Finance 301

Which of the following is true about Asset Diversification?a. It is necessary to invest in at least 500 assets to achieve significant risk reductionb. It is a way of selecting the highest growth stocks in a portfolioc. It involves allocating 100% of investments in the same industryd. It is a method of calculating expected return on an assete. It is used to reduce exposure to firm-specific risk It is used to reduce exposure to firm-specific risk
Which of the following is not a tool of finance? a. Present Value- future value analysisb. financial statements and ratiosc. cost- benefit analysisd. risk and return modelse. spreadsheet modelling C. Cost-Benefit Analysis
Which of these statements concerning the Principles of Finance is true? a. There is an inverse relationship between risk and return b. Investors prefer less risk to more riskc. a dollar tomorrow is worth more than a dollar todayd. markets are inefficient and new information is slowly reflected in the marketplacee. stock prices are not random, but follow a predictable pattern based on profitability ratios B. Investors prefer less risk to more risk
Which of the following is common element of a financial crises? a. A democrat is usually in the White HOuseb. Financial crises occur only about once every 25 yearsC. The federal Government is seldom involved in a financial crisis D. Financial crises usually result from excessive investment in an area of the economy or marketsE. Financing is virtually impossible to obtain leading up to the crisis D. Financial crises usually result from excessive investment in an area of the economy or markets
Which of the following statements regarding the cash flow statement is true? A. Primary Source of Cash is Operating Activities; Primary Use of Cash is Investing ActivitiesB. Financing Activities do not have an impact on the Cash Flow StatementC. A typical company has a positive cash flow from Investing ActivitiesD. Purchases of PP& E can be either an Operating or Financing Activity, based on the size of the purchaseE. Depreciation is classified as a cash flow from Financing Activities A. Primary Source of Cash is Operating Activities; Primary Use of Cash is Investing Activities
Which of the following statements about stockholders and stakeholders is true? A. Stockholders’ interests are protected by contractsB. The federal government is a corporate stakeholderC. Stockholders have a claim on the firm’s cash flows prior to debt holders and suppliersD. Danny Devito exposes the stakeholderE. Stakeholders have a residual claim on the cash flows of a corporation B. The federal government is a corporate stakeholder
Which of the following is true about the different organizational forms? A. Partnership and Sole Proprietorships profit are double taxedB. It is easy to raise large amounts of money in a partnershipC. Corporations are the most complex form of business organization to start upD. The liability of the owner is limited in a sole proprietorshipE. Transferring ownership is most difficult for a corporation C. Corporations are the most complex form of business organization to start up
WHich of the following is true regarding corporate governance? a. Management had a high level of stock ownership in the 1980sb. in the 1980s CEOs were more likely to be fired than beforeC. CEO’s accountability for their performance declined in the 1990sD. Japanese companies have fewer takeovers compared to the United StatesE. Hostile takeovers dominated the 1990s D. Japanese companies have fewer takeovers compared to the United States
Which of the following is true regarding financial statements?A. Operating profit equals sales minus cost of goods soldB. the Balance Sheet measures the growth in assets over a period of timeC. Shareholders equity is found on the income statementD. Assets PLUS liabilites = Shareholders EquityE. The cash flow statement shows how the cash balance changed from one period to the next E. The Cash Flow Statement shows how the cash balance changed from one period to the next
Disney Stock Price increased from $40 to $48 last yer, and the 10 company paid a $2 dividend. What was the stock return on Disney? A. 10%B. 15%C. 20%D. 25%E.30% (48 – 40) + 2 / 40 = 25%
Which statement is the most accurate reflection of the agency problem? A. Management pursues that maximize shareholder valueB. The objectives of shareholders and management are alignedC. Management allocates corporate resources in a way that benefits stockholdersD. Management does not have an ownership stake in the companyE. The management has stock options in the company D. Management does not have an ownership stake in the company
Management’s overall performance is the best gauged byA. Profitability ratiosB. Liquidity RatiosC. Leverage ratiosD. Activity ratiosE. Efficiency ratios A. Profitability Ratios
Use the Strategic Profit Model to calculate the ROE for Badger Inc in 2007Profit Margin= 10%Asset Turnover = 1.5Financial Leverage= .6 B. 9%PM AT = ROA LEV = ROE
On a common sized balance sheet, what is Intel’s “Short Term Investments’ in 2008? S-T INV/ Assets10.51%
