Finance 340, Fall 2018, Exam #1 B, Chapters 1, 2, 3, 6 Multiple Choice: Write th

Question

Finance 340, Fall 2018, Exam #1 B, Chapters 1, 2, 3, 6 Multiple Choice: Write the letter of the correct answer in the space pr ovided. (3 points each) 1. Which of the following is ccounts Recporation's net working capital using the following items from their balance sheet: Cash- wor $800,000, Notes Payable $1,500,000. vable $2,000 0,00 Inventory $$00,000, Accrued Expenses 00,000, Accounts Payable a. $o b. S600.000 c. $2,100,000 d. none of the answers above 2. The primary goal for managers of publicly-owned companies should be to a. make decisions that maximize the companies' net income. b. make decisions that maximize shareholder wealth c. make decisions that maximize the companies' expected EPS d. make decisions that maximize the companies' positive cash flow 3. For which of the following would one expect the book value of the asset to differ widely from its market value? a. Cash b. Accounts receivable c. Inventory d. Fixed assets 4. This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow. current asset b. financial asset c. real asset d. financial markets 5, which of the following is NOT a section on the Statement of Cash Flows? a. Cash flow from operating activities. b. Cash flow from investing activities. c. Cash flow from financing activities. d. Cash flow from stock market activities. 6. This is the amount of additional taxes a firm must pay out for every additional dollar of taxable income it e a. Average tax rate b. Marginal tax rate c. Progressive tax system d. Earnings before tax Which of the following actions would be most likely to reduce potential conflicts of interest between sha debt holders? a. Pay managers large cash bonuses but give them no stock options b. Allow for more perks. c. Increase the restrictive covenants in the firm's debt agreements. d. Award managers options on the firm's stock or allow them to purchase shares through employee ste (ESOPs) 7.

Explanation / Answer

1)

Net working capital = current asset - current liability

Net working capital = ( 600,000 + 2,000,000 + 800,000) - ( 500,000 + 800,000 + 1,500,000)

Net working capital = $600,000

2)

Make decisions that maximize shaeholder wealth

Managers should invest in the projects that create value to the company. By creating value, shareholders wealth gets maximized.

3)

Fixed asset

Fixed assets are recored at cost of acquisition and depreciated. Market values of fixed asset can be different

4)

Financial asset

Financial asset such as stocks and bonds needs to be repaid in the form of dividends and interest paynments. Dividends and interest payments are made from the cash flows.

5)

Cash flow from stock markets

Cash flow from stock markets in not part of cash flows statements.

6)

Marginal tax rate

Marginal tax rate is the additional taxes a firm needs to pay for every additional dollar.

7)

Question not fully visible

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.