, and these adjustments are normally carried into

Question 4

On its 2010 balance sheet, Barngrover Books showed $510 million of retained earnings, and exactly that same amount was shown the following year. Assuming that no earnings restatements were issued, which of the following statements is CORRECT?

a. If the company lost money in 2010, they must have paid dividends.

Question 5

Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet?

The company repurchases common stock.

Question 6

The CFO of Shalit Industries plans to have the company issue $300 million of new common stock and use the proceeds to pay off some of its outstanding bonds. Assume that the company, which does not pay any dividends, takes this action, and that total assets, operating income (EBIT), and its tax rate all remain constant. Which of the following would occur?

The company's taxable income would fall.

Question 7

Which of the following factors could explain why Dellva Energy had a negative net cash flow last year, even though the cash on its balance sheet increased?

a. The company sold a new issue of bonds.

Question 8

Which of the following statements is CORRECT?

Since depreciation is a source of funds, the more depreciation a company has, the larger its retained earnings will be, other things held constant.

Question 9

Below is the common equity section (in millions) of Teweles Technology's last two year-end balance sheets:

2009 2008

Common stock $2,000 $1,000

Retained earnings 2,000 2,340

Total common equity $4,000 $3,340

Teweles has never paid a dividend to its common stockholders. Which of the following statements is CORRECT?

a. The company's net income in 2009 was higher than in 2008.

Assume that Congress recently passed a provision that will enable Bev's Beverages Inc. (BBI) to double its depreciation expense for the upcoming year but will have no effect on its sales revenue or tax rate. Prior to the new provision, BBI's net income after taxes was forecasted to be $4 million. Which of the following best describes the impact of the new provision on BBI's financial statements versus the statements without the provision? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

The provision will reduce the company's net cash flow.

Question 11

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 operating income (EBIT) would increase.

Question 12

Which of the following statements is CORRECT?

The income of certain small corporations that qualify under the Tax Code is completely exempt from corporate income taxes. Thus, the federal government receives no tax revenue from these businesses.

All businesses, regardless of their legal form of organization, are taxed under the Business Tax Provisions of the Internal Revenue Code.

Question 13

Which of the following statements is CORRECT?

a. One way to increase EVA is to achieve the same level of operating income but with more investor-supplied capital.

Question 14

Which of the following statements is CORRECT?

The more depreciation a firm reports, the higher its tax bill, other things held constant.

Question 15

Which of the following items is NOT included in current assets?

Accounts receivable.

Inventory.

Question 16

A firm's new president wants to strengthen the company's financial position. Which of the following actions would make it financially stronger?

a. Increase accounts receivable while holding sales constant.

Question 17

Which of the following statements is CORRECT?

a. Borrowing by using short-term notes payable and then using the proceeds to retire long-term debt is an example of "window dressing." Offering discounts to customers who pay with cash rather than buy on credit and then using the funds that come in quicker to purchase additional inventories is another example of "window dressing."

Question 18

Which of the following statements is CORRECT?

a. If a firm has the highest price/earnings ratio of any firm in its industry, then, other things held constant, this suggests that the board of directors should fire the president.

Question 19

Which of the following statements is CORRECT?

a. If a security analyst saw that a firm's days' sales outstanding (DSO) was higher than the industry average and was also increasing and trending still higher, this would be interpreted as a sign of strength.

Question 20

Taggart Technologies is considering issuing new common stock and using the proceeds to reduce its outstanding debt. The stock issue would have no effect on total assets, the interest rate Taggart pays, EBIT, or the tax rate. Which of the following is likely to occur if the company goes ahead with the stock issue?

a. The ROA will decline.

b. Taxable income will decrease.

Question 21

Casey Communications recently issued new common stock and used the proceeds to pay off some of its short-term notes payable. This action had no effect on the company's total assets or operating income. Which of the following effects would occur as a result of this action?

a. The company's current ratio increased.

Question 22

Which of the following statements is CORRECT?

a. If Firms X and Y have the same P/E ratios, then their market-to-book ratios must also be the same.

Question 23

Companies HD and LD have the same sales, tax rate, interest rate on their debt, total assets, and basic earning power. Both companies have positive net incomes. Company HD has a higher debt ratio and, therefore, a higher interest expense. Which of the following statements is CORRECT?

a. Company HD pays less in taxes.

Question 24

You observe that a firm's ROE is above the industry average, but its profit margin and debt ratio are both below the industry average. Which of the following statements is CORRECT?

a. Its total assets turnover must be above the industry average.

Question 25

Which of the following would indicate an improvement in a company's financial position, holding other things constant?

a. The inventory and total assets turnover ratios both decline.

b. The debt ratio increases.

Question 26

A firm wants to strengthen its financial position. Which of the following actions would increase its quick ratio?

a. Offer price reductions along with generous credit terms that would (1) enable the firm to

Question 27

If a bank loan officer were considering a company's request for a loan, which of the following statements would you consider to be CORRECT?

a. The lower the company's EBITDA coverage ratio, other things held constant, the lower the interest rate the bank would charge the firm.

Question 28

Companies HD and LD are both profitable, and they have the same total assets (TA), Sales (S), return on assets (ROA), and profit margin (PM). However, Company HD has the higher debt ratio. Which of the following statements is CORRECT?

a. Company HD has a lower total assets turnover than Company LD.

Question 29

Which of the following statements is CORRECT?

a. Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to

Question 30

Considered alone, which of the following would increase a company's current ratio?

a. An increase in net fixed assets.

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FIN 534 quiz 2 week 3 30 Questions correct 100%!

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Posted by: argument
Date Posted: 3/24/12 4:27 AM