What is intel’s return on assets for 2008? Net Income/Assets=11.33%
What is Intel’s Current Ratio in 2007? Curr. Assets/Curr. Liabs= 2.80
Which of the following is true? A. Top line growth 9sales0 in more important than bottom line growth (earnings) for companiesB. The U.S. ranks first in the world in terms of economic freedomC. In an efficient market, stock prices reflect stock valuesD. The biggest believers in behavioral finane are finance professorsE. Depreciation is a use of funds C. In an efficient market, stock prices reflect stock values
Calculate Hawkeye Corp’s Market Capitalization using the below informationShare Outstanding = 1millionPrice Per Share = $2Book Value Per Share = $5Earnings Per Share= .25 #shares * price per share =2million
Dow Jones is currently trading ____ at ; The Nasdaq is currently trading at ________? A. 11,500; 2,500B. 8,750; 4, 350C. 25,000; 3500D. 15,500; 4200E. 7,000, 1200 15,000; 4,200
Which of the following is true regarding the roles of the Controller and TreasurerA. Controller oversees the Treasury of the company; treasurer is the head of AccountingB. Controller is responsible for auditing company financials; Treasurer puts together the financial statementsC. Treasurer manages Capital BudgetsD. Controller reports to the Treasureer; Treasurer reports to the President E. Controller is responsible for managing short term capital requirements; Treasurer is responsible for managing long term capital requirements Treasurer manages Capital Budgets
Which of the following is true about Bernie Madoff?A. Madoff’s investment scam lasted only several monthsB. Unlike Charles Ponzi, Madoff promised very high investment returnsC. Madoff’s fraud pre-dated the scheme run by Charles PonziD. The Securities and Exchange Commission discovered Madoff’s investment E. Schemes like Madoff’s require new investment dollars on an ongoing basis to continue E. Schemes like Madoff’s require new investment dollars on an ongoing basis to continue
The Dual challenges to management are to _______ and ____________. A. Treat employees well; be responsible citizen in the communityB. Produce high quality products/services at competitive prices; provide competitive returns to stock holdersC. Provide jobs to the communities it serves; provide excellent service to customersD. Pay taxes to the government; repay loans to lendersE. Have highly satisfied customers; produce a profit for shareholders Produce high quality products/services at competition prices; provide competitive returns to stock holders
Given the following information, calculate the Cash Flow for the Wolverine Net Income= 500,000Depreciation= 50,000Sales of Property=100kCommon Stock 200,000 Net Income + Depreciation + Property Sale – Stock Repurchase$450,000
Which of the following is the true regarding Berkshire Hatheway?A. Government after the financial crisis B.Berkshire’s stock has underperformed the overall stock market over the long termC. Berkshire’s shares trade for over $100k per shareD. Berkshire is primarily an energy companyE. Berkshire is 100% owned by Warren Buffett C. Berkshire’s shares trade for over $100,000 per share
Which of the following is a capital structure decision? A. Paying for new equipment with debt or equityB. Building a new manufacturing plantC. Increasing employee wagesD. Managing short-term assets and liabilitiesE. Changing lending policies for customers A. Paying for new equipment with debt or equity
Which of the following is true? A. The average annual return on the stock market is about 20%B. The average growth rate in the U.S. is 12% C. On average, companies earn a return on equity of 25% in the U.S. D. The price of an ounce of gold is about $50,000E. The price of a barrel of oil is about $100 E. The price of a barrel of oil is about $100
Which of the following is true about behavioral finance? A. Individuals are expected utility maximizersB. Markets are always price efficientC. Market prices may reflect emotions and biasesD. Arbitrageurs eliminate any price distortions in the marketsE. Prices reflect expected outcomes times probabilities C. Market prices may reflect emotions and biases
Which of the following is true about financial statements? A. Companies keep two sets of books- one for taxes and one for investorsB. Accounts receivable are on the income statement C. There are no footnotes relating to income statement accountsD. To reflect current prices, financial statemtns are based on market and not book valuesE. Goodwill is a tangible fixed asset Companies keep two sets of books- one for taxes and one for investors
Which of the following is a working capital decision? A. A company refinances long-term debt at a lower interest rateB. A company pays a dividend to stock holdersC. A company increases its R&D investmentD. A company changes its credit policyE. A company sells its operations in Mexico D. A company changes its credit policy
