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FIN 370 final exam

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Posted by: shonatutes
Date Posted: 5/9/12 3:42 PM
Due Date: 12/31/69

FIN 370 FIN 370 The control of a corporation ultimately lies with the: A. company president. B. company stockholders. C. chief financial officer. D. chairman of the board. E. chief executive officer. Twenty years ago, you deposited $1,000 into an account. Fifteen years ago, you added an additional $3,000 to your account. You earned 6 percent, compounded annually, for the first 5 years and 10 percent, compounded annually, for the last 15 years. How much money do you have in your account today? A. $4,925.34 B. $5,634.48 C. $13,880.59 D. $18,121.84 E. $19,369.43 Baldwin, Inc. paid $18,500 in dividends and $44,600 in interest over the past year while net working capital increased from $10,200 to $28,200. The company purchased $30,000 in net new fixed assets and had depreciation expenses of $15,700. During the year, the firm issued $45,000 in net new equity and paid off $16,000 in long-term debt. What is the amount of Baldwin's cash flow from assets? A. $3,700 B. $34,100 C. $30,200 D. $48,000 E. $18,000 Grandel, Inc. has current liabilities of $10,200 and accounts receivable of $14,800. The firm has total assets of $39,700 and net fixed assets of $18,900. The owners' equity has a book value of $16,500. What is the amount of the net working capital? A. $20,800 B. $10,600 C. $31,000 D. $25,400 E. $23,200 A firm's current assets and current liabilities are referred to as the firm's: A. capital interest. B. cash equivalents. C. capital structure. D. net assets. E. working capital. Over the past year, a firm increased its current assets and decreased its current liabilities. As a result, the firm's net working capital: A. was unaffected as the changes occurred in the firm's current accounts. B. had to decrease. C. had to increase. D. could have either increased, decreased, or remained constant. E. could have remained constant. What is the future value of $4,900 invested for 8 years at 7 percent compounded annually? A. $8,564.35 B. $8,536.85 C. $7,644.15 D. $8,419.11 E. $5,629.53 Which one of the following statements is correct, all else constant? A. Increasing the inventory level will increase the days' sales in inventory. B. Increasing the inventory level will increase the inventory turnover rate. C. Increasing sales will increase the capital intensity ratio. D. Increasing the receivables turnover rate will increase the days' sales in receivables. E. Increasing sales will lower the total asset turnover. Which one of the following will increase the future value of a lump sum invested today? A. shortening the investment time period B. paying simple interest rather than compound interest C. paying interest only at the end of the investment period D. decreasing the amount of the lump sum E. increasing the rate of interest All else equal, which one of the following will increase owners' equity? A. decrease in inventory B. increase in accounts payable C. decrease in net working capital D. increase in accounts receivable E. increase in notes payable Which of the following will increase the sustainable growth rate of a firm? I. eliminating all dividends II. increasing the target debt-equity ratio III. increasing the profit margin IV. increasing the total asset turnover rate A. II, III, and IV only B. I, II, III, and IV C. I, II, and III only D. I, III, and IV only E. I and II only By definition, a bank that pays simple interest on a savings account will pay interest: A. on both the initial investment and all prior interest payments that are reinvested. B. only at the end of the investment period. C. only at the beginning of the investment period. D. only on the initial investment. E. only if all previous interest payments are reinvested. Thirteen years from now, you will be inheriting $30,000. What is this inheritance worth to you today if you can earn 4 percent interest compounded annually? A. $23,190.98 B. $20,741.87 C. $26,359.88 D. $18,017.22 E. $28,846.15 The primary goal of financial management is to maximize the: A. market value of the existing stock. B. current net income. C. revenue growth. D. net working capital. E. the number of shares outstanding. Amanda only has $600 today but needs $1,300 to buy a new laptop. How long will Amanda have to wait to buy the laptop if she earns 8 percent compounded annually on her money? A. 10.11 years B. 9.74 years C. 9.93 years D. 10.05 years E. 9.86 years The Supply Co. has total equity of $639,400 and net income of $51,700. The debt-equity ratio is .55 and the total asset turnover is 1.4. What is the profit margin? A. 4.86 percent B. 3.73 percent C. 6.68 percent D. 7.24 