Quiz #12: FINA 3770 Section 0072 - Finance (Fall 2021 1)

pdf

School

University of North Texas, Dallas *

*We aren’t endorsed by this school

Course

3770

Subject

Finance

Date

Jan 9, 2024

Type

pdf

Pages

8

Uploaded by ladesharogers

Report
Quiz #12 Due Nov 28 at 11:59pm Points 10 Questions 10 Available Nov 22 at 12am - Nov 28 at 11:59pm 7 days Time Limit 60 Minutes Allowed Attempts 50 INSTRUCTIONS Attempt History Attempt Time Score LATEST Attempt 1 57 minutes 9 out of 10 ! Correct answers are hidden. Score for this attempt: 9 out of 10 Submitted Nov 26 at 9:55am This attempt took 57 minutes. Description: This quiz covers the material in Chapter 16 of your text. Instructions: Select the most appropriate answer. The following rules apply: 1. This quiz is a combination of 10 multiple choice and true/false questions. 2. Each 10 question quiz will be randomly drawn from a pool of questions. 3. You have 60 minutes to complete each quiz attempt, at which time the quiz will close. 4. You may take the quiz as many times as you desire. 5. You must obtain a score of at least 70% in order to progress to the next quiz. 6. Your recorded quiz score will the highest score from all attempts. Take the Quiz Again Take the Quiz Again 1 / 1 pts Question 1
A firm should scale back its projected level of operations if the funds required to meet the forecasted sales are readily available. True False It is possible that the funds required to meet the sales forecast simply cannot be obtained. If so, it is better to know this in advance and to scale back the projected level of operations. See 16-4: Using Leverage and Forecasting for Control 1 / 1 pts Question 2 If a firm that has fixed costs in its operations does not meet its forecasted sales level, its operating leverage will result in a magnified decrease in net income compared to what is expected. True If the forecasted sales level is not met, then the production facilities might be expanded too greatly, inventories might be built up too quickly, and so on, and the end result might be that the firm will su ff er a magnified income loss. See 16-4: Using Leverage and Forecasting for Control False 1 / 1 pts Question 3
Accounts that "naturally" fluctuate with changes in routine business operations affect internally generated funds, which are generally referred to as spontaneously generated funds. False True In general, current liabilities that change naturally (spontaneously) with changes in sales provide spontaneously generated funds that tend to change at the same rate as sales. See 16-1: Projected (Pro Forma) Financial Statements 1 / 1 pts Question 4 Operating breakeven analysis deals with the: assets and liabilities forecasted in the pro forma balance sheet. net cash flows from operations shown on the statement of cash flows. noncash items included in operating activities. revenues and expenses associated with a firm's normal production and selling operations. Correct. Operating breakeven analysis deals only with the upper portion of the income statement. This portion of the income statement generally is referred to as the operating section, because it contains only the revenues and expenses associated with the firm's normal production and selling operations. See 16-3: Financial Control-Budgeting and Leverage
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help
interest payments to bondholders and the dividend payments to preferred stockholders. 1 / 1 pts Question 5 The primary reason the income statement is forecast prior to the balance sheet in the financial planning process is because ______ must be estimated. current liabilities that change naturally with changes in sales funds that must raise externally through new borrowing or by selling new stock the market value of stock in the coming year the amount of retained earnings the company expects to generate during the year Correct. The income statement for the coming year is forecast to obtain an initial estimate of the amount of retained earnings (internal equity financing) the company expects to generate during the year. See 16-1: Projected (Pro Forma) Financial Statements the total of cash flows from various activities during the year 1 / 1 pts Question 6
If a firm that has a degree of operating leverage (DOL) greater than 1.0 experiences a 1.0 percent change in _____, its earnings before interest and taxes (EBIT) will change by _____1.0 percent. earnings per share; greater than net operating income; less than sales; greater than Correct. DOL is an index that measures the e ff ect a change in sales has on operating income or EBIT. See 16-3: Financial Control- Budgeting and Leverage net income; greater than fixed costs; less than 1 / 1 pts Question 7 Which of the following mathematical equations represents the operating breakeven point, Q , for a firm? OpBEP Contribution margin = Earnings before interest and tax Sales = Gross profit margin Total operating costs = Total variable costs + Total contribution margin costs Sales = Total variable costs + Total fixed costs
Correct. The operating breakeven point can be found by setting the total revenues equal to the total operating costs so that net operating income (NOI) is zero. See 16-3: Financial Control- Budgeting and Leverage Total operating costs = Contribution margin 1 / 1 pts Question 8 Suppose that in the control phase of the financial planning process a firm discovers it cannot raise the funds that are required to meet the forecasted sales. In this situation, the firm should ______. reformulate its plans to increase retained earnings and to decrease the dividend payments to stockholders scale back its projected level of operations Correct. It is possible that the funds required to meet the sales forecast simply cannot be obtained. If so, it is better to know this in advance and to scale back the projected level of operations than to suddenly run out of cash and have operations grind to a halt. See 16-4: Using Leverage and Forecasting for Control expand its plant and equipment to the level necessary to meet the sales forecast build up its inventory quickly use available cash to repay as many outstanding loans as possible
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help
1 / 1 pts Question 9 Considering each item independently and holding other things constant, which of the following actions would reduce a firm's need for additional capital (additional funds needed, AFN)? Decrease the firm's days sales outstanding (DSO). Correct. Days sales outstanding (DSO) is used to evaluate a firm's ability to collect its credit sales in a timely manner. Therefore, a lower DSO reduces the firm's need for additional capital. See 16-1: Projected (Pro Forma) Financial Statements Increase the firm's dividend payout ratio. Increase the firm's expected sales growth. Decrease the firm's accrual accounts (e.g., accrued wages and taxes). Decrease the firm's profit margin. 0 / 1 pts Question 10 Incorrect Incorrect The degree of financial leverage (DFL) is defined as the percentage change in _____ that results from a given percentage change in earnings before interest and taxes (EBIT). net operating income (NOI) sales
Incorrect. Financial leverage is the existence of fixed financial costs such as interest and preferred dividends. It a ff ects the financing section of the income statement. See 16-3: Financial Control- Budgeting and Leverage net income earnings per share (EPS) fixed financial costs Quiz Score: 9 out of 10