Submit this answer sheet only for your Final Exam Do not return the entire Final Exam.Type your Name on this Answer Sheet.The part of finance concerned with design and delivery of advice and financial products to individuals, business, and government is calledA) Managerial Finance.B) Financial Manager.C) Financial Services.D) none of the above.2) Managerial financeA) involves tasks such as budgeting, financial forecasting, cash management, and funds procurement.B) involves the design and delivery of advice and financial products.C) recognizes funds on an accrual basis.D) devotes the majority of its attention to the collection and presentation of financial data.3) Finance can be defined asA) the system of debits and credits.B) the science of the production, distribution, and consumption of wealth.C) the art and science of managing money.D) the art of merchandising products and services.4) Financial serviceA) is concerned with the duties of the financial manager.B) involves the design and delivery of advice and financial products.C) provides guidelines for the efficient operation of the business.D) handles accounting activities related to data processing.5) Which of the following legal forms of an organizations income is NOT taxed under individual income tax rate?A) Sole proprietorships.B) Partnerships.C) Limited partnership.D) Corporation.6) Under which of the following legal forms of organization, is ownership readily transferable?A) Sole proprietorships.B) Partnerships.C) Limited partnership.D) Corporation.7) The true owner(s) of the corporation is (are) the ________.A) board of directorsB) chief executive officerC) stockholdersD) creditors8) A firm had the following accounts and financial data for 2008:Sales Revenue $3,060 Cost of goods sold $1,800Accounts receivable 500 Preferred stock dividends 18Interest expense 126 Tax rate 40%Total operating expenses 600 Number of common shares 1,000 outstandingAccounts payable 240 The firm?s earnings per share, rounded to the nearest cent, for 2008 was ________.A) $0.5335B) $0.5125C) $0.3204D) $0.30249) A firm had the following accounts and financial data for 2008.Sales Revenue $3,060 Cost of goods sold $1,800Accounts receivable 500 Preferred stock dividends 18Interest expense 126 Tax rate 40%Total operating expenses 600 Number of common shares 1,000Accounts payable 240 outstandingThe firm?s net profit after taxes for 2008 was ______.A) -$206.40B) $213.80C) $320.40D) $206.2510) Paid-in-capital in excess of par represents the amount of proceedsA) from the original sale of stock.B) in excess of the par value from the original sale of common stock.C) at the current market value of common stock.D) at the current book value of common stock.11) A firm had year end 2007 and 2008 retained earnings balances of $670,000 and $560,000, respectively. The firm paid $10,000 in dividends in 2008. The firm?s net profit after taxes in 2007was ________.A) -$100,000B) -$110,000C) $100,000D) $110,00012) A corporation had a year end 2007 retained earnings balance of $220,000. The firm reported net profits after taxes of $50,000 in 2008 and paid dividends in 2008 of $30,000. The firm?s retained earnings balance at year end 2008 was ________.A) $240,000B) $250,000C) $270,000D) $300,00013) The 2002 Sarbanes-Oxley Act was designed toA) limit the compensation that could be paid to corporate CEOs.B) eliminate the many disclosure and conflict of interest problems of corporations.C) provide uniform international accounting standards.D) two of the above.14) The Public Company Accounting Oversight Board (PCAOB)A) is a not-for-profit corporation that oversees auditors of public corporations.B) is a not-for-profit corporation that oversees managers of public corporations.C) is a for-profit corporation that oversees auditors of public corporations.D) is a for-profit corporation that oversees managers of public corporations.15) The future value of $100 received today and deposited at 6 percent for four years isA) $126.B) $ 79.C) $124.D) $116.16) The present value of $100 to be received 10 years from today, assuming an opportunity cost of 9 percent, isA) $236.B) $699.C) $ 42.D) $ 75.17) If a person?s required return does not change when risk increases, that person is said to