The Ultimate Finance Exam: Trivia Quiz

Explanation
The level of required new funds can be calculated by determining the increase in sales and multiplying it by the percentage of spontaneous assets. In this case, the increase in sales is $500,000 - $300,000 = $200,000. The spontaneous assets are 70% of sales, so the required new funds would be 70% of $200,000 = $140,000. However, since the company has a 10% profit margin and a 40% dividend payout ratio, only 60% of the required new funds are needed. Therefore, the level of required new funds would be 60% of $140,000 = $84,000. However, none of the given answer choices match this calculation, so the correct answer is not available.

Explanation
The balance in accounts receivable at the beginning of July will be $4,550. This can be calculated by adding the remaining 70% of May's sales ($4,500 * 0.7 = $3,150) to the forecasted sales for June ($6,500), and then subtracting the 30% collected in June ($6,500 * 0.3 = $1,950). Therefore, the balance in accounts receivable at the beginning of July is $3,150 + $6,500 - $1,950 = $4,550.

Explanation
Sole proprietorship is the least likely organizational form to experience agency problems. This is because in a sole proprietorship, the business is owned and operated by a single individual, who has complete control and decision-making authority. There is no separation between ownership and management, reducing the potential for conflicts of interest or agency conflicts that may arise in other organizational forms where ownership is distributed among multiple individuals or entities.

Explanation
The Sarbanes-Oxley Act was passed to control corrupt corporate behavior. This legislation was enacted in response to a number of high-profile corporate scandals, such as Enron and WorldCom, that involved fraudulent accounting practices and misleading financial statements. The act introduced stricter regulations and oversight for public companies, requiring them to establish internal controls and financial reporting standards. It also established penalties for corporate fraud and increased accountability for executives and auditors. The goal of the act was to restore investor confidence and prevent future corporate misconduct.

Explanation
In order to calculate the earnings per share for the year 2007, we need to first find the earnings for that year. We know that the earnings in 2006 were $580,000. Since the earnings in 2007 were 25% higher, we can calculate the earnings for 2007 by adding 25% of $580,000 to $580,000. This gives us $725,000.

Next, we need to calculate the new number of shares outstanding in 2007. We know that on January 1, 2007, the firm issued 35,000 new shares. Therefore, the total number of shares outstanding in 2007 would be 400,000 + 35,000 = 435,000.

Finally, we can calculate the earnings per share for 2007 by dividing the earnings ($725,000) by the number of shares outstanding (435,000). This gives us $1.67. Therefore, the correct answer is $1.67.

Explanation
The after-tax profit margin is calculated by dividing the net income after taxes by the sales. In this case, the net income before taxes is $200,000 and the sales are $2,000,000. Since the company is in the 50% tax bracket, the net income after taxes would be $200,000 - (50% of $200,000) = $100,000. Therefore, the after-tax profit margin is $100,000 / $2,000,000 = 0.05 or 5%.

Explanation
The return on equity can be calculated by dividing the net income by the equity. Since the debt to equity ratio is 50%, the equity can be calculated as twice the amount of debt, which is $600,000. Therefore, the return on equity is $90,000 divided by $600,000, which equals 0.15 or 15%.

Explanation
The receivables turnover ratio is calculated by dividing net credit sales by the average accounts receivable. In this case, the average collection period is given as 90 days, which means that on average, it takes 90 days for XYZ to collect its accounts receivable. Since the turnover ratio is given as 10x, we can calculate the average accounts receivable by dividing the year-end accounts receivable ($600,000) by the turnover ratio (10). This gives us an average accounts receivable of $60,000. To find the sales figure for the year, we multiply the average accounts receivable by the average collection period (90 days) to get $6,000,000. Therefore, the correct answer is $6,000,000.

Explanation
The expected value of the total sales projection is calculated by multiplying each outcome by its corresponding probability and adding them together. In this case, the expected value is calculated as follows:

(0.20 * $20 * 100) + (0.50 * $25 * 180) + (0.30 * $30 * 210) = $4,540

Therefore, the expected value of the total sales projection is $4,540.

Explanation
The company maintains ending inventory equal to 125% of next month's sales. Since the forecasted sales for July are 1000 units, the ending inventory for June should be 125% of 1000, which is 1250 units. The beginning inventory for June already reflects this policy, so the required production for June would be the difference between the forecasted sales for June (600 units) and the beginning inventory (1250 units), which is 1100 units. Therefore, the correct answer is 1100 units.