Finance Midterm

FINA300 Fall 2011 Benedictine University 100 credibility Name: ___________________________________________________ 1) Which of the afterward statements is CORRECT? a. The New York Banal Exchange is an bargain market, and it has a concrete location. b. Home mortgage loans are traded in the money market. c. If an agent sells shares of banal through a broker, again it would be a primary bazaar transaction. d. Basic markets accord alone with accepted stocks and alternative disinterestedness securities. e. While the distinctions are blurring, advance banks about specialize in lending money, admitting bartering banks about advice companies accession basic from alternative parties. (2) Which of the afterward statements is CORRECT? a. A adverse takeover is the basic adjustment of appointment buying absorption in a corporation. b. A association is a acknowledged article created by a state, and it has a activity and actuality that is abstracted from the lives and actuality of its owners and managers. c. Absolute accountability and bound activity are two key advantages of the accumulated anatomy over alternative forms of business organization. . Bound accountability is an advantage of the accumulated anatomy of alignment to its owners (stockholders), but corporations accept added agitation adopting money in banking markets because of the complication of this anatomy of organization. e. Although the stockholders of the association are cloistral by bound acknowledged liability, the acknowledged cachet of the association does not assure the firm’s managers in the aforementioned way, i. e. , bondholders can sue its managers if the close defaults on its debt. 3) The retained antithesis annual on the antithesis area does not represent cash. Rather, it represents allotment of the stockholders' affirmation adjoin the firm's absolute assets. Put addition way retained antithesis are stockholders' reinvested earnings. a. True b. False (4) In finance, we are about added absorbed in banknote flows than in accounting profits. Chargeless banknote breeze (FCF) is affected as after-tax operating assets additional abrasion beneath the sum of basic expenditures and changes in net alive capital. a. True b. False 5) Alternative things captivated constant, which of the afterward accomplishments would access the bulk of banknote on a company’s antithesis sheet? a. The aggregation repurchases accepted stock. b. The aggregation pays a dividend. c. The aggregation issues new accepted stock. d. The aggregation gives barter added time to pay their bills. e. The aggregation purchases a new allotment of accessories 6) Ryngard Corp's sales aftermost year were $38,000, and its absolute assets were $16,000. What was its absolute assets about-face arrangement (TATO)? a. 2. 04 b. 2. 14 c. 2. 26 d. 2. 38 e. 2. 49 7) A new close is developing its business plan. It will crave $615,000 of assets, and it projects $450,000 of sales and $355,000 of operating costs for the aboriginal year. Administration is analytic abiding of these numbers because of affairs with its barter and suppliers. It can borrow at a amount of 7. 5%, but the coffer requires it to accept a TIE of at atomic 4. 0, and if the TIE avalanche beneath this akin the coffer will alarm in the accommodation and the close will go bankrupt. What is the best debt arrangement the close can use? (Hint: Acquisition the best dollars of interest, again the debt that produces that interest, and again the accompanying debt ratio. ) a. 41. 94% b. 44. 15% c. 46. 47% d. 48. 92% e. 51. 49% 8) Which of the afterward could explain why a business ability accept to accomplish as a association rather than as a sole cartel or a partnership? a. Corporations about face beneath regulations. b. Beneath of a corporation’s assets is about accountable to federal taxes. c. Accumulated shareholders are apparent to absolute liability, but this agency is account by the tax advantages of incorporation. d. Accumulated investors are apparent to absolute liability. e. Corporations about acquisition it easier to accession ample amounts of capital. (9) You afresh awash 200 shares of Disney stock, and the alteration was fabricated through a broker. This is an archetype of: a. A money bazaar transaction. b. A primary bazaar transaction. c. A accessory bazaar transaction. d. A futures bazaar transaction. e. An over-the-counter bazaar transaction 10) Beneath are the 2007 and 2008 anniversary antithesis bedding for Tran Enterprises: Assets:20082007 Cash$ 200,000$ 170,000 Accounts receivable864,000700,000 Inventories 2,000,000 1,400,000 Absolute accepted assets$3,064,000$2,270,000 Net anchored assets 6,000,000 5,600,000 Absolute assets$9,064,000$7,870,000 Liabilities and equity: Accounts payable$1,400,000$1,090,000 Notes payable 1,600,000 1,800,000 Absolute accepted liabilities$3,000,000$2,890,000 Abiding debt 2,400,000 2,400,000 Common banal 3,000,000 2,000,000 Retained antithesis 664,000 580,000 Absolute accepted equity$3,664,000$2,580,000 Absolute liabilities and equity$9,064,000$7,870,000 The close has never paid a allotment on its accepted stock, and it issued $2,400,000 of 10-year, non-callable, abiding debt in 2007. As of the end of 2008, none of the arch on this debt had been repaid. Assume that the company’s sales in 2007 and 2008 were the same. Which of the afterward statements charge be CORRECT? a. The close added its concise coffer debt in 2008. b. The close issued abiding debt in 2008. . The close issued new accepted banal in 2008. d. The close repurchased some accepted banal in 2008. e. The close had abrogating net assets in 2008. (11) Chang Corp. has $375,000 of assets, and it uses alone accepted disinterestedness basic (zero debt). Its sales for the aftermost year were $595,000, and its net assets was $25,000. Stockholders afresh voted in a new administration aggregation that has promised to lower costs and get the acknowledgment on disinterestedness up to 15. 0%. What accumulation allowance would the close charge in adjustment to accomplish the 15% ROE, captivation aggregate abroad constant? a. 9. 45% b. . 93% c. 10. 42% d. 10. 94% e. 11. 49% 11) Which of the afterward statements is CORRECT? a. Most rapidly growing companies accept absolute chargeless banknote flows because banknote flows from absolute operations about beat anchored asset purchases and changes to net alive capital. b. Changes in alive basic accept no aftereffect on chargeless banknote flow. c. Chargeless banknote breeze (FCF) is authentic as follows: FCF =EBIT(1 - T) + Abrasion - Basic expenditures appropriate to sustain operations - Appropriate changes in net alive capital. d. Chargeless banknote breeze (FCF) is authentic as follows: FCF = EBIT(1 - T) + Basic expenditures. e. Managers should be beneath anxious with chargeless banknote breeze than with accounting net income. Accounting net assets is the "bottom line" and represents how abundant the close can administer to all its investors- both creditors and stockholders. (12) Aftermost year Harrington Inc. had sales of $325,000 and a net assets of $19,000, and its anniversary assets were $250,000. The firm's total-debt-to-total-assets arrangement was 45. 0%. Based on the DuPont equation, what was the ROE? a. 13. 82% b. 14. 51% c. 15. 23% d. 16. 00% e. 16. 80%

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