percent E. 8.99 percent Use the following tax table to answer this question: Riddell, Inc. earned $144,320 in taxable income for the year. How much tax does the company owe on this income? A. $56,285 B. $78,535 C. $51,285 D. $49,069 E. $39,535 Which one of the following transactions occurred in the primary market? A. Connie bought her first shares in a public company. B. Prudoe Mfg. sold shares of Plastics Tech on NASDAQ. C. Valerie purchased newly issued shares of Velcro, Inc. D. Alpha, Inc., a publicly owned company, bought shares of New Town Press, also a publicly owned company. E. Pete purchased shares of GPT from his friend, George. Highland, Inc. has total assets of $16,200, net working capital of $3,900, owner's equity of $8,500, and long-term debt of $6,000. What is the value of the current assets? A. $10,200 B. $2,500 C. $9,900 D. $6,300 E. $5,600 The Du Pont identity helps financial managers determine: I. why a firm's return on equity is lower than anticipated. II. the operating efficiency of a firm. III. the utilization rate of a firm's assets. IV. the rate of return on a firm's assets. A. I, II, III, and IV B. I and III only C. I, II, and III only D. II, III, and IV only E. II and III only The average tax rate is defined as the: A. total tax paid divided by total revenue. B. amount of tax due on the next dollar of revenue. C. amount of tax due on the next dollar of taxable income. D. total taxes divided by total taxable income. E. total tax paid divided by total assets. Bella's Boutique has cash of $2,900 and accounts receivable of $4,200. The inventory cost $6,300 and can be sold today for $8,800. The fixed assets were purchased at a cost of $50,500 of which $23,200 has been depreciated. The fixed assets can be sold today for $25,000. What is the total book value of the assets of Bella's? A. $17,700 B. $63,900 C. $40,700 D. $18,400 E. $38,900 Morgan's Industrial Park has total assets of $541,700, long-term debt of $201,400, total equity of $306,800, fixed assets of $469,200, and sales of $600,500. The profit margin is 7 percent. What is the current ratio? A. .46 B. 2.16 C. .91 D. 1.01 E. 1.59 The value of an investment after one or more time periods is called the: A. future value. B. discounted value. C. complex value. D. present value. E. true value. Which one of the following is correct regarding a general partnership? A. A single partner is given total control over the daily operations of the partnership. B. The profits of a general partnership are taxed the same as those of a corporation. C. Each partner's liability for the firm's debts is limited to each partner's investment in the firm. D. The profits of the firm are taxed as a separate entity. E. Each partner has unlimited liability for the partnership debts. Delmont Movers has a profit margin of 8 percent and net income of $64,000. What is the common-size percentage for the cost of goods sold if that expense amounted to $620,000 for the year? Which one of the following statements about a limited partnership is correct? A. The partnership has an unlimited life. B. The partnership is managed on a daily basis by its limited partners. C. Each limited partnership must have at least one general partner. D. All partners have limited liability for partnership debts. E. Partnership profits are taxed the same as corporate profits. Eli and Sons wants to evaluate its assets to determine if its mix of assets has changed over time. To do this, the firm should compile which one of the following financial statements for each of the past few years? Which of the following are classified as tangible fixed assets? I. inventory II. machinery III. patents IV. building A. I and III only B. II and IV only C. I and IV only D. II and III only E. II, III, and IV only Which one of the following statements concerning market and book values is correct? A. Book values represent the amount of cash that will be received if an asset is sold. B. The market value of accounts receivable is generally much lower than the book value of those receivables. C. The current book value of equipment purchased last year is equal to the initial cost of the equipment. D. The market value of fixed assets will always exceed the book value of those assets. E. The market and book values of current assets tend to be relatively equal. Which of the following will increase the profit margin of a firm, all else constant? I. increasing depreciation II. decreasing cost of goods sold III. decreasing the tax rate IV. increasing interest expense Technical Services, Inc. has sales of $846,370, cost of goods sold of $672,500, and inventory of $10,930. How long on average does it take the firm to sell its inventory? A. 77.44 days B. 4.71 days C. 5.93 days D. 22.95 days E. 61.53 daysLisa