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1. Busi 530 exam 1 | Management homework help
1. If a project’s value is less than its required investment, then the project is financially
attractive.2. Which of the firm’s financial managers is most likely to be involved with
obtaining financing for the firm?3. Which one of the following is a real asset?4. A
corporate director:5. When a corporation fails, the maximum that can be lost by an
individual shareholder is:6. In a firm having both a treasurer and a controller, which of
the following would most likely be handled by the controller?7. Which of these duties are
responsibilities of the corporate treasurer? Which one of the following statements is not
characteristic of mutual funds? They are always considered to be financial
institutions.8. The markets for long-term debt and equity are called capital
markets. 9. You can buy silver in the: 10. The rates of return on investments outside the
corporation set the minimum return for investment projects inside the corporation.11. U.S.
bonds and other debt securities are mostly held by:12. A mother in a developing country
wants to borrow the equivalent of $20 to enable her to start a small restaurant run by her
family. Which type of financing is she looking to obtain? 13. During the Financial Crisis of
2007-2009, the U.S. government bailed out all firms in danger of failing.14. In general, what
is changing as you read down the left-hand side of a balance sheet? Assume tax rates on
single individuals are 10% on taxable income up to $9,075, 15% on income of $9,076 to
$36,900 and 25% on income of $36,901 to $89,350. What is the tax liability for a single
individual with $52,000 of taxable income, which includes $2,000 of dividends?15. Accrual
accounting, which attempts to match sales revenues and the expenses associated with the
production of the goods, is conducted in an attempt to: reduce bias in reported profitability
measures.16. Assume a firm generates $2,000 in sales and has a $500 increase in accounts
receivable during an accounting period. Based solely on this information, cash flow will
increase by:17. The existence of goodwill on a corporate balance sheet indicates that the
corporation has: intangible assets from past acquisitions. 18. According to GAAP, assets and
liabilities are typically recorded on the balance sheet at:19. What happens to a firm’s net
worth as it uses cash to repay accounts payable? Perhaps the best method for estimating the
market value of shareholders’ equity is to20. When Tri-C Corp. compares its ratios to
industry averages, it has a higher current ratio, an average quick ratio, and a lower
inventory turnover. What might you assume about Tri-C21. A company has total assets of
$1,000, current liabilities of $130, and total liabilities of $350. What is the long-term debt
ratio?Equity = assets – liabilitiesEquity = $1,000 – 350Equity = $650Long-term debt ratio =
long-term debt/(long-term debt + equity)Long-term debt ratio = ($350 – 130)/[($350 –

2. 130) + $650]Long-term debt ratio = .2522. Assume BDS acquired its main supplier, ABC. As
a result of the acquisition, BDS finds that its profit margin increased but its ROA remained
constant. A decrease in which one of these ratios is most apt to be the reason why the ROA
did not increase with the increase in the profit margin?23. Which one of these changes
indicates an improvement in a firm’s asset management efficiency?24. What is the ROA of a
firm with $150,000 in average receivables, which represents 60 days sales, average assets
of $750,000, and a profit margin of 9%?Sales = ($150,000/60) × 365 = $912,500ROA =
Profit margin × Asset turnover= .09 × ($912,500/$750,000)= .1095, or 10.95%25. Which
one of these costs accounts for the difference between accounting income and economic
value added?26. Calculate the average collection period for Dots Inc. if its accounts
receivables were $550 at the beginning of a year in which the firm generated $3,000 of
sales?Average collection period = $550/($3,000/365) = 67 days27. Efficiency ratios:28. A
major disadvantage of partnerships is that they have double taxation of profits.29. Which
one of these determines the minimum acceptable rate of return on a capital
investment?30. Making good investment and financing decisions is the chief task of the
financial manager31. Financial assets have value because they are claims on the firm’s real
assets and the cash that those assets will produce.32. Which one of the following
statements more accurately describes the controller than the treasurer? 33. A corporate
board of directors should provide support for the top management team: Maximizing
profits is the same as maximizing the value of the firm. 34. The reinvestment of cash back
into the firm’s operations is an example of a flow of savings to investment.35. The stocks of
major corporations trade in many markets throughout the world on a continuous or near-
continuous basis. 36. A capital investment that generates a 10% rate of return is
worthwhile if: “Balanced” mutual funds:37. Which one of these transports income forward
in time? 38. Which one of these parties cannot invest in a hedge fund?39. How is the
relationship between a bond’s credit rating and its interest rate best defined? 40. According
to GAAP, assets and liabilities are typically recorded on the balance sheet at: 41. In a
statement of cash flows, which category includes depreciation expense as a line
item?42. Which one of the following is an intangible asset?43. Which one of the following
statements is correct for a corporation with a negative net income in both the present and
the last fiscal year? 44. Which of the following assets is likely to be considered the most
liquid? 45. In general, what is changing as you read down the left-hand side of a balance
sheet? Professor Diehard found an effective antibiotic for the DEPRESS bacteria, and
patented the drug. He believes that he can sell the patent for $20 million. He then formed a
corporation and invested $400,000 in setting up a production plant. There are 2 million
shares of stock outstanding. If the professor’s belief is correct, what would be the price per
share and the book value per share? 46. What is the overall change in cash resulting from:
$300 increase in inventories, $150 increase in accounts payable, $120 decrease in accounts
receivable, $60 decrease in other current assets, $150 decrease in other current
liabilities? 47. Instead of increasing its long-term debt by borrowing money from a bank to
purchase new stereo equipment, Jay’s Jams Inc. decides to lease the equipment on a long-
term basis. How will the long-term debt ratio differ if the lease option is selected over the
bank-debt option? A firm’s profit margin when ignoring the effects of financing is 20%

3. with an EBIT of $1.5 million and sales of $5 million. How much did the firm pay in
taxes? 48. After-tax operating income for a leveraged firm is defined as:49. An asset
turnover ratio of 1.75 can be interpreted as: XYZ Corp. has an operating profit margin of 7%,
a debt burden of .8, and has financed two-thirds of its assets through equity. What asset
turnover ratio is necessary to achieve an ROE of 18%? 50. Which of the following is the
least effective measure of operating performance?51. In the past year, TVG had revenues of
$3 million, cost of goods sold of $2.5 million, and depreciation expense of $200,000. The
firm has a single issue of debt outstanding with a face value of $1million, market value of
$.92 million, and a coupon rate of 8%. What is the firm’s times interest earned
ratio? 52. Which one of these ratios is commonly referred to as the acid-test ratio?