If firm a has a higher debt-to-equity ratio than firm b then

Midterm Exam Part I

Question 2

Which of the following cannot be engaged in managing the business?

a limited partner

a general partner

a sole proprietor

none of these

Question 2

1 / 1 point

One reason for the existence of agency problems between managers and share holders is that:

managers know how to manage the firm better than shareholders.

there is a separation of ownership and control of the firm.

shareholders have unreasonable expectations about managerial performance.

none of these.

Question 3

1 / 1 point

On June 23, 20X8, Mikhal Cosmetics sold $250,000 worth of its products to Rynex Corporation. The goods were shipped to Rynex on July 2. The payment from Rynex was received on September 20. Under the "cash basis of accounting" revenue should be recorded on:

June 23, 20X8.

July 2, 20X8.

September 20, 20X8.

none of the above

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Question 4

1 / 1 point

During the last year, Sigma Co had Net Income of $156, paid $20 in dividends, and sold new stock for $37. Beginning equity for the year was $600. Ending equity was

Answer:

773

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Question 5

1 / 1 point

The following items are components of a traditional balance sheet. How much are the total assets of the firm?

Plant and equipment

$42,500

Common stock

 15,000

Cash

   5,200

Inventory

 22,000

Bad debt reserve

    6,000

Additional paid-in capital

    6,000

Accumulated depreciation

 28,800

Accounts receivable

 22,000

Answer:

56,900

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Question 6

1 / 1 point

Book value is the value of a company according to its balance sheet. Market value is the value of the company in the eyes of the stock market.

True

False

Question 7

1 / 1 point

When evaluating a Statement of Cash Flows, which of the following would be considered an example(s) of cash flow from financing activities?

Depreciation

Capital Expenditure

Repayment of Bank Loan

All of the Above

Question 8

1 / 1 point

When reviewing a Balance Sheet, which of the following items would you expect to find under Assets?

A. Cash

B. Accounts Payable

C. Inventory

A & B

A & C

Question 9

1 / 1 point

Cameron Balance Sheet

Accounts Payable and Accruals

28

Accounts Receivable

62

Accumulated Depreciation

(175)

Cash

39

Common Stock

120

Fixed Assets (gross)

390

Inventory

125

Long-Term Debt

200

Retained Earnings

65

What is Cameron Inc.’s Net Working Capital?

Answer:

198

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Question 10

1 / 1 point

A firm’s current ratio is 1.2, and its quick ratio is 1.0. If its current liabilities are $13,600, what are its inventories?

Answer:

2,720

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Question 11

1 / 1 point

Iris Income Statement

Cost of Goods Sold

340

Depreciation Expense

35

Interest Expense

20

Operating Expense (excluding depreciation)

115

Sales

770

 What was Iris Inc.’s earnings before interest and taxes (EBIT)?

Answer:

280

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Question 12

1 / 1 point

Iris Balance Sheet

Accounts Payable and Accruals

65

Accounts Receivable

50

Accumulated Depreciation

(175)

Cash

34

Common Stock

120

Fixed Assets (gross)

390

Inventory

127

Long-Term Debt

200

Retained Earnings

65

 What is Iris Inc.’s Total Assets?

Answer:

426

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Question 13

1 / 1 point

If firm A has a higher debt-to-equity ratio than firm B, then

firm A has a lower equity multiplier than firm B.

firm B has higher financial leverage than firm A.

firm B has a lower equity multiplier than firm A.

none of the above

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Question 14

1 / 1 point

 Flying Tigers, Inc., has net sales of $744,000 and accounts receivables of $166,000. What is the firm's accounts receivables turnover? (Give your answer upto two decimal places)

Answer:

4.48

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Question 15

1 / 1 point

Reagan Corp. has reported a net income of $811,200 for the year. The company's share price is $13.72, and the company has 323,710 shares outstanding. Compute the firm's price-earnings ratio upto two decimal places.

Answer:

5.47

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Question 16

1 / 1 point

You purchased a piece of property for $30,000 nine years ago and sold it today for $83,190. What was the annual rate of return on your investment?

9%

10%

11%

12%

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Question 17

1 / 1 point

The First National Bank has agreed to lend you $30,000 today, but you must repay $42,135 in 3 years. What rate is the bank is charging you?

13%

12%

11%

10%

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Question 18

1 / 1 point

The Florida lottery agrees to pay the winner $257,000 at the end of each year for the next 20 years. What is the future value of this prize if each payment is put in an account earning 0.07?

Answer:

10,535,841.53

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Question 19

1 / 1 point

Which of the following is not a “Fundamental Decision of Financial Management”?

The capital budgeting decision

The macroeconomic management decision

The financing decision

Working capital management decision

Question 20

1 / 1 point

Which of the following is least likely to be part of an Annual Report?

financial tables

discussions of the firm’s product lines, its services to its customers, and its contributions to the communities in which it operates

audited financial statements

ratio analysis of other firms in the same industry

Attempt Score:

20 / 20 - 100 %

Overall Grade (highest attempt):

20 / 20 - 100 %

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