Which of these statements concerning the Principles of Finance is true? A. Buying a greater number of stocks increases the risk of your portfolioB. Investors prefer more risk to less risk C. According to the Capital Asset Pricing Model, Beta is the appropriate measure of riskD. Transaction costs and inflation increase your real investment returnsE. Security selection is more important than asset allocation in long-term investment performance C. According to the Capital Asset Pricing Model, Beta is the appropriate measure of risk
Which of the following is not true about corporate defense mechanisms? A. They are used by activist investors to get the attention of management B. They initially became popular in the 1980s in response to hostile takeoversC. Poison pills result in a sale of stock at low prices to existing stock holders once triggeredD. They have made a comeback in the current capital market environmentE. THey make companies more difficult and expensive to take over A. They are used by activist investors to get the attention of management
Activist investors: A. have a negative impact on a company and its stock priceB. usually invest in company that has been outperforming the marketC. are not required to report their investment holdings to the SECD. seek changes in management and/or strategy to improve stockholder returnsE. have largely disappeared from the market in recent years D. seek changes in management and/or strategy to improve stockholder returns
What would you add back to Net Income to determine Operating Profit? A. DividendsB. Interest and TaxesC. COGSD. SG&A and DepreciationE. Long-term debt B. Interest and Taxes
Which of the following corporate governance model would partnering companies own each other’s stock? A. Anglo- American corporate governance modelB. Japan-Germany corporate governance modelC. Rest of World corporate governance modelD. Democratic corporate governance modelE. Dodd-Frank corporate governance model B. Japan-Germany corporate governance model
1. Which of the following is a characteristic of a sole proprietorship?A. It is easier to raise money than it is for corporations B. There is no legal distinction between the business and ownerC. It is the most complex form of business organization to start upD. The liability of the owner is limitedE. The profits are double taxed B. There is no legal distinction between the business and owner
Which of the following is a characteristic of a partnership?A. It is more difficult for a partnership to raise capital compared to a corporation B. Business partnerships are listed on the NYSEC. Partnerships are easier to set up than sole proprietorshipsD. The liability of the owners for the business’ claims is limitedE. The profits are double taxed A. It is more difficult for a partnership to raise capital compared to a corporation
. Calculate the stock return from the following information: Beginning Price: $120.00Price 1 Year Later: $180.00Annual dividend: $15.00A. 12.5%B. 41.7%C. 50.0%D. 62.5%E. 8.3% D. 62.5%
Calculate the stock return from the following information: Beginning Price: $90.00Ending Price: $50.00Annual dividend: $25.00A. -50.0%B. -27.8%C. -30.0%D. -44.4%E. -16.7% E. -16.7%
3. What is the return on a stock with the following information? Beginning Price: $25Ending Price: $30Annual Dividend: $2A. 20.0%B. 23.3%C. 28.0%D. 16.7%E. 12.0% C. 28%
1. Which of the following investments are the most risky?A. International stocksB. Corporate bondsC. Treasury bondsD. Large-cap stocksE. Savings account A. International stocks
2. Which of the following investments are the least risky?A. Small-cap stocksB. Corporate bondsC. International stocksD. Large growth stocksE. Mid-cap stocks B. Corporate bonds
1. Which of the following is part of the treasurer’s function?A. Auditing the company’s financialsB. Publishing financial statementsC. Making capital expendituresD. Monitoring accounting systemsE. Filing the company’s taxes C. Making capital expenditures
2. Which of the following is part of the controller’s function?A. Determining the feasibility of various projectsB. Financial planningC. Managing short and long term capital requirementsD. Working capital managementE. Preparing financial statements and reports E. Preparing financial statements and reports
According to the Theory of Efficient Capital Markets:A. Stock prices are not affected by new informationB. Current stock prices reflect all publicly available informationC. Stock prices adjust to new information slowly over timeD. Stock prices only react instantly to positive financial information E. Investors can easily beat the market B. Current stock prices reflect all publicly available information
According to the Theory of Efficient Capital Markets:A. Stock prices do not reflect all publicly available informationB. Stock prices take a long time to capture new informationC. Stock prices react instantaneously to new informationD. Stock prices react positively to all new informationE. Investors can easily predict exact stock prices C. Stock prices react instantaneously to new information