deposits $2,500 into an account paying 5 percent interest, compounded annually. At the same time, Jill deposits $2,500 into an account paying 2.5 percent interest, compounded annually. At the end of five years: A. Lisa will have earned exactly twice the amount of interest as Jill earned. B. Jill will have earned more interest than Lisa. C. Both Lisa and Jill will have earned the same amount of interest. D. Lisa will have earned more than twice the amount of interest that Jill earned. E. Lisa will have earned somewhere between 1 and 2 times the amount of interest that Jill earned. Walther Enterprises has accounts receivable of $52,700, total assets of $269,250, cost of goods sold of $147,900 and a capital intensity ratio of 1.25. What is the accounts receivables turnover rate? You have $2,000 today and want to quadruple your money in 10 years. What interest rate must you earn? A. 23.11 percent B. 11.61 percent C. 7.18 percent D. 14.87 percent E. 20.13 percent Which of the following will increase the liquidity level of a firm? I. the purchase of inventory for cash II. the sale of inventory on credit III. the sale of inventory for cash IV. the collection of accounts receivable When you discount money you are: A. calculating the future value of a present amount. B. offering to accept less value than that to which you are entitled. C. computing the present value of a future amount. D. stating the rate of interest you require to invest your funds. E. agreeing to invest funds at a lower than normal rate of interest. Which of the following correctly describe a dealer market? I. Dealers match buyers with sellers. II. Dealers buy and sell for themselves at their own risk. III. Dealer trading occurs over-the-counter. IV. Dealer transactions occur on a trading floor. E. I and III only Which one of the following situations is most apt to create an agency problem? A. A key employee is granted stock options on an annual basis. B. The production manager is granted an annual bonus based on the size of the firm's total operations. C. Each employee is given a gift certificate for a free dinner for two whenever the firm remains accident-free for one year. D. A company researcher is paid a bonus whenever she develops a new method of production that increases the shelf life of the firm's products. E. The company president receives an annual bonus based on the market value of the firm's stock. Paul is the owner of Paul's Cabinets, which is a sole proprietorship. The firm cannot pay its bills because a large customer defaulted on payment. Which one of the following statements is correct given this situation? You want to invest an amount of money today and receive back twice that amount in the future. You expect to earn 6 percent interest. Approximately how long must you wait for your investment to double in value? A. 6 years B. 8 years C. 10 years D. 12 years E. 9 years Which of the following will increase the total amount of interest earned on an investment? Assume all interest is reinvested. I. increasing the frequency of the interest payments II. decreasing the frequency of the interest payments III. increasing the interest rate IV. decreasing the interest rate A firm has total assets of $456,000 and total equity of $217,000. What is the debt-equity ratio? A firm has adopted a policy whereby it will not seek any additional external financing. Given this, what is the maximum growth rate of the firm if it has net income of $4,500, total equity of $40,000, total assets of $80,000, and a 70 percent dividend payout ratio? Which of the following transactions will increase the liquidity of a firm? I. purchasing equipment with cash II. collecting an account receivable III. selling inventory at cost IV. selling inventory at a profit The process of managing a firm's long-term investments is called: A. risk management. B. capital structure management. C. working capital management. D. asset allocation. E. capital budgeting. When analyzing alternative capital structures for a firm, a financial manager must consider which of the following? The Fruit Co. has total assets of $7,800, fixed assets of $7,100, current liabilities of $1,500, and long-term liabilities of $4,600. What is the total debt ratio? Equitable Sales has total owner's equity of $14,500. The firm has current assets of $4,900, current liabilities of $1,200, and total assets of $20,100. What is the value of the long-term debt? Limited liability companies: A. provide limited liability for some, but not all, of its owners. B. cannot be created for professional service firms, such as accountants and attorneys. C. are a hybrid between a sole proprietorship and a partnership. D. that meet IRS standards are taxed like a partnership. E. are taxed like a corporation.


