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FIN 370 Week 5 Final Exam

FIN 370 Week 5 Final Exam
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TRUE/FALSE.  Write 'T' if the statement is true and 'F' if the statement is false. (2 points total) 

1.   Profit maximization stresses the efficient use of timing and risks.

2.   Financial assets are tangible assets such as houses, equipment, and inventories. 

3.   The sustainable rate of growth represents the rate at which a firm’s sales can grow if it wants to maintain its present financial ratios and does not want to resort to a sale of new equity shares.

4.   Business risk refers to the relative disperses in the firm’s expected earnings after interest and taxes.

5.   New capital-budgeting projects are always new products taken to market.

6.  The stock of cash is a type of inventory.

7.   If an asset is sold above depreciated value, it may be used to offset gains and thus result in tax savings.

8.    Free cash flow is the cash flow in excess of that required to fund all projects with positive and negative net present value when discounted at the relevant cost of capital.

9.   The Euro eliminated exchange costs and exchange rate fluctuations.

10.   The foreign exchange market is like the New York Stock Exchange because they are both physical entities.

 

MULTIPLE CHOICE.  Choose the one alternative that best completes the statement or answers the question.  Please provide any back-up of your calculations on a separate worksheet so that credit can be assigned.  

(3 points total)

11. Which of the following measure an organization’s liquidity?

12. If I invest $1000 at an interest rate of 2% what would the future value be after 5 years?

13. Burns Promotions Plus has an annuity that pays $2500 at the beginning of the next 4 years what is the future value of the annuity if the interest rate is 5%?

14. Grover’s Vinyl Siding has a $2000 loan that needs to be repaid in 3 equal installments at the end of the next three years with an interest rate of 6%; what would the requested payment be?

15. Plexus Pictures collects 70% of its sales during the month of sales, 20% one month after the sales and 10% two months after the sale. The company expects sales of $15,000 in August; $25,000 in September; $10,000 in October; and $50,000 in November How much money will they collect in October?

16. The significance of a ratio can only be truly appreciated Except when:

17. Which is not a type of ratio?

18. Burns Promotions Plus has a cost of revenue of $219,793 million for the fiscal year ended January 31, 2008.  It had an inventory balance of $29,447 million at the end of this fiscal year.  Based on this information what is the number of days inventory for the year 2007 (ending January 31, 2008).

19. Burns Promotions Plus has a cost of revenue of $219,793 million for the fiscal year ended January 31, 2008.  It had an inventory balance of $29,447 million at the end of this fiscal year.  Based on this information what is the inventory turnover for the year 2007 (ending January 31, 2008).

20. What is working capital?

21. Euro was introduced because of the following EXCEPT?

PROBLEMS.  Provide back-up of your work on a separate worksheet so that credit can be assigned. You may provide either a Word document or an Excel spreadsheet.

(2.5 points each= 5 points total)

 Amy's Widgets Balance Sheet

ASSETS LIABILITIES

Current Assets Current Liabilities

  Cash $   2,100 Notes Payable $   5,000 

  Petty Cash 100 Accounts Payable 35,900 

  Temporary Investments 10,000 Wages Payable 8,500 

  Accounts Receivable - net 40,500 Interest Payable 2,900 

  Inventory 31,000 Taxes Payable 6,100 

  Supplies 3,800 Warranty Liability 1,100 

  Prepaid Insurance     1,500 Unearned Revenues     1,500 

  Total Current Assets   89,000 Total Current Liabilities   61,000 

-

Investments   36,000 Long-term Liabilities

  Notes Payable 20,000 

Property, Plant & Equipment Bonds Payable  400,000 

  Land 5,500 Total Long-term Liabilities  420,000 

  Land Improvements 6,500

  Buildings 180,000

  Equipment 201,000 Total Liabilities  481,000 

  Less: Accum Depreciation   (56,000)

  Prop, Plant & Equip - net  337,000

-

Intangible Assets STOCKHOLDERS' EQUITY

  Goodwill 105,000 Common Stock 110,000 

  Trade Names  200,000 Retained Earnings 229,000 

  Total Intangible Assets  305,000 Less: Treasury Stock   (50,000)

  Total Stockholders' Equity  289,000 

Other Assets     3,000

-

Total Assets $770,000 Total Liabilities & Stockholders' Equity $770,000 

Income Statement 2008 For Amy's Widgets

 

Sales (all on Credit) $500,000 

  Cost of Good Sold $380,000 

     Gross Profit $120,000 

 

Operating Expenses

  Selling/Admin expense $80,000 

 

Operating Income $40,000 

Interest Expense $12,000

 

Income before taxes $28,000 

Income Tax Expense $5,000 

 

Net Income after Taxes $23,000 

 

22.    Based on the above information:

23.    Based on the above information:

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