Midterm Practice Finance 351

48 Questions | Total Attempts: 145

SettingsSettingsSettings
Midterm Practice Finance 351 - Quiz

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

Back to Top Back to top