beA) risk-seeking.B) risk-indifferent.C) risk-averse.D) risk-aware.18) Last year Mike bought 100 shares of Dallas Corporation common stock for $53 per share. During the year he received dividends of $1.45 per share. The stock is currently selling for $60 per share. What rate of return did Mike earn over the year?A) 11.7 percent.B) 13.2 percent.C) 14.1 percent.D) 15.9 percent.19) A common approach of estimating the variability of returns involving forecasting thepessimistic, most likely, and optimistic returns associated with the asset is calledA) marginal analysis.B) sensitivity analysis.C) break-even analysis.D) financial statement analysis.20) The ________ is the extent of an assets risk. It is found by subtracting the pessimistic outcome from the optimistic outcome.A) returnB) standard deviationC) probability distributionD) range21) The ________ of an event occurring is the percentage chance of a given outcome.A) dispersionB) standard deviationC) probabilityD) reliability22) The ________ is a measure of relative dispersion used in comparing the risk of assets with differing expected returns.A) coefficient of variationB) chi squareC) meanD) standard deviation23) The ________ is the annual rate of interest earned on a security purchased on a given date and held to maturity.A) term structureB) yield curveC) risk-free rateD) yield to maturity24) Generally, an increase in risk will result in ________ required return or interest rate.A) a lowerB) a higherC) an unchangedD) an undetermined25) The nominal rate of interest is composed ofA) the real rate plus an inflationary expectation.B) the real rate plus a risk premium.C) the risk-free rate plus an inflationary expectation.D) the risk-free rate plus a risk premium.26) Dividends in arrears that must be paid to the preferred stockholders before payment of dividends to common stockholders areA) cumulative.B) noncumulative.C) participating.D) convertible.27) The cost of preferred stock isA) lower than the cost of long-term debt.B) higher than the cost of common stock.C) higher than the cost of long-term debt and lower than the cost of common stock.D) lower than the cost of convertible long-term debt and higher than the cost of commonstock.28) ________ analysis is a technique used to assess the returns associated with various cost structures and levels of sales.A) Time-seriesB) MarginalC) BreakevenD) Ratio29) Earnings before interest and taxes (EBIT) is a descriptive label forA) operating profits.B) net profits before taxes.C) earnings per share.D) gross profits.30) ________ costs are a function of time, not sales, and are typically contractual.A) FixedB) Semi-variableC) VariableD) Operating31) The firms ________ is the level of sales necessary to cover all operating costs, i.e., the point at which EBIT = $0.A) cash breakeven pointB) financial breakeven pointC) operating breakeven pointD) total breakeven point32) At the operating breakeven point, ________ equals zero.A) sales revenueB) fixed operating costsC) variable operating costsD) earnings before interest and taxes33) A firm?s operating breakeven point is sensitive to all of the following variables EXCEPTA) fixed operating costs.B) sales price per unit.C) interest expense.D) variable operating cost per unit.34) Net working capital is defined asA) a ratio measure of liquidity best used in cross-sectional analysis.B) the portion of the firm?s assets financed with short-term funds.C) current liabilities minus current assets.D) current assets minus current liabilities.35) In working capital management, risk is measured by the probability that a firm will becomeA) liquid.B) technically insolvent.C) unable to meet long-term obligations.D) less profitable.36) In general, the more net working capital a firm has,A) the greater its risk.B) the lower its risk.C) the less likely are creditors to lend to the firm.D) the lower its level of long-term funds.Table 14.1Irish Air Services has determined several factors relative to its asset and financing mix.(a) The firm earns 10 percent annually on its current assets.(b) The firm earns 20 percent annually on its fixed assets.(c) The firm pays 13 percent annually on current liabilities.(d) The firm pays 17 percent annually on long-term funds.