question

Probably the least effective means of aligning management goals with shareholder interests is:

answer

automatically increasing management salaries on an annual basis.

question

A limited liability company (LLC):

answer

prefers its profits be taxed as personal income to its owners.

question

Which one of the following is a working capital decision?

answer

How much cash should the firm keep in reserve?

question

The Sarbanes-Oxley Act of 2002 has:

answer

essentially made officers of publicly traded firms personally responsible for the firm's financial statements.

question

Which one of the following situations is most apt to create an agency conflict?

answer

Basing management bonuses on the length of employment

question

Jamie is employed as a currency trader in the Japanese yen market. Her job falls into which one of the following areas of finance?

answer

International finance

question

Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. The cash flow statement for last year must have which one of the following assuming that no new shares were issued?

answer

Positive cash flow to stockholders

question

Which one of the following statements concerning the balance sheet is correct?

answer

Assets are listed in descending order of liquidity.

question

An increase in which one of the following will increase operating cash flow for a profitable, tax-paying firm?

answer

Depreciation

question

The December 31, 2018, balance sheet of Justin's Golf Shop, Inc., showed current assets of $1,065 and current liabilities of $895. The December 31, 2019, balance sheet showed current assets of $1,280 and current liabilities of $955.
What was the company's 2019 change in net working capital, or NWC?

answer

Equation:
Change in net working capital = change in current assets - change in current liabilities
Change in net working capital = (1280 - 1065) - (955 - 895)
Change in net working capital = 155
Answer : NWC = 155

question

Duela Dent is single and had $195,200 in taxable income. Use the rates from Table 2.3. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
TABLE: https://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/finance/Ross_Essentials_10e/table_2.3.jpg
Calculate her income taxes.

answer

(0- 9525) (.1 ) = 952.50
(9525 -38,700)(.12) = 3501
(38,700 - 82,500)(.22) = 9636
(82,500 - 157,500)(.24) = 18,000
(157,500 - 195,200)(.32) = 12,064
ADD them all
Income taxes = (952.5 + 3501 + 9636 + 18,000 + 12,064)
Income taxes = 44,153.50
Income taxes = $44,153.50
Solution:
https://gyazo.com/bbb75d5dae7bfe090317d2fa9d098cb0

question

The December 31, 2018, balance sheet of Whelan, Inc., showed long-term debt of $1,470,000 and the December 31, 2019, balance sheet showed long-term debt of $1,720,000. The 2019 income statement showed an interest expense of $101,000.
What was the firm's cash flow to creditors during 2019?

answer

Cash flow to creditors = Interest Expense - [Long term debt (2019) - Long term debt (2018)]
Cash flow to creditors = $101,000 - [$1,720,000 - $1,470,000]
Cash flow to creditors = - $149,000
Cash flow to creditors during 2019 is - $149,000

question

A firm has a current ratio of 1.4 and a quick ratio of .9. Given this, you know for certain that the firm:

answer

Current ratio = current assets/ current liabilities
% Net working cap = %curr assets = %curr liab
% Net working cap = 1.4 - 1
% Net working cap = .4
has positive net working capital.

question

The DuPont identity can be used to help a financial manager determine the:
I. degree of financial leverage used by a firm.
II. operating efficiency of a firm.
III. utilization rate of a firm's assets.
IV. rate of return on a firm's assets.

answer

I, II, III, and IV

question

The sustainable growth rate is based on the premise that:

answer

the debt-equity ratio will be held constant

question

Prince Albert Canning PLC had a net loss of Â£26,782 on sales of Â£492,162.
a. What was the company's profit margin?
b. In dollars, sales were $698,266. What was the net loss in dollars?

answer

(a)
Profit margin = (Net profit or loss / sales) x 100
Profit margin = -26,782 / 492,162
Profit margin = -5.44%
(b)
Value per Â£ = (Sales in dollars / Sales in pounds)
Value per Â£ = 698,266/ 492,162
Value per Â£ = $1.419
Value per Â£ = $1.42

question

Y3K, Inc., has sales of $7,535, total assets of $3,555, and a debt-equity ratio of .40. Assume the return on equity is 16 percent.
What is its net income?

answer

Equity:
= Total assets/1.40
= $3,555/1.40
= $2,539
Net income:
= Equity*16%
= $2,539*16%
= $406.29

question

Assume the following ratios are constant.
Total asset turnover = 2.17
Profit margin = 4.5%
Equity multiplier=1.64
Payout ratio=42%
What is the sustainable growth rate?

answer

ROE = profit margin x asset turnover x equity multiplier
sustainable growth rate = (ROE x b)/ [1-(ROE x b)]
ROE = 16.01%
sustainable growth rate = (16.01% x .58)/ (1- (16.01% x .58))
sustainable growth rate = 10.24%

question

Today, Charity wants to invest less than $3,000 with the goal of receiving $3,000 back some time in the future. Which one of the following statements is correct?

answer

The period of time she has to wait decreases as the amount she invests increases.

question

Computing the present value of a future cash flow to determine what that cash flow is worth today is called:

answer

discounted cash flow valuation.

question

You're trying to save to buy a new $200,000 Ferrari. You have $33,000 today that can be invested at your bank. The bank pays 4 percent annual interest on its accounts.
How long will it be before you have enough to buy the car?

answer

(a)
FV = PV * ( 1+ r)^n
200000 = 33,000 x (1 + .04)^n
n = log( 200,000/33,000) / log(1.04)
n = 45.94

question

Imprudential, Inc., has an unfunded pension liability of $758 million that must be paid in 15 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present.
If the relevant discount rate is 7 percent, what is the present value of this liability?

answer

Present value=$758,000,000*Present value of discounting factor(rate%,time period)
=$758,000,000/1.07^15
=$758,000,000*0.362446019
which is equal to
=$274,734,082.90(Approx).

question

Assume that in 2018, a copper penny struck at the Philadelphia mint in 1796 was sold for $480,000.
What was the rate of return on this investment?

answer

(a)
Future Value = Present Value*((1+r)^t)
t = 2018 - 1796
t = 222
480,000 = 0.01(1+r)^222
1+ r = 48,000,000^(1/222)
r = 0.0829
r = 8.29%

question

You have $5,200 to deposit. Regency Bank offers 9 percent per year compounded monthly (.75 percent per month), while King Bank offers 9 percent but will only compound annually.
How much will your investment be worth in 18 years at each bank?

answer

(a)
REGENCY BANK
Excel format:
=FV(.09/12 , 18 x 12, 0, -5200)
= 26,117.72
Regency bank investments after 18 years is $26,117.72
(b)
KING BANK
Excel format:
= FV(0.09,18,0,-5200)
= 24,529.03
King bank investments after 18 years is $24,529.03
Alternative method - Numbers are different
https://gyazo.com/cad2bdc5bd5cb001e4349ac62f34216f

question

Suppose you are committed to owning a $240,000 Ferrari.
If you believe your mutual fund can achieve an annual return of 11.05 percent, and you want to buy the car in 9 years on the day you turn 30, how much must you invest today?

answer

PV = FV/ (1 +r)^n
PV = 240,000/ (1+ 0.1105)^9
PV = 93,442.44
Amount to be invested today is $93,442.44