American Public University FINC400 quiz 1-8

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Finc400 quiz 1-8

art 1 of 1 – Week 1 Quiz

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Question 1 of 25

4.0 Points

The firm’s price-earnings (P/E) ratio is influenced by its

A.capital structure.

B.earnings volatility.

C.sales, profit margins, and earnings.

D.all of these.

Question 2 of 25

4.0 Points

The primary disadvantage of accrual accounting is that

A.it does not match revenues and expenses in the period in which they are incurred.

B.it does not appropriately measure accounting profit.

C.it does not recognize accounts receivable.

D.it does not adequately show the actual cash flow position of the firm

Question 3 of 25

4.0 Points

Total assets of a firm are financed with liabilities and stockholders’ equity.

True

False

.

Question 4 of 25

4.0 Points

Gross profit is equal to

A.sales minus cost of goods sold.

B.sales minus (selling and administrative expenses).

C.sales minus (cost of goods sold and selling and administrative expenses).

D.sales minus (cost of goods sold and depreciation expense).

Question 5 of 25

4.0 Points

The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.

A. True

B. False

uestion 6 of 25

4.0 Points

Ratios are used to compare different firms in the same industry.

A. True

B. False

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Question 7 of 25

4.0 Points

The Sarbanes-Oxley Act was passed in an effort to

A.protect small business from large corporations dominating the market.

B.ensure that partnerships divide profits among partners in a fair manner.

C.guarantee outside auditors can control corporate accounting practices.

D.control corrupt corporate behavior.

uestion 8 of 25

4.0 Points

Which of the following is not subtracted out in arriving at operating income?

A.interest expense

B.cost of goods sold

C.depreciation

D.selling and administrative expense

Question 9 of 25

4.0 Points

Which of the following is not a primary source of capital to the firm?

A.assets

B.common stock

C.preferred stock

D.bonds

Question 10 of 25

4.0 Points

A firm has $1,500,000 in its common stock account and $1,000,000 in its paid-in capital account. The firm issued 100,000 shares of common stock. What was the original issue price if only one stock issue has ever been sold?

A.$35 per share

B.$25 per share

C.$15 per share

D.Not enough information to tell

Question 11 of 25

4.0 Points

Debt utilization ratios are used to evaluate the firm’s debt position with regard to its asset base and earning power.

A. True

B. False

uestion 12 of 25

4.0 Points

A firm with earnings per share of $3 and a price-earnings ratio of 20 will have a stock price of

A.$60.00

B.$15.00

C.$6.67

D.the market assigns a stock price independent of EPS and the P/E ratio.

Question 13 of 25

4.0 Points

The P/E ratio is strongly related to the past performance of the firm.

A. True

B. False

Question 14 of 25

4.0 Points

Money markets would include which of the following securities?

A.common stock and corporate bonds.

B.treasury bills and commercial paper.

C.certificates of deposit and preferred stock.

D.all of these.

uestion 15 of 25

4.0 Points

Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.

A. True

B. False

Question 16 of 25

4.0 Points

Preferred stock is excluded from stockholders equity because it does not have full voting rights.

A. True

B. False

Question 17 of 25

4.0 Points

Sales minus cost of goods sold is equal to earnings before taxes.

A. True

B. False

Question 18 of 25

4.0 Points

Asset utilization ratios

A.relate balance sheet assets to income statement sales.

B.measure how much cash is available for reinvestment into current assets.

C.are most important to stockholders.

D.measures the firm’s ability to generate a profit on sales.

Question 19 of 25

4.0 Points

The P/E ratio provides no indication of investors’ expectations about the future of a company.

A. True

B. False

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Question 20 of 25

4.0 Points

Asset utilization ratios relate balance sheet assets to income statement sales.

A. True

B. False

Question 21 of 25

4.0 Points

Financial markets exist as a vast global network of individuals and financial institutions that may be lenders, borrowers, or owners of public companies worldwide.

A. True

B. False

Question 22 of 25

4.0 Points

Which of the following is an outflow of cash?

A.profitable operations

B.the sale of equipment

C.the sale of the company’s common stock

D.the payment of cash dividends

uestion 23 of 25

4.0 Points

The Bubba Corp. had earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40% tax bracket its after-tax profit margin is:

A.40%

B.12%

C.20%

D.25%

Question 24 of 25

4.0 Points

The income statement is the major device for measuring the profitability of a firm over a period of time.

A. True

B. False

Question 25 of 25

4.0 Points

Which of the following is an inflow of cash?