(e) The firm?s monthly current, fixed and total asset requirements for the previous year are summarized in thetable below: Current Fixed TotalMonth Assets Assets AssetsJanuary $45,000 $100,000 $145,000February 40,000 100,000 140,000March 50,000 100,000 150,000April 55,000 100,000 155,000May 60,000 100,000 160,000June 75,000 100,000 175,000July 75,000 100,000 175,000August 75,000 100,000 175,000September 60,000 100,000 160,000October 55,000 100,000 155,000November 50,000 100,000 150,000December 50,000 100,000 150,00037) The firms monthly average permanent funds requirement is ________. (See Table 14.1)A) $100,000.B) $57,500.C) $140,000.D) $157,500.38) The firms monthly average seasonal funds requirement is ________. (See Table 14.1)A) $17,500.B) $57,500.C) $40,000.D) $157,500.39) The firms annual financing costs of the aggressive financing strategy are ________. (See Table 14.1)A) $21,175.B) $26,075.C) $24,475.D) $22,775.446 Gitman Principles of Managerial Finance, 12e40) The firms annual financing costs of conservative financing strategy are ________. (See Table14.1)A) $22,775.B) $26,075.C) $26,775.D) $21,175.41) The firms annual profits on total assets for the previous year were ________. (See Table 14.1)A) $20,000.B) $21,500.C) $23,625.D) $25,750.42) If the firms current liabilities in December were $40,000, the net working capital was ________.(See Table 14.1)A) $140,000.B) $60,000.C) $10,000.D) -$10,000.Table 14.2 Flum Packages, Inc.Assets Liabilities & EquityCurrent assets $10,000 Current Liabilities $ 5,000Fixed assets 20,000 Long-term debt 12,000 Equity 13,000 Total $30,000 Total $30,000 The company earns 5 percent on current assets and 15 percent on fixed assets. The firms current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent43) The firms initial ratio of current to total asset is ________. (See Table 14.2)A) 1:3B) 3:1C) 2:3D) 3:244) The two major sources of short-term financing areA) a line of credit and accounts payable.B) accounts payable and accruals.C) a line of credit and accruals.D) accounts receivable and notes payable.45) Tangshan Mining was extended credit terms of 3/15 net 30 EOM. The cost of giving up the cash discount, assuming payment would be made on the last day of the credit period, would beA) 75.26%.B) 18.56%.C) 72.99%.D) 37.12%.46) As part of a union negotiation agreement, the United Clerical Workers Union conceded to be paid every two weeks instead of every week. A major firm employing hundreds of clerical workers had a weekly payroll of $1,000,000 and the cost of short -term funds was 12 percent. The effect of this concession was to delay clearing time by one week. Due to the concession, the firmA) realized an annual loss of $120,000.B) realized an annual savings of $120,000.C) increased its cash cycle.D) decreased its cash turnover.47) A firm purchased goods on January 27 with a purchase price of $1,000 and credit terms of 2/10 net 30 EOM. The firm paid for these goods on February 9. The firm must pay _____ for the goods.A) $1,000B) $980C) $800D) $90048) By offering credit to customers, the firm mayA) increase the price of the good to cover its costs.B) decrease its investment in accounts receivable.C) decrease its investment in accounts payable.D) decrease the cost of goods purchased.49) A ________ is normally initiated by a firm that needs funds for operations. An asset previously owned by a lessee is sold to the lessor.A) direct leaseB) leveraged leaseC) sale-leasebackD) capital lease50) ________ leases are non-cancelable and are generally used for leasing land, buildings, and large pieces of fixed equipment.A) FinancialB) OperatingC) SerialD) Direct51) Advantages of leasing from the lessees perspective include all of the following EXCEPTA) capability of effectively depreciating land.B) ability to avoid restrictive covenants that are normally part of a long-term loan.C) benefit of the salvage value at the end of the term of the lease reverts to the lessor.D) 100 percent financing.52) All of the following must be considered when making a lease-versus-purchase decision EXCEPTA) the after-tax cash flows for each year under the lease alternative.B) the after-tax cash flows for each year under the purchase alternative.C) the present value of all cash flows.D) the depreciation expense under the lease.
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