FIN 370 

FIN 370 

The control of a corporation ultimately lies with the: 
A. company president.
B. company stockholders.
C. chief financial officer.
D. chairman of the board.
E. chief executive officer.

 


Twenty years ago, you deposited $1,000 into an account. Fifteen years ago, you added an additional $3,000 to your account. You earned 6 percent, compounded annually, for the first 5 years and 10 percent, compounded annually, for the last 15 years. How much money do you have in your account today? 
A. $4,925.34
B. $5,634.48
C. $13,880.59
D. $18,121.84
E. $19,369.43

Baldwin, Inc. paid $18,500 in dividends and $44,600 in interest over the past year while net working capital increased from $10,200 to $28,200. The company purchased $30,000 in net new fixed assets and had depreciation expenses of $15,700. During the year, the firm issued $45,000 in net new equity and paid off $16,000 in long-term debt. What is the amount of Baldwin's cash flow from assets? 
A. $3,700
B. $34,100
C. $30,200
D. $48,000
E. $18,000

Grandel, Inc. has current liabilities of $10,200 and accounts receivable of $14,800. The firm has total assets of $39,700 and net fixed assets of $18,900. The owners' equity has a book value of $16,500. What is the amount of the net working capital? 
A. $20,800
B. $10,600
C. $31,000
D. $25,400
E. $23,200

A firm's current assets and current liabilities are referred to as the firm's: 
A. capital interest.
B. cash equivalents.
C. capital structure.
D. net assets.
E. working capital.

 

Over the past year, a firm increased its current assets and decreased its current liabilities. As a result, the firm's net working capital: 
A. was unaffected as the changes occurred in the firm's current accounts.
B. had to decrease.
C. had to increase.
D. could have either increased, decreased, or remained constant.
E. could have remained constant.

 

 What is the future value of $4,900 invested for 8 years at 7 percent compounded annually? 
A. $8,564.35
B. $8,536.85
C. $7,644.15
D. $8,419.11
E. $5,629.53

 

Which one of the following statements is correct, all else constant? 
A. Increasing the inventory level will increase the days' sales in inventory.
B. Increasing the inventory level will increase the inventory turnover rate.
C. Increasing sales will increase the capital intensity ratio.
D. Increasing the receivables turnover rate will increase the days' sales in receivables.
E. Increasing sales will lower the total asset turnover.

 Which one of the following will increase the future value of a lump sum invested today? 
A. shortening the investment time period
B. paying simple interest rather than compound interest
C. paying interest only at the end of the investment period
D. decreasing the amount of the lump sum
E. increasing the rate of interest

 

All else equal, which one of the following will increase owners' equity? 
A. decrease in inventory
B. increase in accounts payable
C. decrease in net working capital
D. increase in accounts receivable
E. increase in notes payable

 

Which of the following will increase the sustainable growth rate of a firm? 
I. eliminating all dividends
II. increasing the target debt-equity ratio
III. increasing the profit margin
IV. increasing the total asset turnover rate 
A. II, III, and IV only
B. I, II, III, and IV
C. I, II, and III only
D. I, III, and IV only
E. I and II only

 

By definition, a bank that pays simple interest on a savings account will pay interest: 
A. on both the initial investment and all prior interest payments that are reinvested.
B. only at the end of the investment period.
C. only at the beginning of the investment period.
D. only on the initial investment.
E. only if all previous interest payments are reinvested.

 Thirteen years from now, you will be inheriting $30,000. What is this inheritance worth to you today if you can earn 4 percent interest compounded annually? 
A. $23,190.98
B. $20,741.87
C. $26,359.88
D. $18,017.22
E. $28,846.15

 

The primary goal of financial management is to maximize the: 
A. market value of the existing stock.
B. current net income.
C. revenue growth.
D. net working capital.
E. the number of shares outstanding.

Amanda only has $600 today but needs $1,300 to buy a new laptop. How long will Amanda have to wait to buy the laptop if she earns 8 percent compounded annually on her money? 
A. 10.11 years
B. 9.74 years
C. 9.93 years
D. 10.05 years
E. 9.86 years

The Supply Co. has total equity of $639,400 and net income of $51,700. The debt-equity ratio is .55 and the total asset turnover is 1.4. What is the profit margin? 
A. 4.86 percent
B. 3.73 percent
C. 6.68 percent
D. 7.24 percent
E. 8.99 percent

 


Use the following tax table to answer this question: 

  

Riddell, Inc. earned $144,320 in taxable income for the year. How much tax does the company owe on this income? 
A. $56,285
B. $78,535
C. $51,285
D. $49,069
E. $39,535

 

Which one of the following transactions occurred in the primary market? 
A. Connie bought her first shares in a public company.
B. Prudoe Mfg. sold shares of Plastics Tech on NASDAQ.
C. Valerie purchased newly issued shares of Velcro, Inc.
D. Alpha, Inc., a publicly owned company, bought shares of New Town Press, also a publicly owned company.
E. Pete purchased shares of GPT from his friend, George.

