Exam1 FIN470 Spring 2008 Key

Exam1 FIN470 Spring 2008 Key - Exam1 FIN470 Spring 2008 Key...

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Exam1 FIN470 Spring 2008 Key 1. Which one of the following statements concerning a sole proprietorship is correct? A. The owner of a sole proprietorship may be forced to sell his or her personal assets to pay company debts. B. The owners of a sole proprietorship share profits as established by the partnership agreement. C. The profits of a sole proprietorship are taxed twice. D. A sole proprietorship is designed to protect the personal assets of the owner. E. A sole proprietorship is often structured as a limited liability company. Ross - Chapter 001 #30 SECTION: 1.2 TOPIC: SOLE PROPRIETORSHIP TYPE: CONCEPTS 2. Your firm currently has $1,800 in sales and is operating at 60 percent of the firm's capacity. What is the full capacity level of sales? A. $3,000 B. $4,500 C. $2,880 D. $1,080 E. $720 Full-capacity sales = $1,800 / .60 = $3,000 AACSB TOPIC: ANALYTIC Ross - Chapter 004 #47 SECTION: 4.3 TOPIC: FULL CAPACITY SALES LEVEL TYPE: PROBLEMS 3. Which one of the following is a capital budgeting decision? A. determining how much inventory to keep on hand B. determining how much money should be kept in the checking account C. deciding when to repay a long-term debt D. determining how much debt should be borrowed from a particular lender E. deciding whether or not to open a new store Ross - Chapter 001 #24 SECTION: 1.1 TOPIC: CAPITAL BUDGETING TYPE: CONCEPTS
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A. debt-equity ratio will remain constant while retained earnings increase. B. fixed assets, debt-equity ratio, and number of common shares outstanding will all increase at the same rate. C. debt-equity ratio will have to increase. D. fixed assets will have to increase at the same rate, regardless of the current capacity level. E. number of common shares outstanding will increase at the same rate of growth. Ross - Chapter 004 #37 SECTION: 4.4 TOPIC: SUSTAINABLE GROWTH RATE TYPE: CONCEPTS 5. Coffee Brewers expects sales of $1,500 next year. The profit margin is 5 percent and the firm has a 70 percent dividend payout ratio. What is the projected increase in retained earnings? A. $15.00 B. $22.50 C. $37.50 D. $52.50 E. $37.50 Change in retained earnings = $1,500 .05 (1 .70) = $22.50 AACSB TOPIC: ANALYTIC Ross - Chapter 004 #46 SECTION: 4.3 TOPIC: PRO FORMA STATEMENTS TYPE: PROBLEMS 6. When fixed assets on a pro forma statement are projected to increase at a rate equivalent to the projected rate of sales growth, it can be assumed that the firm is: A. projected to grow at the sustainable rate of growth. B. creating excess capacity. C. currently operating at full capacity. D. projected to grow at the internal rate of growth. E.
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Exam1 FIN470 Spring 2008 Key - Exam1 FIN470 Spring 2008 Key...

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