A.funds spent in normal business operations

B.the purchase of a new factory

C.the sale of the firm’s bonds

D.the retirement of the firm’s bonds

Week 2

Question 1 of 25 4.0 Points

A lower price for the firm’s product will reduce the firm’s breakeven point.

A. True

B. False

Question 2 of 25 4.0 Points

(point) Profit is generally adequate to finance significant growth.

A. True

B. False

Question 3 of 25 4.0 Points

If a firm has a break-even point of 40,000 units and the contribution margin on the firm’s single product is $4.00 per unit and fixed costs are $60,000, what will the firm’s operating profit be at sales of 40,000 units?

A.$100,000

B.$30,000

C.$15,000

D.$145,000

Question 4 of 25 4.0 Points

(point) The break-even point can be calculated as

A.variable costs divided by contribution margin.

B.total costs divided by contribution margin.

C.variable cost times contribution margin.

D.fixed cost divided by contribution margin.

Question 5 of 25 4.0 Points

The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.

A. True

B. False

Question 6 of 25 4.0 Points

If fixed costs rise while other variables stay constant

A.the breakeven point rises.

B.degree of operating leverage increases.

C.total profit declines.

D.all of these

Question 7 of 25 4.0 Points

Operating leverage emphasizes the impact of using fixed assets in the business.

A. True

B. False

Question 8 of 25 4.0 Points

(point) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced

A.is higher.

B.is lower.

C.is the same.

D.can be either higher or lower.

Question 9 of 25 4.0 Points

The contribution margin is equal to price per unit minus total costs per unit.

A. True

B. False

Question 10 of 25 4.0 Points

(point) Which of the following is most likely to increase the final number for notes payable in the pro forma balance sheet?

A.decrease in inventory.

B.increase in retained earnings.

C.decrease in accounts payable.

D.decrease in accounts receivable.

Question 11 of 25 4.0 Points

An increase in sales and profits generates the necessary cash required for economic growth.

A. True

B. False

Question 12 of 25 4.0 Points

The percent-of-sales forecast is likely to be most accurate when used with cyclical companies.

A. True

B. False

Question 13 of 25 4.0 Points

Pro forma financial statements are

A.the most comprehensive means of financial forecasting.

B.often required by prospective creditors.

C.projections of financial statements for a future period.

D.all of these.

Question 14 of 25 4.0 Points

(point) When the cost of raw materials is increasing, FIFO accounting

A.yields higher ending inventory values than LIFO.

B.produces higher unit sales than using LIFO.

C.yields higher cost of goods sold than LIFO.

D.All of these.

Question 15 of 25 4.0 Points

(point) If sales volume exceeds the break-even point, the firm will experience

A.an operating loss.

B.an operating profit.

C.an increase in plant and equipment.

D.an increase in stock price.

Question 16 of 25 4.0 Points

The value of ending inventory should be equal to beginning inventory plus total production costs minus cost of goods sold.

A. True

B. False

Question 17 of 25 4.0 Points

(point) Leverage works best when volume is increasing.

A. True

B. False

Question 18 of 25 4.0 Points

(point) The percent-of-sales method would be more accurate under a steady sales assumption than cyclical sales.

A. True

B. False

Question 19 of 25 4.0 Points

If the price per unit decreases because of competition but the cost structure remains the same

A.the breakeven point rises.

B.the degree of combined leverage declines.

C.the degree of financial leverage declines.

D.All of these

Question 20 of 25 4.0 Points

Sales (100,000 units) $ 1,000,000

Variable costs 300,000

Contribution margin 700,000

Fixed manufacturing costs 200,000

Operating income 500,000

Interest 75,000

Earnings before taxes 425,000

Taxes (30%) 127,500

Net Income $ 297,500

Refer to the figure above. The Degree of Operating Leverage is

A.1.40x

B.1.56x

C.3.33x

D.2.22x

Question 21 of 25 4.0 Points

(point) The percent-of-sales method for financial forecasting assumes that balance sheet accounts maintain a constant relationship to sales.

A. True

B. False

Question 22 of 25 4.0 Points

(point) As the contribution margin rises, the breakeven point goes down.

A. True

B. False

Question 23 of 25 4.0 Points

(point) In the percent-of-sales method, an increase in dividends

A.will increase required new funds.

B.will decrease required new funds.

C.has no effect on required new funds.

D.more information is needed.

Question 24 of 25 4.0 Points

Which of the following is not true about leverage?

A.operating leverage influences the top half of the income statement, determining EBIT.

B.financial leverage deals with the bottom half of the income statement, determining EPS

C.combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.

D.none of these

Question 25 of 25 4.0 Points

The finance department should work independently without the input of other departments because there may be significant biases when creating proformas.

A. True

B. False

Week 3

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