MGMT 640 Financial Decision Making for Managers Mid Term Part 1 Answer

MGMT 640 Financial Decision Making for Managers Mid Term Part 1 Answer

Question 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
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
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:

June 23, 20X8.

July 2, 20X8.

September 20, 20X8.

none of the above

Question 4
During the last year, Sigma Co had Net Income of $140, paid $18 in dividends, and sold new stock for $39. Beginning equity for the year was $670. Ending equity was

Question 5
The following items are components of a traditional balance sheet. How much are the total assets of the firm?

Plant and equipment $44,900
Common stock 15,000
Cash 8,000
Inventory 21,000
Bad debt reserve 6,000
Additional paid-in capital 6,000
Accumulated depreciation 26,400
Accounts receivable 22,000

Cash + Inventory + Accounts Recievable – Bad Debt Reserve + Plant & Equipment – Accumulated Depreciation

Question 6
Brighton Corp. bought an oil rig exactly 6 years ago for $106,000,000. Brighton depreciates oil rigs straight line over 10 years assuming no salvage value. (Straight line depreciation means that the yearly depreciation will be the purchase price of the oil rig divided by the number of years it will last, which is 10 years here). The rig was just sold to British Petroleum for $30,000,000. What Capital Gain/Loss will Brighton report on this transaction?

Question 7
Walker Corporation conducted the following activities during 2001: (1) they sold 10,000 shares of their own stock for $15.00 per share; (2) they issued bonds for which they received $494,000; (3) they paid dividends to their stockholders totaling $83,000; (4) they sold a piece of equipment for $50,000 that they were carrying on their books for $20,000; (5) they earned net income of $140,000. What would be shown on the Statement of Cash Flows for “Cash from financing activities” based on the information above?

Question 8
Given the following selected information on Cicalese’s Chocolate, Inc., calculate Cash Flow from Operating Activities for the year 20X1.

Dec 31, 20X0 Dec 31, 20X1
EAT $ 600,000 $ 740,000
Depreciation Exp. 100,000 130,000
Dividends 400,000 550,000
Accounts Receivable 1,500,000 2,000,000
Inventory 3,500,000 2,000,000
Accts. Payable and Accruals 350,000 500,000
Long-Term Debt 2,300,000 3,000,000
Common Stock 2,200,000 2,500,000
Retained Earnings 6,150,000 6,350,000

Question 9
Cameron Balance Sheet
Accounts Payable and Accruals 30
Accounts Receivable 56

Accumulated Depreciation (175)
Cash 35
Common Stock 120
Fixed Assets (gross) 390
Inventory 134
Long-Term Debt 200
Retained Earnings 65
What is Cameron Inc.’s Net Working Capital?

Question 10
A firm’s current ratio is 1.5, and its quick ratio is 1.0. If its current liabilities are $10,100, what are its inventories?

Question 11
Iris Income Statement
Cost of Goods Sold 350
Depreciation Expense 35
Interest Expense 20
Operating Expense (excluding depreciation) 115
Sales 770

What was Iris Inc.’s earnings before interest and taxes (EBIT)?

Question 12 Iris Balance Sheet
Accounts Payable and Accruals 65
Accounts Receivable 64

Accumulated Depreciation (175)
Cash 35
Common Stock 120
Fixed Assets (gross) 390
Inventory 135
Long-Term Debt 200
Retained Earnings 65
What is Iris Inc.’s Total Assets?

Question 13
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 lower financial leverage than firm A.

firm B has a lower equity multiplier than firm A.

none of the above

Question 14
Flying Tigers, Inc., has net sales of $742,000 and accounts receivables of $155,000. What is the firm’s accounts receivables turnover? (Give your answer upto two decimal places)

Question 15
Reagan Corp. has reported a net income of $841,000 for the year. The company’s share price is $13.22, and the company has 309,910 shares outstanding. Compute the firm’s price-earnings ratio upto two decimal places.

Question 16
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%

Question 17
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%

Question 18
The Florida lottery agrees to pay the winner $262,000 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 0.10?

Question 19
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
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

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MGMT 640 Financial Decision Making for Managers Mid Term Part 1 Answer