Given the following information, a rational investor would most likely invest in which stock?Stock A: Mean Return – 12%; Standard Deviation – 11%Stock B: Mean Return – 12%; Standard Deviation – 9%A. Stock A because it is riskier than Stock BB. Stock A because it is not as risky as Stock BC. Stock B because it is riskier than Stock AD. Stock B because it is not as risky as Stock AE. No difference because they have the same rate of return D. Stock B because it is not as risky as Stock A
1. The last 10 year returns of Stock A and Stock B have a mean of 20% each and standard deviation of 80% and 30% respectively. Assuming all other criteria for choosing a stock are similar for A and B, a risk averse investor would prefer investing inA. Stock AB. Stock BC. Indifferent to bothD. Gets confused and stop investing once for allE. Insufficient information Stock B
Which of the following statements about Business Organizational Forms is true?A. Corporations are easier to start than sole proprietorshipsB. Owners of corporations have limited liabilityC. Partnerships are easier to transfer than corporationsD. It is easier for sole proprietorships to raise capital than corporationsE. Sole proprietorships are double taxed B. owners of coproations have limited liability
The time value of money implies that:A. A dollar today is worth MORE than a dollar tomorrowB. A dollar today is worth LESS than a dollar tomorrowC. The value of money does not change over timeD. Investors are indifferent to receiving a dollar today vs. a dollar in the futureE. The value of a dollar tomorrow depends on many things, but time is not one of them Answer: A A. dollar today is worth MORE than a dollar tomorrow
The time value of money implies that:A. Investors are indifferent to receiving a dollar today vs. a dollar in the futureB. A dollar today is worth the SAME as a dollar tomorrowC. A dollar today is worth LESS than a dollar tomorrowD. The value of money does not change over timeE. A dollar tomorrow is worth LESS than a dollar today E. A dollar tomorrow is worth LESS than a dollar today
3. Jennifer is selling her iPhone which is worth $500 to Dave. Dave suggests the following options. The most financially valuable option for Jennifer isA. Immediate cash payment of $500B. Cash payment of $500, a year after the SaleC. Cash payments of $50 per month, for 10 months from the saleD. Any of the aboveE. None of the above A. Immediate cash payment $500
Which of the following is an “enemy” of your investment plan? A. Strong market fundamentalsB. Corporate governanceC. Strong company earningsD. Dividend payoutsE. Taxes E. Taxes
2. Which of the following would increase an investor’s real rate of return?A. Brokerage firms increasing the commissions on executing a trade for an investorB. The government raising the capital gains tax on investments C. Higher asset management fees paid by the investor to a mutual fundD. A significant drop in the inflation rateE. Only buying low-risk investments, such as T-bills D. A significant drop in the inflation rate
What is working capital management?A. Determining the optimal use of debt and equity for a firmB. Managing a firm’s short-term financial positionC. Choosing the best option for financing an acquisitionD. Managing investments in property, plant, and equipmentE. Identifying investments that will return more than the targeted ROI A. Determining the optimal use of debt and equity for a firm
As you increase a portfolio’s diversification in an asset class, the riskiness of the portfolio:A. IncreasesB. DecreasesC. Stays the sameD. Increases, then decreasesE. Fluctuates with the beta B. Decreases
2. As you decrease a portfolio’s diversification in an asset class, the riskiness of the portfolio:A. IncreasesB. DecreasesC. Stays the sameD. Decreases, then increasesE. Fluctuates with the beta A. Increases
Which of the following is an element of good management according to Gordon Gekko?A. Managerial efficiency is not importantB. Management is not accountable to shareholdersC. Management should have a stake in the companyD. Shareholder value should be ignoredE. Managers should not think about increasing the stock price C. Management should have a stake in the company
Which of the following is a principle held by Gordon Gekko:A. Management must be accountable to the shareholdersB. Management should not have a stake in the companyC. The maximization of shareholder value doesn’t matterD. Managerial efficiency is not importantE. Making money for the shareholders is not essential A. Management must be accountable to the shareholders
1. Given the following information for Conwood Inc., compute its market capitalization:Stock price: $50.00Earnings per share: $7.50Price/Earnings ratio: 19Shares outstanding: 2.5 billionA. $0.99 billionB. $356.25 billionC. $6.58 billionD. $18.75 billionE. $125.00 billion E. 125 billion
2. Given the following information for UST, compute its market capitalization:Stock price: $12.50Earnings per share: $6.25Price/Earnings ratio: 15Shares outstanding: 6 billionA. $37.5 billionB. $5.0 billionC. $562.5 billionD. $75.0 billionE. $2.5 billion D. 75 billion
Which activity is most likely to increase shareholder value?A. Minimizing the company’s cost of capitalB. Minimizing the amount of projects the company spends money onC. Financing the company’s business with expensive debtD. Maximizing the amount of corporate assetsE. Investing in projects that are always the least risky A. Minimizing the company’s cost of capital
