STR 581 Capstone Final Examination Part Two

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1. Internal reports that review the actual impact of decisions are prepared
by:

the controller
department heads

factory workers

management accountants
2. Horizontal analysis is also known as:

trend analysis
vertical analysis

linear analysis

common size analysis

3. Which of the following is an advantage of corporations relative to partnerships
and sole proprietorships?

most common form of organization

reduced legal liability for investors

lower taxes

harder to transfer ownership

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4. Serox stock was selling for $20 two years ago. The stock sold for $25 one year
ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year.
What was the rate of return for owning Serox in the most recent year? (Round to
the nearest percent.)

32%
16%

12%

40%
5. External financing needed: Jockey Company has total assets worth $4,417,665.
At year-end it will have net income of $2,771,342 and pay out 60 percent as
dividends. If the firm wants no external financing, what is the growth rate it can
support?

30.3%
27.3%

32.9%

25.1%
6. An unrealistic budget is more likely to result when it:

has been developed by all levels of management.

has been developed in a top down fashion.

has been developed in a bottom up fashion.

is developed with performance appraisal usages in mind.

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7. Which of the following financial statements is concerned with the company at a
point in time?

balance sheet
retained earnings statement

statement of cash flows

income statement
8. Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase
its dividend by $0.25 in each of the following three years. If their required rate of
return if 14 percent, what is the present value of their dividends over the next four
years?

$12.50
$11.63

$9.72

$13.50
9. An activity that has a direct cause-effect relationship with the resources
consumed is a(n):

product activity
cost driver

cost pool

overhead rate
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10. The major element in budgetary control is:

the approval of the budget by the stockholders

the valuation of inventories

the preparation of long-term plans

the comparison of actual results with planned objectives.

11. Tule Time Comics is considering a new show that will generate annual cash
flows of $100,000 into the infinite future. If the initial outlay for such a production

is $1,500,000 and the appropriate discount rate is 6 percent for the cash flows,
then what is the profitability index for the project?

0.11
1.11

0.90

1.90
12. How firms estimate their cost of capital: The WACC for a firm is 13.00 percent.
You know that the firms cost of debt capital is 10 percent and the cost of equity
capital is 20% What proportion of the firm is financed with debt?

70%
50%

33%

30%
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13. The most important information needed to determine if companies can pay
their current obligations is the:

relationship between current assets and current liabilities

relationship between short-term and long-term liabilities

projected net income for next year

net income for this year

14. Process costing is used when:

dissimilar products are involved

production is aimed at fulfilling a specific customer order.

the production process is continuous.

costs are to be assigned to specific jobs.

15. A cost which remains constant per unit at various levels of activity is a:

fixed cost
mixed cost

manufacturing cost

variable cost
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16.The group of users of accounting information charged with achieving the
goals of the business is its:

investors
auditors

creditors

managers
17. Teakap, Inc. has current assets of $1,456,312 and total assets of $4,812,369 for
the year ending September 30, 2006. It also has current liabilities of $1,041,012,
common equity of $1,500,000 and retained earnings of $1,468,347. How much
long-term debt does the firm have?

$803,010
$2,303,010

$1,844,022

$2,123,612
18. The cash conversion cycle?

begins when the firm invests cash to purchase the raw materials that would be
used to produce the goods that the firm manufactures.
estimates how long it takes on average for the firm to collect its outstanding
accounts receivables balance.
begins when the firm uses its cash to purchase raw materials and ends when the
firm collects cash payments on its credit sales.
shows how long the firm keeps its inventory before selling it.
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19. Ajax Corp. is expecting the following cash flows - $79,000, $112,000, $164,000,
$84,000, and $242,000 over the next five years. If the companys opportunity
cost is 15 percent, what is the present value of these cash flows? (Round to the
nearest dollar.)

$480,906
$429,560

$414,322

$477,235
20. Jack Robbins is saving for a new car. He needs to have $21,000 for the car in
three years. How much will he have to invest today in an account paying 8
percent annually to achieve his target? (Round to nearest dollar)

$26,454
$19,444

$22,680

$16,670
21. Which of the following presents a summary of changes in a firms balance
sheet from the beginning of an accounting period to the end of that accounting
period?

the statement of net worth

the statement of cash flows

the statement of working capital

the statement of retained earnings

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22. M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is
expected to exist forever. The company is currently financed with 75 percent
equity and 25 percent debt. Your analysis tells you that the appropriate discount
rates are 10 percent for the cash flows, and 7 percent for the debt. You currently
own 10 percent of the stock.
If Dynamo wishes to change its capital structure from 75 percent equity to 60
percent equity and use the debt proceeds to pay a special dividend to
shareholders, how much debt should they use?

