FINC400 I004 quiz 3

FINC400 I004 Sum 13

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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

uestion 2 of 25

4.0 Points

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

A. True

B. False

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. of operating leverage increases. 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 higher. lower. 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.

estion 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 operating loss. operating profit. increase in plant and equipment. 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


Contribution margin


Fixed manufacturing costs


Operating income




Earnings before taxes


Taxes (30%)


Net Income

$ 297,500

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





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.

uestion 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. 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

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