Corporate Finance Final Exam 75 Questions with 100% Correct Answers
A firm had the following accounts and financial data for 2005.
Sales Revenue $3,060
Cost of Goods Sold $1,800
Acct Receivable 500
Preferred S
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Corporate Finance Final Exam 75 Questions with 100% Correct Answers
A firm had the following accounts and financial data for 2005.
Sales Revenue $3,060
Cost of Goods Sold $1,800
Acct Receivable 500
Preferred Stock Dividends $ 18
Interest Expense 126
Tax Rate 40%
Total operating expenses 600
No. of shares of common stock outstanding 1,000
Accounts payable 240
The firm's earnings available to common shareholders for 2005 were ________. -Answer- $302.40
A financial manager must choose between four alternative Assets: 1, 2, 3, and 4. Each asset costs $35,000 and is expected to provide earnings over a three-year period as described below.
Assets Year 1 Year 2 Year 3
1 $21,000 $15,000 $6,000
2 9,000 15,000 21,000
3 3,000 20,000 19,000
4 6,000 12,000 12,000
Based on the profit maximization goal, the financial manager would choose -Answer- Asset 2
A financial manager must choose between three alternative investments. Each asset is expected to provide earnings over a three-year period as described below. Based on the wealth maximization goal, the financial manager would
Year Asset 1 Asset 2 Asset 3
1 $21,000 $9,000 $15,000
2 15,000 15,000 15,000
3 9,000 21,000 15,000
$45,000 $45,000 $45,000 -Answer- Choose Asset 1
The wealth of the owners of a corporation is represented by -Answer- Share value
The primary economic principle used in managerial finance is -Answer- marginal cost-benefit analysis
The dividend exclusion for corporations receiving dividends from another corporation has resulted in -Answer- stock investments being relatively more attractive relative to bond investments made by one corporation in another corporation
In a ________ market, the buyer and seller are not brought together to trade securities directly but instead have their orders executed on the ________. -Answer- dealer; over-the-counter market
Operating profits are defined as -Answer- earnings before interest and taxes
The key participants in financial transactions are individuals, businesses, and governments. Individuals are net ________ of funds, and businesses are net ________ of funds. -Answer- suppliers; demanders
The primary goal of the financial manager is -Answer- maximizing wealth
________ is a term used to describe the magnification of risk and return introduced through the use of fixed cost financing such as preferred stock and long-term debt. -Answer- Financial leverage
One way often used to insure that management decisions are in the best interest of the stockholders is to -Answer- tie management compensation to the performance of the company's common stock price.
A corporation had year end 2004 and 2005 retained earnings balances of $320,000 and $400,000, respectively. The firm reported net profits after taxes of $100,000 in 2005. The firm paid dividends in 2005 of ________. -Answer- $20,000
Managerial finance -Answer- involves tasks such as budgeting, financial forecasting, cash management, and funds procurement
A firm has just ended its calendar year making a sale in the amount of $150,000 of merchandise purchased during the year at a total cost of $112,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. The net profit and cash flow from this sale for the year are -Answer- $37,500 and -$112,500, respectively
The DuPont system merges the income statement and balance sheet into two summary measures of profitability: -Answer- return on total assets and return on equity
Financial managers evaluating decision alternatives or potential actions must consider -Answer- risk, return and impact on share price
Firms that require funds from external sources can obtain them in one of the following ways EXCEPT
a. financial institution
b. financial markets
c. government
d. private placement -Answer- government
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