Project #161782 - finance

Business Tutors

Subject Business
Due By (Pacific Time) 01/07/2017 05:00 pm

Q1. Private placements usually have several advantages associated with them, but also tend to suffer from specific disadvantages. Which of the following is a disadvantage of a private placement when compared to other methods of selling new securities?
    a. strictly standardized features/terms
    b. higher interest costs
    c. reduced flotation costs
    d. avoidance of registration with the SEC

Q2. The Securities and Exchange Commission (SEC)
    a. regulates only initial public offerings, or IPOs.
    b. regulates only primary market transactions to ensure investors are provided with adequate and accurate information on new securities.
    c. regulates both primary and secondary markets.
    d. regulates initial public offerings, but not seasoned equity offerings, in the primary market.

Q3. An example of a secondary market transaction involving a capital market security is
    a. a new issue of a security with a very short maturity.
    b. a new issue of a security with a very long maturity.
    c. the transfer of a previously-issued security with a very short maturity.
    d. the transfer of a previously-issued security with a very long maturity.

Q4. John calls his stockbroker and instructs him to purchase 100 shares of Microsoft Corporation common stock. This transaction occurs in the
    a. secondary market.
    b. primary market.
    c. credit market.
    d. futures market.

Q5. An example of a primary market transaction involving a money market security is
    a. a new issue of a security with a very short maturity.
    b. a new issue of a security with a very long maturity.
    c. the transfer of a previously-issued security with a very short maturity.
    d. the transfer of a previously-issued security with a very long maturity.

Q6. A life insurance company purchases $1 billion of corporate bonds from premiums collected on its life insurance policies. Therefore
    a. the corporate bonds are indirect securities and the life insurance policies are direct securities.
    b. the corporate bonds are indirect securities and the life insurance policies are indirect securities.
    c. the corporate bonds are direct securities and the life insurance policies are indirect securities.
    d. the corporate bonds are direct securities and the life insurance policies are direct securities.

Q7. The stock market with the most stringent listing requirements is the
    a. New York Stock Exchange (NYSE).
    b. NASDAQ Stock Market.
    c. American Stock Exchange (AMEX).
    d. All organized exchanges have the same listing requirements in order to make trading fair for all investors.

Q8. Spandra Electronics wants to raise money by selling stock. After talking to several investment banking firms, Spandra decides to hire Goldman Sachs to sell 5 million shares of its common stock. Goldman sells 4.5 million shares and returns the rest to Spandra. This is an example of
    a. a privileged subscription with a standby agreement.
    b. a commission or best-efforts agreement.
    c. a privileged subscription with a standby agreement.
    d. a competitive bid purchase.

Q9. The real rate of return is the return earned above the
    a. default risk premium.
    b. risk-adjusted return.
    c. inflation risk premium.
    d. variability of returns measured by standard deviation.

Q10. Commercial banks that also provide investment banking services are called
    a. conglomerate banks.
    b. multi-purpose banks.
    c. investment enhanced banks.
    d. universal banks.

Q11. The investment banker performs what three basic functions?
    a. underwriting, distributing, and regulating
    b. underwriting, advising, and price-pegging
    c. underwriting, distributing, and advising
    d. underwriting, distributing, and negotiating

Q12. Siskiyou Corp. has cash of $75,000; short-term notes payable of $100,000; accounts receivables of $275,000; accounts payable of $135,000: inventories of $350,000; and accrued expenses of $75,000. What is the firm's net working capital?
    a. $390,000
    b. $175,000
    c. $700,000
    d. $210,000

Q13. The Colorado Jet Boat Company had a cash balance of $3 million at the beginning of 2010. During 2010, Sales were $8 million and expenses were $7 million. Therefore
    a. the cash balance at the end of 2010 is $4 million.
    b. the cash balance at the end of 2010 must be greater than $3 million.
    c. the cash balance at the end of 2010 must be less than $11 million.
    d. the cash balance at the end of 2010 cannot be determined from the information given.

Q14. Inventories are considered fixed assets because inventory levels remain fairly constant throughout the year.
    a. True
    b. False

Q15. Two companies have identical assets and operating activities. Which of the follow statements is true?
    a. Both companies have the same net income.
    b. The company with more debt will have lower operating income due to interest expense.
    c. The company with more debt will have higher operating income due to leverage.
    d. The company with more debt will have lower net income due to interest expense.

Q16. Rogue Corp. has sales of $4,250,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $250,000, and the corporate tax rate is 40%. What is Rogue's tax liability?
    a. $258,000
    b. $260,000
    c. $360,000
    d. $600,000

Q17. Racing Horse Corporation reported net income for 2010 of $200,000, sales of $540,000, expenses (excluding depreciation) of $180,000, and depreciation expense of $60,000. The company's accounts receivable balance increased by $40,000 during the year and its accounts payable balance remained the same. The company's change in cash for the year is estimated to be
    a. $100,000.
    b. $160,000.
    c. $220,000.
    d. $380,000.