 

Highland, Inc. has total assets of $16,200, net working capital of $3,900, owner's equity of $8,500, and long-term debt of $6,000. What is the value of the current assets? 
A. $10,200
B. $2,500
C. $9,900
D. $6,300
E. $5,600

 

 The Du Pont identity helps financial managers determine: 
I. why a firm's return on equity is lower than anticipated.
II. the operating efficiency of a firm.
III. the utilization rate of a firm's assets.
IV. the rate of return on a firm's assets. 
A. I, II, III, and IV
B. I and III only
C. I, II, and III only
D. II, III, and IV only
E. II and III only

The average tax rate is defined as the: 
A. total tax paid divided by total revenue.
B. amount of tax due on the next dollar of revenue.
C. amount of tax due on the next dollar of taxable income.
D. total taxes divided by total taxable income.
E. total tax paid divided by total assets.

Bella's Boutique has cash of $2,900 and accounts receivable of $4,200. The inventory cost $6,300 and can be sold today for $8,800. The fixed assets were purchased at a cost of $50,500 of which $23,200 has been depreciated. The fixed assets can be sold today for $25,000. What is the total book value of the assets of Bella's? 
A. $17,700
B. $63,900
C. $40,700
D. $18,400
E. $38,900

 

Morgan's Industrial Park has total assets of $541,700, long-term debt of $201,400, total equity of $306,800, fixed assets of $469,200, and sales of $600,500. The profit margin is 7 percent. What is the current ratio? 
A. .46
B. 2.16
C. .91
D. 1.01
E. 1.59

 

The value of an investment after one or more time periods is called the: 
A. future value.
B. discounted value.
C. complex value.
D. present value.
E. true value.

 

Which one of the following is correct regarding a general partnership? 
A. A single partner is given total control over the daily operations of the partnership.
B. The profits of a general partnership are taxed the same as those of a corporation.
C. Each partner's liability for the firm's debts is limited to each partner's investment in the firm.
D. The profits of the firm are taxed as a separate entity.
E. Each partner has unlimited liability for the partnership debts.

Delmont Movers has a profit margin of 8 percent and net income of $64,000. What is the common-size percentage for the cost of goods sold if that expense amounted to $620,000 for the year? 

 


 Which one of the following statements about a limited partnership is correct? 
A. The partnership has an unlimited life.
B. The partnership is managed on a daily basis by its limited partners.
C. Each limited partnership must have at least one general partner.
D. All partners have limited liability for partnership debts.
E. Partnership profits are taxed the same as corporate profits.

 


 Eli and Sons wants to evaluate its assets to determine if its mix of assets has changed over time. To do this, the firm should compile which one of the following financial statements for each of the past few years? 

Which of the following are classified as tangible fixed assets? 
I. inventory
II. machinery
III. patents
IV. building 
A. I and III only
B. II and IV only
C. I and IV only
D. II and III only
E. II, III, and IV only

 


Which one of the following statements concerning market and book values is correct? 
A. Book values represent the amount of cash that will be received if an asset is sold.
B. The market value of accounts receivable is generally much lower than the book value of those receivables.
C. The current book value of equipment purchased last year is equal to the initial cost of the equipment.
D. The market value of fixed assets will always exceed the book value of those assets.
E. The market and book values of current assets tend to be relatively equal.