Which activity is most likely to increase shareholder value?A. Minimizing the amount of projects the company spends money onB. Using only equity to finance the company’s acquisitionsC. Maximizing the cost of capitalD. Allocating capital to investments with the highest risk-adjusted returnE. Maximizing the amount of corporate assets D. Allocating capital to investments with the highest risk adjusted return
3. Which of the following is true about creating shareholder value?A. The pricing efficiency of the markets is not an issue if managers are to pursue shareholder value creationB. Activist investors such as Carl Icahn attempt to force companies to create shareholder valueC. Danny Devito in ‘Other People’s Money’ promotes the Stakeholder Approach D. The interests of stakeholders can be ignored in pursuing the creation of shareholder valueE. Paying dividends to shareholders is a form of agency costs B. Excessive investment in an asset class
Which of the following is a common element of financial crises?A. Strong growth in the US economyB. Excessive investment in an asset classC. Trade deficitD. Democratic PresidentE. Occurs only once every 30 years B. Excessive investment in an asset class
Which of the following is a common element of financial crises?A. Easy financingB. Strong growth in the US economyC. Increase in value of dollarD. Trade deficitE. Excessive exports A. Easy financing
Which of the following is an example of the agency problem?A. Management pursues strategies that maximize shareholder valueB. Management invests in a project that serves the interests of management more than shareholdersC. The objectives of shareholders and management are alignedD. Management allocates corporate resources in a way that increases the value of the company’s sharesE. Management has stock options in the company, potentially providing large payouts if the company does well B. management invests in a project that serves the interests of management more than shareholders
Which of the following is an example of the agency problem?A. Management acts in the best interest of shareholdersB. The objectives of shareholders and management are alignedC. Management invests in a project that serves the interests of shareholdersD. Corporate Management invests in a negative ROI project because it will mean large bonuses and kickbacks for all senior executives E. The management has stock options in the company, potentially providing large payouts if the company does well D. Corporate Management invests in a negative ROI project because it will mean large bonuses and kickbacks for all senior executives
. Which of the following is an example of an internal control mechanism used to ensure that management acts in shareholder interests?A. Shareholder ActivismB. Market for Corporate ControlC. Managerial Labor MarketD. Threat of Takeover by Private Equity InvestorsE. Audited Financial Statements E. Audited Financial Statements
According to Behavioral Finance, which of the following statements are true?A. Markets are always efficientB. Decisions are based on rational expectationsC. Prices reflect valuesD. Prices reflect emotions and biasesE. Low risk equals high returns D. Prices reflect emotions and biases
According to Traditional Finance, which of the following statements are true?A. Markets are never efficientB. Prices reflect expected outcomesC. Arbitrageurs will not correct the marketD. Decisions are based on emotions and biasesE. There are flaws in utility functions Prices reflect expected outcomes
3. The financial crisis of the late 2000s is proof of irrational investors supports which of the following theories? A. Behavioral FinanceB. Risk AversionC. Traditional FinanceD. Efficient MarketsE. Diversification reduces risk A. Behavioral Finance
. Which of the following is true about the Chief Financial Officer (CFO)?A. The CFO reports to the head ControllerB. CFO is the head accountant for an organizationC. The CFO is prohibited from signing the Annual ReportD. The CFO oversees the financial activities of an organizationE. The CFO is expected to serve on the Board of Directors D. The CFO oversees the financial activites of an organization
Which of the following is true about the Chief Financial Officer (CFO)?A. The Controller and Treasurer report to the CFO B. The CFO is not responsible for risk managementC. The CFO is solely responsible for Treasury operations D. The CFO is not expected to give advice on corporate strategyE. The CFO takes a “hands off” approach to financial management A. The controller and treasurer report to the CFO
1. Which of the following companies Warren Buffet would least prefer to invest inA. Twitter, Inc.B. NestleC. Exxon MobilD. PNC Financial servicesE. None of the above A. Twitter
2. Which of the following does Warren Buffet believe is necessary for investment in a company:A. Low barriers to entryB. Management that acts without owner interestsC. Prefers to buy and sell shares quicklyD. Enjoys investing in high-tech companiesE. Generators of cash flow E. Generators of cash flow
