BUSI 530 Corporate Finance Exam 1 Help

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BUSI 530 Corporate Finance Exam 1 Help

corporate finance assignment help1Q1. Which of the following statements best distinguishes the difference between real and financial assets?

  • Real assets have less value than financial assets.
  • Real assets are tangible; financial assets are not.
  • Financial assets represent claims to income that is generated by real assets.
  • Financial assets appreciate in value; real assets depreciate in value.

Q2. Which one of these is a disadvantage of the corporate form of business?

  • Access to capital
  • Unlimited personal liability for owners
  • Limited firm life
  • Legal requirements

Q3. Financial managers should only accept investment projects that:

  • increase the current profits of the firm.
  • can increase the firm’s market share.
  • earn a higher rate of return than the firm currently earns on its existing projects.
  • earn a higher rate of return than shareholders can get by investing on their own.

Q4. In a firm having both a treasurer and a controller, which of the following would most likely be handled by the controller?

  • Internal auditing
  • Credit management
  • Banking relationships
  • Insurance

Q5. A corporate director:

  • is selected by and can be removed by management.
  • can be voted out of power by the shareholders.
  • has a lifetime appointment to the board.
  • is selected by a vote of all corporate stakeholders.

Q6. A corporate board of directors should provide support for the top management team:

  • under all circumstances.
  • in all decisions related to cash dividends.
  • only when the board approves of management’s actions.
  • if shareholders are pleased with the firm’s performance.

Q7. A financial analyst in a corporation may be involved with all of the following EXCEPT:

  • analyzing a new investment project.
  • monitoring risk.
  • managing investment of the company’s cash.
  • purchasing the firm’s plant and equipment.

Q8. Which one of these was a contributing factor to the need for many foreign banks to seek aid from their governments as a result of the financial crisis of 2007-2009?

  • Decrease in their exchange rates
  • Investments in U.S. subprime mortgages
  • Interest rate spikes
  • Currency controls

Q9. Which one of the following financial intermediaries has shown the greatest preference for investing in long-term financial assets?

  • Commercial banks
  • Insurance companies
  • Finance companies
  • Savings banks

Q10. Firms can often determine the price of any commodities they use in their production process by consulting the price quotes provided by:

  • their investment bank.
  • the New York Mercantile Exchange.
  • the New York Stock Exchange.
  • the Standard & Poor’s market indexes.

Q11. In the United States, banks are the most important source of long-term financing for corporations.

  • True
  • False

Q12. Liquidity is important to a mutual fund primarily because:

  • a fund that is less liquid will attract more investors.
  • the fund’s shareholders may want to redeem their shares at any time.
  • new investors may invest in the fund at any time.
  • the fund requires cash to pay its taxes.

Q13. One contributing factor to the 2007-2009 financial crisis was the structuring of mortgage loans with:

  • high initial payments, offset by significantly lower payments later.
  • low initial payments, offset by significantly higher payments later.
  • high initial payments, offset by high payments later.
  • very short maturities.

Q14. Which one of the following is the biggest provider of payment mechanisms?

  • Hedge funds
  • Banks
  • Mutual funds
  • Insurance companies

Q15. If the market value of assets is high, then the market value of liabilities must be high also.

  • True
  • False

Q16. The statement of cash flows shows the firm’s cash inflows and outflows from operations as well as from its investments and financing activities.

  • True
  • False

Q17. If market interest rates have increased since a company last borrowed long-term funds, the market value of these long-term funds will likely be:

  • greater than their book value.
  • less than their book value.
  • equal to their book value.
  • unknown without knowing the maturity of the debt.

Q18. If the balance sheet of a firm indicates that total assets exceed current liabilities plus shareholders’ equity, then the firm has:

  • no retained earnings.
  • long-term debt.
  • no accumulated depreciation.
  • current assets.

Q19. Net working capital is a measure of a company’s:

  • goodwill.
  • short-term liabilities.
  • estimated cash reservoir.
  • shareholders’ equity.

Q20. Professor Diehard found an effective antibiotic for the DEPRESS bacteria, and patented the drug. He believes that he could sell the patent for $20 million. He then formed a corporation and invested $400,000 in setting up a production plant. There are 2 million shares of stock outstanding. If the professor’s belief is correct, what would be the price per share and the book value per share?

  • $10.20; $0.20
  • $10.00; $0.20
  • $9.80; $0.40
  • $9.80; $0.20

Q21. Amy wants to know if inventory is increasing as a percentage of total assets. Which one of these statements most easily provides the information she is seeking?

  • Statement of cash flows
  • Balance sheet
  • Common-size balance sheet
  • Income statement

Q22. What happens to the market value of a firm’s equity as the book value of the firm’s equity increases?

  • It increases by the same amount.
  • It decreases by the same amount.
  • It remains constant.
  • There is no set relationship to determine this outcome.

Q23. What is the inventory turnover ratio for ABC Corp. if cost of goods sold equals $5,000, current ratio equals 3, quick ratio equals 1.5, and the firm has $1,800 in current assets?

  • 2.78 times
  • 4.17 times
  • 5.56 times
  • 8.33 times

Q24. A deficiency of the standard measures of liquidity is that the measures:

  • ignore a firm’s reserve borrowing capacity.
  • fail to include accounts receivable as an asset.
  • give inventories equal weighting in the quick ratio.
  • do not include the current portions of long-term debt.

Q25. Calculate the average collection period for Dots Inc. if its accounts receivables were $550 at the beginning of a year in which the firm generated $3,000 of sales?

  • 60 days
  • 61 days
  • 67 days
  • 73 days

Q26. Balsco’s balance sheet shows total assets of $238,000 and total liabilities of $107,000. The firm has 55,000 shares of stock outstanding that sell for $11 a share. What is amount of market value added?

  • $389,000
  • $474,000
  • $1,073,000
  • $123,712

Q27. The use of debt in the firm’s capital structure will increase ROE if the firm:

  • has more debt than equity.
  • pays less in taxes than in interest.
  • earns a higher return than the rate paid on debt.
  • has a times interest earned ratio greater than 1.0.

Q28. What are the annual sales for a firm with $400,000 in debt, a total debt ratio of 0.4, and an asset turnover of 3?

  • $333,333
  • $1,200,000
  • $1,800,000
  • $3,000,000

Q29. Which of the following will allow your firm to achieve its targeted 16% ROA with an asset turnover of 2.5?

  • A leverage ratio of .0667
  • A P/E ratio of 14
  • A return on equity of 25%
  • An operating profit margin of 6.4%

Q30. A firm has average daily expenses of $2.13 million and average accounts payable of $112.7 million. On average, how many days does it take the firm to pay its bills?

  • 63.47 days
  • 52.91 days
  • 48.19 days
  • 59.03 days

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