 

 Which of the following will increase the profit margin of a firm, all else constant? 
I. increasing depreciation
II. decreasing cost of goods sold
III. decreasing the tax rate
IV. increasing interest expense 

Technical Services, Inc. has sales of $846,370, cost of goods sold of $672,500, and inventory of $10,930. How long on average does it take the firm to sell its inventory? 
A. 77.44 days
B. 4.71 days
C. 5.93 days
D. 22.95 days
E. 61.53 daysLisa deposits $2,500 into an account paying 5 percent interest, compounded annually. At the same time, Jill deposits $2,500 into an account paying 2.5 percent interest, compounded annually. At the end of five years: 
A. Lisa will have earned exactly twice the amount of interest as Jill earned.
B. Jill will have earned more interest than Lisa.
C. Both Lisa and Jill will have earned the same amount of interest.
D. Lisa will have earned more than twice the amount of interest that Jill earned.
E. Lisa will have earned somewhere between 1 and 2 times the amount of interest that Jill earned.

 

 Walther Enterprises has accounts receivable of $52,700, total assets of $269,250, cost of goods sold of $147,900 and a capital intensity ratio of 1.25. What is the accounts receivables turnover rate? 

You have $2,000 today and want to quadruple your money in 10 years. What interest rate must you earn? 
A. 23.11 percent
B. 11.61 percent
C. 7.18 percent
D. 14.87 percent
E. 20.13 percent

Which of the following will increase the liquidity level of a firm? 
I. the purchase of inventory for cash
II. the sale of inventory on credit
III. the sale of inventory for cash
IV. the collection of accounts receivable 

When you discount money you are: 
A. calculating the future value of a present amount.
B. offering to accept less value than that to which you are entitled.
C. computing the present value of a future amount.
D. stating the rate of interest you require to invest your funds.
E. agreeing to invest funds at a lower than normal rate of interest.

 

Which of the following correctly describe a dealer market? 
I. Dealers match buyers with sellers.
II. Dealers buy and sell for themselves at their own risk.
III. Dealer trading occurs over-the-counter.
IV. Dealer transactions occur on a trading floor. 

E. I and III only

 

 

 

Which one of the following situations is most apt to create an agency problem? 
A. A key employee is granted stock options on an annual basis.
B. The production manager is granted an annual bonus based on the size of the firm's total operations.
C. Each employee is given a gift certificate for a free dinner for two whenever the firm remains accident-free for one year.
D. A company researcher is paid a bonus whenever she develops a new method of production that increases the shelf life of the firm's products.
E. The company president receives an annual bonus based on the market value of the firm's stock.

 

Paul is the owner of Paul's Cabinets, which is a sole proprietorship. The firm cannot pay its bills because a large customer defaulted on payment. Which one of the following statements is correct given this situation? 
You want to invest an amount of money today and receive back twice that amount in the future. You expect to earn 6 percent interest. Approximately how long must you wait for your investment to double in value? 

A. 6 years
B. 8 years
C. 10 years
D. 12 years
E. 9 years

 


Which of the following will increase the total amount of interest earned on an investment? Assume all interest is reinvested. 
I. increasing the frequency of the interest payments
II. decreasing the frequency of the interest payments
III. increasing the interest rate
IV. decreasing the interest rate 
A firm has total assets of $456,000 and total equity of $217,000. What is the debt-equity ratio? 

 

 A firm has adopted a policy whereby it will not seek any additional external financing. Given this, what is the maximum growth rate of the firm if it has net income of $4,500, total equity of $40,000, total assets of $80,000, and a 70 percent dividend payout ratio? 

 

Which of the following transactions will increase the liquidity of a firm? 
I. purchasing equipment with cash
II. collecting an account receivable
III. selling inventory at cost
IV. selling inventory at a profit 

 

The process of managing a firm's long-term investments is called: 
A. risk management.
B. capital structure management.
C. working capital management.
D. asset allocation.
E. capital budgeting.

 

When analyzing alternative capital structures for a firm, a financial manager must consider which of the following?

The Fruit Co. has total assets of $7,800, fixed assets of $7,100, current liabilities of $1,500, and long-term liabilities of $4,600. What is the total debt ratio? 

 

Equitable Sales has total owner's equity of $14,500. The firm has current assets of $4,900, current liabilities of $1,200, and total assets of $20,100. What is the value of the long-term debt? 


 Limited liability companies: 
A. provide limited liability for some, but not all, of its owners.
B. cannot be created for professional service firms, such as accountants and attorneys.
C. are a hybrid between a sole proprietorship and a partnership.
D. that meet IRS standards are taxed like a partnership.
E. are taxed like a corporation.

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