What is Berkshire Hathaway’s primary business? A. InsuranceB. AutomobileC. Investment BanksD. TextilesE. Semi-Conductors E. Semi- Conductors
In the short term, stock prices are driven by:A. Supply and demandB. Corporate earnings (fundamentals)C. Leadership structureD. Long-term value of the companyE. Company cash flow A. Supply and Demand
Which of the following concerning the relationship between risk and return is correct?A. Investors do not need to be compensated for taking on riskB. Investors generally demand higher return for lower risk investmentsC. Riskier investments tend to have higher returnsD. Safer investments provide the highest returnsE. Risk and return are not related C. Riskier investments tend to have higher returns
Which of the following concerning the relationship between risk and return is correct?A. Risk and return are directly relatedB. Investors generally require a lower return as they take on more riskC. Safer investments tend to have higher returnsD. Higher risk investments historically provided lower returnsE. Investors do not need to be compensated for taking on risk A. Risk and return are directly related
1. Historically, which of the following investment decisions is most significant in portfolio performance? A. Industry selectionB. Sector selectionC. Security selectionD. Country selectionE. Asset allocation E. asset allocation
2. Which of the following is not a part of the corporate financial toolbox:A. Accounting Statements and RatiosB. Risk and Return ModelsC. GAAP performance and ComparablesD. Present ValueE. Spreadsheet Modeling C. GAAP
1. What is true about risk-averse investors?A. Most rational investors are not risk averseB. A risk-averse investor never takes on any risk, small or largeC. Risk averse investors prefer stocks with lower standard deviations compared to higher standard deviationsD. Risk aversion means a rational investor prefers more risk to less riskE. Finance theory is based on the assumption that investors maximize risk C. Risk averse investors prefer stocks with lower standard deviations compared to higher standard deviations
2. Stocks in which of the following industries would require the highest expected return for an investor? A. Water companiesB. Electric companiesC. Telecom companiesD. Biotech companiesE. Property Insurance companies D. Biotech Companies
1. Which of the following is true about financial markets?A. Markets only bring together buyers and sellers in common stocksB. The U.S. is viewed as having the most free markets in the worldC. The pricing efficiency of the markets is not an issue if managers are to pursue shareholder value creationD. Companies and their CFOs today do not place much emphasis on capital markets E. The alternative to allocating capital through markets is for the government to allocate capital E. The alternative to allocating capitl through markets is for the government to allocate capital
What distinguishes Debt and Equity Markets from other capital markets?A. They are where currencies are tradedB. They are where companies raise funds to finance growthC. They are where essential commodities such are corn and wheat D. They are where fold and other precious metals are traded E. They are relative unimportant relative to other markets B. They are where companies raise funds to finance growth
The annual report publicly traded companies must file with the SEC is the _______A. 10QB. 8KC. 4CD. 10KE. 401K D. 10K
. The quarterly report publicly traded companies must file with the SEC is the _______A. 10QB. 8KC. 4CD. 10KE. 401K A. 10Q
Why did Bernard Madoff’s Ponzi scheme fall apart?A. Too many new investors wanted him to manage their portfoliosB. His auditor turned him inC. There was a financial crisis and too many investors withdrew their moneyD. He lacked the name recognition to attract investorsE. The SEC investigation revealed his scheme C. There was a financial crisis and too many investors withdrew their money
Bernard Madoff told his investors he had $50B in his fund but he really only had $15B. Why?A. He paid out higher returns than he earnedB. He lost money investing in International Reply Coupons (IRCs)C. He was fined by the SEC for audit infractionsD. He spent a fortune on commercials to attract new investorsE. Interest rates skyrocketed, which decreased the value of his stocks A. He paid out higher returns than he earned
Calculate the company’s Current Assets:Fixed Assets = $300,000Long-term debt = $225,000Current Liabilities = $175,000Shareholder’s Equity = $150,000A. $400,000B. $375,000C. $800,000D. $1,100,000E. $250,000 E. 250 million
Calculate the company’s Current Liabilities:Fixed Assets = $450,000Current Assets = $400,000Long-term debt = $250,000Shareholder’s equity = $275,000A. $1,275,000B. $625,000C. $450,000D. $325,000E. $260,000 D. 325 million
The managerial defense mechanism that occurs when a company is targeted for hostile takeover and responds by selling off its prized assets is______.A. The Pac-Man defenseB. GreenmailC. Crown JewelsD. Poison PillE. Golden Parachutes C. Crown Jewels