Q18. What information does a firm's statement of cash flows provide to the viewing public?
    a. a report of investments made and their cost for a specific period of time
    b. a report documenting a firm's cash inflows and cash outflows from operating, financing, and investing activities for a defined period of time
    c. a report of revenues and expenses for a defined period of time
    d. an itemization of all of a firm's assets, liabilities, and equity for a defined period of time

Q19. Wheeler Corporation had retained earnings as of 12/31/15 of $15 million. During 2016, Wheeler's net income was $7 million. The retained earnings balance at the end of 2016 was equal to $20 million. Therefore
    a. Wheeler paid a dividend in 2015 of $5 million.
    b. Wheeler paid a dividend in 2015 of $2 million.
    c. Wheeler sold common stock during 2015 for $5 million.
    d. Wheeler purchased treasury stock in 2015 for $2 million.

Q20. The basic format of an income statement is
    a. Sales - Expenses = Profits.
    b. Income - Expenses = EBIT.
    c. Sales - Liabilities = Profits.
    d. Assets - Liabilities = Profits.

Q21. Universal Financial, Inc. has total current assets of $1,200,000; long-term debt of $600,000; total current liabilities of $500,000; and long-term assets of $800,000. How much is the firm's net working capital?
    a. $1,000,000
    b. $900,000
    c. $600,000
    d. $700,000

Q22. A corporation has annual sales of $18 million, total assets of $4 million, a debt ratio of 40%, depreciation expense of $200,000, and a tax rate of 40%. The corporation's total stockholders' equity is equal to
    a. $5,600,000.
    b. $2,800,000.
    c. $2,400,000.
    d. $1,800,000.

Q23. Corporation A decides to borrow $1,000,000 and use the money to buy back $1,000,000 of its common stock. The corporation pays 6% interest on its borrowed funds which exactly equals the amount of the dividend it used to pay on the common stock it repurchased. Therefore
    a. Corporation A's operating income will decrease due to higher interest expense.
    b. Corporation A's net income will increase due to the tax deductibility of interest expense.
    c. Corporation A will have no change in its operating income since the interest expense exactly offsets the prior dividend payment.
    d. Corporation A's gross profit will decrease.

Q24. Changes in depreciation expense do not affect operating income because depreciation is a non-cash expense.
    a. True
    b. False

Q25. California Retailing Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $250,000, and the corporate tax rate is 40%. The firm paid dividends to preferred stockholders of $40,000, and the firm distributed $60,000 in dividend payments to common stockholders. What is California Retailing's "Addition to Retained Earnings"?
    a. $650,000
    b. $390,000
    c. $330,000
    d. $290,000

Q26. Financial ratios are often reported by industry or line of business because differences in the type of business can make ratio comparisons uninformative or even misleading.
    a. True
    b. False

Q27. WRJ has a debt ratio of .4, current liabilities of $18,000, and total assets of $120,000. What is the level of WRJ's total liabilities?
    a. $22,000
    b. $48,000
    c. $58,000
    d. $63,934

Q28. Denver Systems has total assets of $1,000,000; common equity of $400,000; a gross profit of $800,000; total operating expenses of $620,000; interest expense of $20,000; income taxes of $74,000; and preferred dividends of $30,000. What is Denver Systems' return on equity?
    a. 7.5%
    b. 20.0%
    c. 21.5%
    d. 14.0%

Q29. Rural Hydroponics has total equity of $560,000; sales of $2,250,000; current assets of $700,000; and total liabilities of $435,000. What is Rural Hydroponics' total asset turnover?
    a. 4.02
    b. 3.21
    c. 2.26
    d. 5.51

Q30. Acme Incorporated has a debt ratio of .42, noncurrent liabilities of $20,000 and total assets of $70,000. What is Acme's level of current liabilities?
    a. $8,400
    b. $9,400
    c. $12,348
    d. $10,600

Q31. HighLev Incorporated borrows heavily and uses the leverage to boost its return on equity to 30% this year, nearly 10% higher than the industry average. However, HighLev's stock price decreases relative to its industry counterparts. How is this possible?
    a. Markets are inefficient and fail to recognize the benefits of leverage.
    b. The increased debt resulted in interest payments that made HighLev's operating income drop even though return on equity increased.
    c. Shareholders are not interested in return on equity.
    d. the high levels of debt increased the riskiness of HighLev relative to its competitors.

Q32. When comparing inventory turnover ratios, other things being equal
    a. a lower inventory turnover is preferred in order to keep inventory costs low.
    b. a higher inventory turnover is preferred to improve liquidity.
    c. higher inventory turnover results from old or obsolete inventory increasing the inventory balance on the balance sheet.
    d. higher inventory turnover results from an increase in the selling price of the product.

