Midterm Practice Finance 351

48 Questions | By Kosdaisy | Last updated: Mar 18, 2022 | Total Attempts: 144

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Corporate Finance midterm practice for chapters 1-10 in Finance Applications & Theory, by Cornett.

Questions and Answers

1.

Monitors inside a public firm are
- A.
  
  The SEC
- B.
  
  Auditors
- C.
  
  Executive management
- D.
  
  The board of directors
- E.
  
  None of the above
2.

The firms highest level financial manager is usually the
- A.
  
  Chief Financial Officer (CFO)
- B.
  
  Financial Director
- C.
  
  Controller
- D.
  
  Treasurer
- E.
  
  Chief Executive Officer(CEO)
3.

What type of retirement plan do most companies offer to their employees?
- A.
  
  A defined benefit plan
- B.
  
  A defined contribution plan
- C.
  
  A lifetime position
- D.
  
  A lump sum payment amount
- E.
  
  None of the above
4.

The process of monitoring managers and aligning their interests and incentives with shareholders is called
- A.
  
  Audit committee
- B.
  
  Employee stock options
- C.
  
  Agency problem
- D.
  
  Corporate governance
- E.
  
  None of the above
5.

Finance managers goal or objective is
- A.
  
  To increase wealth
- B.
  
  To report the value and status of assets
- C.
  
  To maximize shareholder wealth
- D.
  
  To maximize profits
6.

All of the followinf are subareas osf finance listed in the textbook except
- A.
  
  Derivative finance
- B.
  
  International finance
- C.
  
  Financial institutions
- D.
  
  Investments
- E.
  
  All of the above are listed and are subareas of finance
7.

If we're discussing business investment (business projects) such as construction of a new assembly line we are most likely describing
- A.
  
  Short-term assets
- B.
  
  Intangible assets
- C.
  
  Current assets
- D.
  
  Real assets
- E.
  
  Financial assets
8.

The often difficult effort to get managers to align their interests with shareholders is
- A.
  
  Corporate governance
- B.
  
  Corporation problem
- C.
  
  Managerial restraints
- D.
  
  The agency problem
- E.
  
  None of the above
9.

These types of analysts examine a firm's financial strength for debt holders
- A.
  
  Corporate analysts
- B.
  
  Diagnostic analysts
- C.
  
  Equity analysts
- D.
  
  Credit analysts
- E.
  
  None of the above
10.

A firm has net sales of $1,500,000, Cost of Goods Sold is $700,000, depreciation expense of $100,000, selling and administrative expenses of $200,000, interest expense of $100,000, and an average tax rate of 40%. What is the firm's net income?
- A.
  
  210,000
- B.
  
  240,000
- C.
  
  280,000
- D.
  
  315,000
- E.
  
  None of the above
11.

A firm has net sales of $1,500,000, Cost of Goods Sold is $700,000, depreciation expense of $100,000, selling and administrative expenses of $200,000, interest expense of $100,000, and an average tax rate of 40%. What is the firm's operating margin?
- A.
  
  15.8%
- B.
  
  22.5%
- C.
  
  33.3%
- D.
  
  62.5%
- E.
  
  None of the above
12.

A firm has net sales of $1,500,000, Cost of Goods Sold is $700,000, depreciation expense of $100,000, selling and administrative expenses of $200,000, interest expense of $100,000, and an average tax rate of 40%. What is the firm's gross profit margin?
- A.
  
  15.8%
- B.
  
  22.5%
- C.
  
  53.3%
- D.
  
  62.5%
- E.
  
  None of the above
13.

In a standard cash flow statement dividends paid are included in cash flows from
- A.
  
  Operations
- B.
  
  Investing
- C.
  
  Financing
- D.
  
  Foreign exchange
- E.
  
  All of the above
14.

A decrease in a current liability account is considered a(n)
- A.
  
  Investment opportunity
- B.
  
  Bad thing and should be avoided at all cost
- C.
  
  Use of cash
- D.
  
  Source of cash
- E.
  
  None of the above
15.

The balance sheet identity states
- A.
  
  Equity = assets - liabilities
- B.
  
  Equity = assets + liabilities
- C.
  
  Assets = liabilities - equity
- D.
  
  Liabilities = assets + equity
- E.
  
  None of the above
16.

Power's Mold Removal's year-end 2009 balance sheet lists current assets of $325,000, fixed assets of $550,000, current liabilities of $290,000, and long-term debt of $260,000. Calculate Power's total stockholders' equity.
- A.
  
  615,000
- B.
  
  550,000
- C.
  
  350,000
- D.
  
  325,000
- E.
  
  35,000
17.

Chapman's Home Inspection, Inc.'s 2009 income statement lists the following income and expenses: EBIT = $750,000, Interest expense of $115,000, and taxes of $190,000. Chapman's has no preferred stock outstanding and 200,000 shares of common stock outstanding. Calculate the 2009 earnings per share.
- A.
  
  .45
- B.
  
  .75
- C.
  
  1.25
- D.
  
  2.23
- E.
  
  3.55
18.

Financial Leverage is best described as
- A.
  
  The ratio of short-term to long-term debt
- B.
  
  A firm's ability to stretch the impact of its capital
- C.
  
  The extent to which a firm chooses to finance its venture of assets by issuing debt securities
- D.
  
  The most aggressive strategy to maximized shareholder's wealth
- E.
  
  None of the above
19.

A firm has net sales of $5,000,000, cost of goods sold is $3,000,000, depreciation expense of $300,000, selling and administrative expenses of $600,000, interest expense of $200,000, and an average tax rate of 20%. The firm's net income is
- A.
  
  210,000
- B.
  
  350,000
- C.
  
  720,000
- D.
  
  800,000
- E.
  
  None of the above
20.

A firm has net sales of $5,000,000, cost of goods sold is $3,000,000, depreciation expense of $300,000, selling and administrative expenses of $600,000, interest expense of $200,000, and an average tax rate of 20%. The firm's operating margin is
- A.
  
  22%
- B.
  
  30%
- C.
  
  33.3%
- D.
  
  50%
- E.
  
  None of the above
21.

A firm has net sales of $5,000,000, cost of goods sold is $3,000,000, depreciation expense of $300,000, selling and administrative expenses of $600,000, interest expense of $200,000, and an average tax rate of 20%.The firm's gross profit margin is
- A.
  
  20%
- B.
  
  30%
- C.
  
  33.3%
- D.
  
  40%
- E.
  
  None of the above
22.

A firm has net sales of $5,000,000, cost of goods sold is $3,000,000, depreciation expense of $300,000, selling and administrative expenses of $600,000, interest expense of $200,000, and an average tax rate of 20%. The firm's taxable income is
- A.
  
  1,200,000
- B.
  
  1,000,000
- C.
  
  900,000
- D.
  
  200,000
- E.
  
  Cannot be determined
23.

A firm has a gross profit of $1,000,000, selling and administrative expenses of $500,000, depreciation of $100,000 and interest expense of $200,000. What is its operating profit?
- A.
  
  200,000
- B.
  
  250,000
- C.
  
  325,000
- D.
  
  400,000
- E.
  
  None of the above
24.

In a standard cash flow statement, cash flows are separated into all of the following efforts except
- A.
  
  Operations
- B.
  
  Investing
- C.
  
  Financing
- D.
  
  Marketing
25.

An increase in a current liability account is considered a(n)
- A.
  
  Investment opportunity
- B.
  
  Bad thing and should be avoided at all cost
- C.
  
  Use of cash
- D.
  
  Source of cash
- E.
  
  None of the above