The managerial defense mechanism that occurs when a target company purchases the acquirer’s shares at a premium over the market price is______.A. The Pac-Man defenseB. GreenmailC. Crown JewelsD. Poison PillE. Golden Parachutes B. Greenmail
Which of the following is true of stakeholders?A. Danny Devito (in ‘Other People’s Money’) represents the stakeholder view of the firm B. Stakeholders’ interests are protected by contractual agreementsC. Stakeholders are entitled to a residual claim of the firm’s cash flowsD. The government is not considered a stakeholderE. Good management works to maximize the value of the firm to the stakeholders B. Stakeholder’s interests are protected by contractual agreements
Which of the following statements about shareholders is true?A. Shareholders are protected by contractsB. Shareholders are paid before stakeholdersC. Shareholders do not agree with Danny Devito’s view (in ‘Other People’s Money’)D. Shareholders are considered owners of the firmE. Shareholders are not stakeholders the company D. Shareholders are considered owners of the firm
Which of the following statements about stockholders and stakeholders is true?A. The federal government is never a corporate stakeholderB. Danny Devito (in ‘Other People’s Money’) represents the stakeholder view of the firmC. Stockholders have a residual claim on a firm’s cash flowsD. Stockholders are protected by contractsE. Stockholders are not stakeholders in a corporation C. Stockholders have a residual claim on a firm’s cash flows
Which of the following is true regarding depreciation methods?A. Companies report the same financial results to investors that they report to the Internal Revenue ServiceB. Using accelerated depreciation methods for fixed assets provides for higher reported net income than straight line depreciationC. Companies employ straight line depreciation to report higher net income to the Internal Revenue ServiceD. Companies report higher depreciation and net income using straight line depreciation for fixed assetsE. Companies report higher depreciation and lower net income using accelerated depreciation for fixed assets to the Internal Revenue Service E. Companies report higher depreciation and lower net income using accelerated depreciation for fixed assets to the Internal Revenue Service
Which of the following is true regarding depreciation methods?A. Companies do not report the same depreciation methods to investors that they report to the Internal Revenue ServiceB. Using accelerated depreciation methods for fixed assets provides for higher reported net income than straight line depreciationC. Companies employ straight line depreciation in reporting net income to the Internal Revenue ServiceD. Companies report higher depreciation and net income using straight line depreciation for fixed assetsE. Companies report lower depreciation and higher net income using accelerated depreciation for fixed assets A. Companies do not report the same depreciation methods to investors that they report to the Internal Revenue Service
On a common size income statement, each item is expressed as a percentage of what value?A. Cost of Goods Sold (COGS)B. RevenueC. Net IncomeD. Total AssetsE. Selling, General and Administrative (SG&A) Expenses B. Revenue
On a common size balance sheet, each item is expressed as a percentage of what value?A. Liabilities + Stockholders EquityB. CashC. Net SalesD. Power, Plant and Equipment (PP&E)E. Inventory A. Liabilites + Stockholders Equity
Which of the following is a measure of profitability?A. Operating MarginB. Days Sales OutstandingC. Days Payables OutstandingD. Fixed Asset TurnoverE. Current Ratio A. Operating Margin
Which of the following is a measure of company’s liquidity?A. Fixed Assets TurnoverB. Profit MarginC. Return on EquityD. Quick RatioE. Return on Assets D. Quick Ratio
Calculate the Return on Equity (ROE) using the Strategic Profit Model for a company with the following data:Profit margin = 15%Total Asset Turnover = 2.1Inventory Turnover = 1.2Equity Multiplier = 0.8Current Ratio = 1.7A. 25%B. 51%C. 36%D. 18%E. 6%Answer: A 2. Calculate the Return on Equity (ROE) using the Strategic Profit Model for a company with the following data:Profit margin = 8%Total Asset Turnover = 1.5Inventory Turnover = 2.4Equity Multiplier = 1.6Current Ratio = 0.9A. 7%B. 41%C. 19%D. 23%E. 9% 19%
Given the following information, what is the stock price of the firm?Market capitalization: $205MMarket Value of Debt: $73MNo. of shares outstanding: 3.5MBook value of equity: $115MNet Sales: $340MP/E Ratio: 8A. $58.57B. $25.63C. $91.43D. $49.82E. $35.14 A. 58.57
Given the following information, how many shares are outstanding for this firm?Market capitalization: $250MMarket Value of Debt: $88MGross Profit: $140MBook value of equity: $93MCurrent Ratio: 1.3Stock Price: $65A. 2.69M sharesB. 3.85M sharesC. 4.64M sharesD. 1.07M sharesE. 6.50M shares B. 3. 85 million
