Fin 200 Final Exam 48 Questions

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Fin 200 FinalExam 48 QuestionsReport this Question as InappropriateQuestion1. Insider trading occurs whenA. corporate officers buy stock in their company.B. lawyers, investment bankers, and others buy common stock in companies represented by theirfirms.C. someone has information not available to the public which they use to profit from trading instocks.D. any stock transactions occur in violation of the Federal Trade Commissions restrictions onmonopolies.2) Regarding risk levels, financial managers shouldA. avoid higher risk projects because they destroy valueB. focusprimarily on market fluctuationsC. pursue higher risk projects because they increase valueD. evaluate investor's desire for risk3) Maximization of shareholder wealth is a concept in whichA. increased earnings is of primary importance.B. profits are maximized on a quarterly basis.C. virtually all earnings are paid as dividends to common stockholders.D. optimally increasing the long-term value of the firm is emphasized.4) An increase in investments in long-term securities will:A. increase cash flowfrom investing activities.B. decrease cash flow from investing activities.C. increase cash flow from financing activities.D. decrease cash flow from financing activities.5) Which of the following would represent a use of funds and, indirectly, a reduction in cashbalances?A. an increase in inventoriesB. the sale of new bonds by the firmC. a decrease in marketable securitiesD. an increase in accounts payable6) Which of the following is not aprimary source of capital to the firm?A. assetsB. bonds

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C. common stockD. preferred stock7) If a firm has both interest expense and lease payments,A. times interest earned will be smaller than fixed charge coverage.B. fixed charge coverage cannot be computed.C. times interest earned will be greater than fixed charge coverage.D. times interest earned will be the same as fixed charge coverage.8) In examining the liquidity ratios, the primary emphasis is the firm'sA. ability to effectively employ its resources.B. ability to earn an adequate return.C. overall debt position.D. ability to pay short-term obligations on time.9) For a given level of profitability as measured by profit margin, the firm's return on equity willA. increase as its debt-to-assets ratio decreases.B. decrease as its times-interest-earned ratio decreases.C. decrease as its current ratio increases.D. increase as its debt-to assets ratio increases.MEGAFRAME COMPUTER COMPANYBalance Sheetas of 12/31/2006AssetsCash $40,000Accounts Receivable 60,000Inventory 90,000New Plant and Equipment 220,000Total Assets $410,000LIABILITY AND STOCKHOLDERS' EQUITYAccounts Payable $60,000Accrued Expenses 40,000Long-Term Debt 130,000Common Stock 60,000Paid-In capita 20,000Retained Earnings 100,000Total Liabilities and Stockholders' Equity $410,000MEGAFRAME COMPUTER CO.Income Statement For the Year Ended 12/31/2006Sales (all on credit) $720,000

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Cost of Goods Sold 500,000Gross Profit $220,000Sales and Administrative Expense 20,000Depreciation40,000Operating Profit $160,000Interest Expense 16,000Profit before Taxes $144,000Taxes (30%) 43,200Net Income $100,80010) Refer to the figure above. Megaframe's current ratio isA. 1.9:1B. 3.2:1C. 1.625:1D. 1.5:1Tew CompanyBalance SheetAs of December 31, 2007AssetsCash $20,000A/R 80,000Inventory 50,000Net Plat & Equip. 250,000Total Assets-------------$400,000Liabilities and Stockholders' EquityA/ P $40,000Accrued Expenses 60,000Long-Term debt 130,000Common Stock100,000Paid-In capital 10,000Retained earnings 60,000Total Liability and Stockholder equity---------------$400,000Tew CompanyIncome StatementFor the Year Ended Dec. 31, 2007

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