An eight-year investment certificate from a federally insured bankġ9) Dorning Shade Company will use an estimated 50,000 gumbands in its manufacturing process next year. A six-month unsecured promissory note from International Harvesterī. is consistent with the goal of shareholder wealth maximization.ġ7) Net working capital provides a very useful summary measure of a firm's short-term financing decisions.ġ8) Which of the following has the least interest rate risk?Ī. If you expect a 12% annual rate of return on your investment, how much will you sell the land for in 10 years?ġ1) The break-even model expresses the volume of output as a unit quantity.ġ2) Which of the following is NOT an example of variable costs?ġ3) In general, as the level of sales rises above the break-even point, the degree of operating leverage:ġ4) Based on the data in Table 1, what is the break-even point in units produced and sold?ġ5) The IRR is the discount rate that equates the present value of the project's future net cash flows with the project's initial outlay.Ī. All of the above would be found in a cash budget.ĩ) The present value of a $100 perpetuity discounted at 5% is $1200.ġ0) You just purchased a parcel of land for $10,000. How much money is expected to be collected in October?Ĩ) Which of the following would not be found in a cash budget?ĭ. The company expects sales of $10,000 in August, $20,000 in September, $30,000 in October, and $40,000 in November. Calculate Millers's return on equity.ĥ) When public corporations decide to raise cash in the capital markets, what type of financing vehicle is most favored?Ħ) 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?ħ) 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 total debt ratio for the firm is 50%. has a total asset turnover of 2.5 and a net profit margin of 3.5%. Raising capital that is needed for growthģ) The debt ratio is a measure of a firm's:Ĥ) Millers Metalworks, Inc. Making business decisions that optimize economic wealthĭ. Making investment decisions that optimize economic valueĬ. Maximizing profits gives too much weight to the tax position of shareholders.Ģ) Financial management is concerned with which of the following?ī. Maximizing shareholder wealth gives superior consideration to the entire portfolio of shareholder investments.ĭ. Maximizing profits ignores the uncertainty that is related to expected profits.Ĭ. Maximizing shareholder wealth places greater emphasis on the short term.ī. Sales = 1.8(TA) = 1.1) Why is maximizing shareholder wealth a better goal than maximizing profits?Ī. 5 and a total debt of $200,000, then fixed assets are: If Power-On has a total asset turnover of 1.8, a fixed asset turnover of 3.2, a debt ratio of. have if the firm has a current ratio of 2.5, a quick ratio of 1.2, and current liabilities of $12,000? Gray’s credit sales are $98,000 and its average collection period is 40 days. Assuming that Williamson wants to maintain an inventory turnover of 5.0, calculate their projected level of inventory. ![]() Williamson has projected sales to increase 50% and expects the new gross margin ratio to decrease by 2% due to increased efficiency. Williamson Trucking has current sales of $10,000 and a cost of goods sold of $4,300. Return on Equity = (NI/Sales) X (Sales/Total Assets) X (Total Assets/Equity) Return on Equity = (Net Profit Margin X Asset Turnover)/(1-Debt Ratio) ![]() What are the pros and cons of financial leverage to an organization? What are the advantages or disadvantages of financial leverage to shareholders of an organization? What are the advantages or disadvantages of financial leverage to creditors of an organization?ħ.
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