What are some challenges to the Shareholder Value Standard?A. Too little focus on markets and expectationsB. Management looks only at the long-term horizonC. A decline in financial scandals, which makes the SEC irrelevantD. CEO compensation too heavily tied to stock priceE. Capital markets not reliant enough on technology D. CEO compensation too heavily tied to stock price
What issues could arise from overemphasizing the Shareholder Value Standard?A. Managers try to only hit short-term estimates rather than focus on long-term health of the companyB. CEOs pay is no longer tied to stock optionsC. There have been fewer financial scandalsD. Companies do not care about meeting analyst expectationsE. Shareholders want companies to take on projects with the lowest ROI A. Managers try to only hit short-term estimates rather than focus on long-term health of the company
. Which of the following is true regarding balance sheets?A. They report the net assets generated and consumed, as well as the net income over a specific time periodB. They report the resources and the obligations of a company, as well as the equity of the owners over a specific time periodC. They report the amount of cash generated and consumed by a company over a specific time periodD. They report the resources and the obligations of a company, as well as the equity of the owners at one point in timeE. They report the resources and net income of a company at one point in time D. They report the resources and the obligations of a company, as well as the equity of the owners at one point in time
Which of the following is true regarding income statements?A. They report the company’s assets, liabilities, and stockholders’ equity over a specific time periodB. They report the net assets generated, the net assets consumed, and the net income over a specific time periodC. They report the amount of cash and net income generated at one point in timeD. They report the net assets generated and consumed, as well as the net income at one point in timeE. They report the resources of a company, the obligations of a company, and the equity of the owners over a specific time period B. They report the resources and the obligations of a company, as well as the equity of the owners over a specific time period
. Shareholders’ equity on the balance sheet is equal to which of the following? A. The market value of company’s shares in the marketB. The assets plus the liabilities of a companyC. Previous issued common stock plus retained earningsD. The market value of the company’s issued bonds and common stockE. The total assets of a company C. Previous issued common stock plus retained earnings
Which of the following is true regarding Zeno’s given the following information?Current Assets = $200Fixed Assets = $310Current Liabilities = $190Long Term Debt = $140Revenue = $450Net Income = $90A. Shareholder Equity = $100B. Current Ratio = 1.65C. Asset Turnover = 1.20D. Debt to Equity Ratio = 0.78E. Return on Equity = 75% D. Debt to Equity Ratio =.78
Which of the following is true regarding Café 210 given the following information?Current Assets = $400Fixed Assets = $150Current Liabilities = $200Long Term Debt = $75Sales = $240Net Income = $50A. Shareholder Equity = $290B. Current Ratio = 0.90C. Asset Turnover = 1.27D. Debt to Equity Ratio = 1.33E. Return on Equity = 18% E. Return on Equity = 18%
The Matching Principle in GAAP:A. Matches sales to inventory shipmentsB. Matches the expenses related to a sale in the same periodC. Matches ROE to a firm’s capital investmentD. Matches costs of goods sold with the inventory on the balance sheetE. Matches revenues with profits on the income statement B. Matches the expenses related to a sale in the same period
According to the Revenue Recognition Principle in GAAP:A. Dividends can be paid only after taxable income is positiveB. Expenses can be realized when cash payment is madeC. Companies can realize revenue only if the transaction is profitableD. Revenue is recognized when a good or service is provided, not when the money is receivedE. Companies can realize certain gains on their operating books, while omitting them from their tax books D. Revenue is recognized when a good or service is provided, not when the money is received
Which of the following correctly describes the revenue recognition policy under US GAAP?A. Revenue is recognized when a company has manufactured the product.B. Revenue is recognized only when payment has been received for a good or service.C. GAAP does not provide any guidance on revenue recognition.D. Revenue is recognized when a company receives payment for a good or service.E. Revenue is recognized when a good or service has been provided. E. Revenue is recognized when a good or service has been provided
Which of the following is true regarding financial statements?Gross profit equals sales minus cost of goods sold.The Balance Sheet measures the growth in revenues over a period of time.Shareholders’ equity is found on the income statementAssets divided by Liabilities equals Shareholder EquityAccounts receivable is found on cash flow statement A. Gross Profit equals sales minus cost of goods sold

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