$225
$600

$375

$321
23. Horizontal analysis is a technique for evaluating a series of financial
statement data over a period of time:

that has been arranged from the highest number to the lowest number.
to determine the amount and/or percentage increase or decrease that has taken

place.

to determine which items are in error.

that has been arranged from the lowest number to the highest number.
24. Jayadev Athreya has started his first job. He will invest $5,000 at the end of
each year for the next 45 years in a fund that will earn a return of 10 percent. How
much will Jayadev have at the end of 45 years?

$2,667,904
$5,233,442

$1,745,600

$3,594,524
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25. Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its
depreciation and amortization expenses amounted to $84 million. The firm has
135 million shares outstanding and a share price of $12.80. A competing firm that
is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.
What is the enterprise value of Turnbull Corp.? Round to the nearest million
dollars.

$1,344 million
$453.6 million

$1,315 million

$1,787 million
26. Firms that achieve higher growth rates without seeking external financing:

Have a low plowback ratio

are highly leveraged

have less equity and/or are able to generate high net income leading to a high
ROE.

None of these
27. In a process cost system, product costs are summarized:

on job cost sheets.

when the products are sold.

after each unit is produced.

on production cost reports.

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28. The convention of consistency refers to consistent use of accounting
principles:

within industries
among accounting periods

throughout the accounting period

among firms
29. If a companys weighted average cost of capital is less than the required
return on equity, then the firm:

is financed with more than 50% debt

is perceived to be safe

partnership

has debt in its capital structure

30. Your firm has an equity multiplier of 2.47. What is the debt-to-equity ratio?

0
1.74

0.60

1.47
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31. The accumulation of accounting data on the basis of the individual manager
who has the authority to make day-to-day decisions about activities in an area is
called:

master budgeting
static reporting

responsibility accounting

flexible accounting
32. Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon
rate. Investors buying the bond today can expect to earn a yield to maturity of
6.875 percent. What should the companys bonds be priced at today? Assume
annual coupon payments. (Round to the nearest dollar.)

$1014
$972

$923

$1,066
33. Variance reports are:

internal reports for management

SEC financial reports

external financial reports

all of these
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34. The break-even point is where:

contribution margin equals total fixed costs.

total sales equal total variable costs.

total sales equal total fixed costs.

total variable costs equal total fixed costs.

35. When a company assigns the costs of direct materials, direct labor, and both
variable and fixed manufacturing overhead to products, that company is using:

operations costing
product costing

absorption costing

variable costing
36. Which of the following is considered a hybrid organizational form?

sole proprietorship
partnership

limited liability partnership

corporation
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37. Gateway, Corp. has an inventory turnover of 5.6. What is the firms dayss
sales in inventory?

57.9
61.7

65.2

64.3
38. The process of evaluating financial data that change under alternative
courses of action is called:

incremental analysis
contribution margin analysis

cost-benefit analysis

double entry analysis

39. What decision criteria should managers use in selecting projects when there
is not enough capital to invest in all available positive NPV projects?

the modified internal rate of return

the profitability index

the discounted payback

the internal rate of return

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of STR 581Final Exam Assignment from UOP. Other topics in the class are as follows:

STR 581 Week 1 Ethics Reflection Paper

STR 581 Week 1 Complete
STR 581 Week 2 Research Proposal
STR 581 Week 2 Learning Team Activity
STR 581 Week 2 Complete
STR 581 Week 3 External and Internal Environmental Analysis
STR 581 Week 3 Learning Team Peer Evaluation
STR 581 Week 3 Complete
STR 581 Week 4 Strategic Choice and Evaluation
STR 581 Week 4 Learning Team Peer Evaluation
STR 581 Week 4 Complete
STR 581 Week 4 Capstone Final Examination, Part Two
STR 581 Week 5 Implementation Strategic Controls and Contingency Plans
STR 581 Week 5 Learning Team Peer Evaluation
STR 581 Week 5 Complete
STR 581 Week 6 Strategic Plan and Presentation
STR 581 Week 6 Complete
STR 581 Week 1 Knowledge Check (Latest)
STR 581 Week 2 Knowledge Check (Latest)
STR 581 Week 3 Knowledge Check (Latest)
STR 581 Week 4 Knowledge Check (Latest)
STR 581 Week 5 Knowledge Check (Latest)

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