Q33. Given an accounts receivable turnover of 10 and annual credit sales of $900,000, the average collection period is
    a. 18.25 days.
    b. 36.50 days.
    c. 90 days.
    d. 40.56 days.

Q34. Williams Inc. has a current ratio equal to 3, a quick ratio equal to 1.8, and total current assets of $6 million. Williams' inventory balance is
    a. $2,000,000.
    b. $2,400,000.
    c. $4,000,000.
    d. $4,800,000.

Q35. Benkart Corporation has sales of $5,000,000, net income of $800,000, total assets of $2,000,000, and 100,000 shares of common stock outstanding. If Benkart's P/E ratio is 12, what is the company's current stock price?
    a. $60 per share
    b. $96 per share
    c. $240 per share
    d. $360 per share

Q36. Smith Corporation has earned a return on capital invested of 10% for the past two years, but an investment analyst reviewing the company has stated the company is not creating shareholder value. This may be due to the fact that
    a. the risk free rate of interest is 3%.
    b. the corporation's inventory turnover is high.
    c. investors' required rate of return is 8%.
    d. investors' required rate of return is 12%.

Q37. RBW Corp. has cash of $48,000; short-term notes payable of $35,000, accounts receivable of $100,000; accounts payable of $120,000; inventories of $200,000; and accruals of $90,000. What is RBW's current ratio?
    a. 1.57
    b. 2.71
    c. 1.42
    d. 0.64

Q38. An inventory turnover ratio of 7.2 compared to an industry average of 5.1 is likely to indicate that
    a. the firm has higher sales than the industry average.
    b. the firm is selling a product mix that includes more high margin items.
    c. the firm is managing its inventory inefficiently.
    d. the firm's products are in inventory for fewer days before they are sold than is average for the industry.

Q39. XYZ Corporation has a P/E ratio of 20 and EFG Corporation has a P/E ratio of 10. It is likely that
    a. XYZ's earnings per share are twice the earnings per share of EFG.
    b. investors expect XYZ's earnings to grow faster than EFG's earnings.
    c. investors believe that for the same level of earnings growth, XYZ is a higher risk company.
    d. investors believe XYZ stock is overvalued.

Q40. The CEO of High Tech International decides to change an accounting method at the end of the current year. The change results in reported profits increasing by 5%, but the company's cash flows are not changed. If capital markets are efficient, then
    a. the stock price will not be affected by the accounting change.
    b. the stock price will increase due to higher profits.
    c. the stock price will increase only if the accounting change will also result in higher profits in the next year.
    d. the stock price will decrease because accounting method changes are not permitted under generally accepted accounting principles.

Q41. Joe is deciding whether or not to invest $10,000 in a business that has pending lawsuits against it. If Joe invests and the business loses the lawsuits, the most Joe can lose is
    a. $10,000 if Joe is a general partner.
    b. $10,000 if Joe is a sole proprietor.
    c. $10,000 if Joe is a limited partner.
    d. $10,000 plus his share of the lawsuits if Joe is a limited partner.

Q42. Which of the following forms of business organizations provide limited liability to all its owners?
    a. general partnership
    b. limited partnership
    c. corporation
    d. both B and C

Q43. Investors will be indifferent between two investments if both investments have the same expected return.
    a. True
    b. False

Q44. The principle of risk-return tradeoff means that
    a. higher risk investments must earn higher returns.
    b. an investor who takes more risk will earn a higher return.
    c. a rational investor will only take on higher risk if he expects a higher return.
    d. an investor who bought stock in a small corporation five years ago has more money than an investor who bought U.S. Treasury bonds five years ago.

Q45. Capital budgeting is concerned with
    a. whether a company's assets should be financed with debt or equity.
    b. managing a firms cash budgeting procedures.
    c. what long-term investments a firm should undertake.
    d. planning sales of a corporation's equity capital.

Q46. The financial manager most directly responsible for producing the company's financial statements and directing its cost accounting functions is the
    a. chief financial officer.
    b. controller.
    c. treasurer.
    d. vice president - financer.

Q47. Cash flows and profits are synonymous; in other words, higher cash flows equal higher profits.
    a. True
    b. False

Q48. An investment project is acceptable if the total cash received over the life of the project exceeds the total cash spent over the life of the project.
    a. True
    b. False

Q49. The sole proprietorship has no legal business structure separate from its owner.
    a. True
    b. False

Q50. Assume that an investor is offered a choice of a risk-free government bond that is expected to return 3.5% or a high-risk corporate stock. According to one of the principles of finance, what would induce the investor to purchase the corporate stock?
    a. a return that is substantially lower than 3.5%
    b. cash dividends
    c. a return that is substantially higher than 3.5%
    d. none of the above
 

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