midterm pt 1

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University of Maryland Global Campus (UMGC) *

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640

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Management

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Apr 3, 2024

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docx

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n 1 1 Which of the following cannot be engaged in managing the business? a limited partner a general partner a sole proprietor none of these Question 2 1 / 1 point One reason for the existence of agency problems between managers and share holders is that: managers know how to manage the firm better than shareholders. there is a separation of ownership and control of the firm. shareholders have unreasonable expectations about managerial performance. none of these. Question 3 0 / 1 point On June 23, 20X8, Mikhal Cosmetics sold $250,000 worth of its products to Rynex Corporation. The goods were shipped to Rynex on July 2. The payment from Rynex was received on September 20. Under the "cash basis of accounting" revenue should be recorded on: September 20, 20X8. n 4 1 During the last year, Sigma Co had Net Income of $154, paid $16 in dividends, and sold new stock for $40. Beginning equity for the year was $690. Ending equity was Answer: 868 Hide question 4 feedback SOLUTION: Beginning Equity + Net Income - Dividends +Stock n 5 1

The following items are components of a traditional balance sheet. How much are the total assets of the firm? Plant and equipment $41,300 Common stock 15,000 Cash 7,800 Inventory 24,500 Bad debt reserve 6,000 Additional paid-in capital 6,000 Accumulated depreciation 26,800 Accounts receivable 22,000 Answer: 62,800 Hide question 5 feedback Cash + Inventory + Accounts Recievable - Bad Debt Reserve + Plant & Equipment - Accumulated Depreciation n 6 1 Book value is the value of a company according to its balance sheet. Market value is the value of the company in the eyes of the stock market. True False Question 7 1 / 1 point When evaluating a Statement of Cash Flows, which of the following would be considered an example(s) of cash flow from financing activities? Depreciation Capital Expenditure

Repayment of Bank Loan All of the Above Question 8 1 / 1 point When reviewing a Balance Sheet, which of the following items would you expect to find under Assets? A. Cash B. Accounts Payable C. Inventory A & B A & C Question 9 1 / 1 point Cameron Balance Sheet Accounts Payable and Accruals 30 Accounts Receivable 62 Accumulated Depreciation (175) Cash 39 Common Stock 120 Fixed Assets (gross) 390 Inventory 131 Long-Term Debt 200 Retained Earnings 65 What is Cameron Inc.’s Net Working Capital? Answer: 202 Hide question 9 feedback SOLUTION:

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Net working Capital = Total current assets - total current liabilities Cash + A/R + inventory -A/P - Accruals n 10 1 A firm’s current ratio is 1.2, and its quick ratio is 1.0. If its current liabilities are $13,200, what are its inventories? Answer: 2,640 Hide question 10 feedback Current ratio = Current assets/Current liabilities, solve for Current Assets Substitute into the quick ratio and solve for inventory. 1.0 = (Current Assets – inventories)/Current liabilities n 11 1 Iris Income Statement Cost of Goods Sold 320 Depreciation Expense 35 Interest Expense 20 Operating Expense (excluding depreciation) 115 Sales 590 What was Iris Inc.’s earnings before interest and taxes (EBIT)? Answer: 120 Hide question 11 feedback SOLUTION: {Sales}-{COGS}-Operating expense - Depreciation Expense n 12 1

Iris Balance Sheet Accounts Payable and Accruals 65 Accounts Receivable 59 Accumulated Depreciation (175) Cash 27 Common Stock 120 Fixed Assets (gross) 390 Inventory 121 Long-Term Debt 200 Retained Earnings 65 What is Iris Inc.’s Total Assets? Answer: 422 Hide question 12 feedback SOLUTION: Cash + A/R + Inventory + Fixed Assets + Accumulated Dep n 13 1 If firm A has a higher debt-to-equity ratio than firm B, then firm A has a lower equity multiplier than firm B. firm B has higher financial leverage than firm A. firm B has a lower equity multiplier than firm A. none of the above Hide question 13 feedback Firm A has higher debt-to-equity ratio than firm B, then it means that firm A has relatively less

equity. So any changes in the firm's value is reflected more in the change in value of equity, as the value of debt doesn't change much. So the greater change in value of equity for firm A is equivalent to greater financial leverage. n 14 1 Flying Tigers, Inc., has net sales of $704,000 and accounts receivables of $159,000. What is the firm's accounts receivables turnover? (Give your answer up to two decimal places) Answer: 4.42 Hide question 14 feedback SOLUTION: Accts Receivable Turnover = Net Sales/AR n 15 1 Reagan Corp. has reported a net income of $814,200 for the year. The company's share price is $12.74, and the company has 304,090 shares outstanding. Compute the firm's price- earnings ratio up to two decimal places. Answer: 4.77 Hide question 15 feedback SOLUTION: 1) Calculate the Earnings per share: Net Income / Shares Outstanding 2) Calculate Price earnings ratio: Price per share / Earnings per share n 16 1 You purchased a piece of property for $30,000 nine years ago and sold it today for $83,190. What was the annual rate of return on your investment? 9% 10% 11% 12% Hide question 16 feedback SOLUTION: 30,000 = 83,190 (PVF k,9 )

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PVF k,9 = .3606, k = 12% Calculator steps: 9 n –30,000 PV 83,190 FV Solve for I/Y = 12.0% n 17 1 The First National Bank has agreed to lend you $30,000 today, but you must repay $42,135 in 3 years. What rate is the bank is charging you? 13% 12% 11% 10% Hide question 17 feedback PVF k,3 = $30,000/$42,135 = .712; k = 12% n 18 0 The Florida lottery agrees to pay the winner $256,000 at the end of each year for the next 20 years. What is the future value of this prize if each payment is put in an account earning 0.07? Answer: (10,494,846) SOLUTION: FV 20 = $PVA[FVF k,n ] In Excel use the FV formula, entering the following variables =FV(rate,nper,pmt) n 19 1 Which of the following is not a “Fundamental Decision of Financial Management”? The capital budgeting decision The macroeconomic management decision The financing decision Working capital management decision Question 20 1 / 1 point Which of the following is least likely to be part of an Annual Report? financial tables discussions of the firm’s product lines, its services to its customers, and its contributions to the

communities in which it operates audited financial statements ratio analysis of other firms in the same industry

midterm pt 1

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