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BUSI 7110 EXAM 1 QUESTIONS AND CORRECT
ANSWERS 100% VERIFIED
Projected future financial statements are called - ANSWER Pro Forma statements The maximum rate at which a firm can grow while maintaining a constant debt-equity ratio is best defined by its - ANSWER Sustainable rate of growth The sustainable growth rate will be equivalent to the internal growth rate when and only when: - ANSWER the firm has no debt The sustainable growth rate is: - ANSWER usually higher than the internal growth rate Marice's mercantile wants to maintain its current dividend policy of a payout ratio of 35 percent. The firm does not want to increase its equity financing but is willing to maintain its current debt-equity ratio. Given these requirements, the maximum rate at which Marcie's can grow is equal to - ANSWER The sustainable growth rate Capital structure refers to the firm's - ANSWER Proportions of financing from current and long-term debt and equity Which one of these best fits the description of an agency cost? - ANSWER The payment required for an outside audit of the firm The ultimate control of a corporation lies in the hands of the corporate - ANSWER Stakeholders Which of the following corporate document provides the number of members on the original board of directors - ANSWER Articles of incorporation
The process of planning and managing a firm's long term assets is called - ANSWER Capital budgeting The primary goal of financial management is to - ANSWER maximize the current value per share of the existing stock Which of the following is the best description of the major benefit of being a limited partner versus being a general partner - ANSWER Liability for firm debts is limited to the capital invested A proxy fight is when - ANSWER A group solicits voting rights in order to vote in their own board of directors. Accounting profits and cash flows are generally - ANSWER Different because of the various GAAP rules regarding the recognition of income The cheapest business entity to form is typically the - ANSWER sole proprietorship What does the statement of cash flows shows - ANSWER How much the firm's cash - the total of currancy, bank deposits, and short-term liquid securities (or cash equivalents) -- increased or decreased during the year Which of the following items cannot be found on a firm's balance sheet under current liabilities - ANSWER Costs of goods sold What does a typical industrial company's balance sheet list - ANSWER the firm's assets that will be converted to cash first, and then goes down to list the firm's longest lived assets last What is considered a source of cash? - ANSWER Common stock increase on the balance sheet
You are the beneficiary of a life insurance policy. The insurance company offers to pay the proceeds to you either as a lump sum of $50,000 today or in monthly installments of $550 for ten years. If you can earn 6 percent, compounded monthly, which should you take and why? - ANSWER You should take the lump sum because the payments are only worth $49,540.40 today. Denise will receive annual payments of $10,000 for the next 25 years. The discount rate is 6.8 percent. What is the difference in the present value of these payments if they are paid at the beginning of each year rather than at the end of each year? - ANSWER 8, You borrow $12,600 to buy a car. The terms of the loan call for monthly payments for five years at an interest rate of 4.65 percent, compounded monthly. How much does each payment amount to? - ANSWER 235. Theo is depositing $1,300 today in an account with an expected rate of return of 8. percent. If he deposits an additional $3,200 two years from today, and $4,000 three years from today, what will his account balance be ten years from today? - ANSWER 15,699. What is the annual percentage rate on a loan that charges interest of 1.65 percent per quarter? - ANSWER 6.60%
