1)

Why is maximizing shareholder wealth a better goal than maximizing profits?

c.

Maximizing shareholder wealth gives superior consideration to the entire portfolio of shareholder

investments.

2)

Financial management is concerned with which of the following?

e.

All of the above

3)

The debt ratio is a measure of a firms:

a.

leverage.

4)

Millers Metalworks, Inc. has a total asset turnover of 2.5 and a net profit margin of 3.5%. The

total debt ratio for the firm is 50%. Calculate Millerss return on equity.
a.

17.5%

5)

When public corporations decide to raise cash in the capital markets, what type of financing

vehicle is most favored?

c.

6)

Common stock

If an investor were to sell 100 shares of Microsoft stock to another investor in the securities

market, this would be referred to as what type of transaction?

b.

7)

A secondary market transaction

A company collects 60% of its sales during the month of the sale, 30% one month after the sale,

and 10% two months after the sale. The company expects sales of $10,000 in August, $20,000 in
September, $30,000 in October, and $40,000 in November. How much money is expected to be
collected in October?
a.

$25,000

8)

Which of the following would not be found in a cash budget?

c.

Depreciation

9)

The present value of a $100 perpetuity discounted at 5% is $1200.

False

10)

You just purchased a parcel of land for $10,000. If you expect a 12% annual rate of return on

your investment, how much will you sell the land for in 10 years?

b.

$31,060

11)

The break-even model expresses the volume of output as a unit quantity.

True

12)

Which of the following is NOT an example of variable costs?

b.

13)

Depreciation

In general, as the level of sales rises above the break-even point, the degree of operating

leverage:
a.

increases.

Table 1
Average selling price per unit
Variable cost per unit

$16.00
$11.00

Units sold

200,000

Fixed costs

$800,000

Interest expense

14)

$ 50,000

Based on the data in Table 1, what is the break-even point in units produced and sold?

d.

15)

160,000

The IRR is the discount rate that equates the present value of the projects future net cash

flows with the projects initial outlay.

True

16)

The NPV method:

d.

17)

all of the above.

Net working capital provides a very useful summary measure of a firms short-term financing
decisions.
True

18)

Which of the following has the least interest rate risk?

a.

19)

A six-month unsecured promissory note from International Harvester

Dorning Shade Company will use an estimated 50,000 gumbands in its manufacturing process

next year. The carrying cost of gumband inventory is $.04 per unit, and the cost of reordering
gumbands is $50 per order. What is Dorning Shades economic ordering quantity for gumbands (round
to the nearest 100 gumbands)?
a.

20)

11,200

ABC will purchase a machine that will cost $2,575,000. Required modifications will cost

$375,000. ABC will need to invest $75,000 for additional inventory. The machine has an IRS approved
useful life of 7 years; it is presumed to have no salvage value. ABC plans to depreciate the machine by
using the straight-line method. The machine is expected to increase ABCs sales revenues by
$1,890,000 per year; operating costs excluding depreciation are estimated at $454,600 per year.
Assume that the firms tax rate is 40%. What is the annual operating cash flow?

d.

$1,029,811

Need by Thursday August 13th @ 6:00PM

Thank you,

Godzilla1965