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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? 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? Ross - Chapter 001 #24 SECTION: 1.1 TOPIC: CAPITAL BUDGETING TYPE: CONCEPTS
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4. If a firm bases its growth projection on the rate of sustainable growth, and has positive net income, then the: 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: Ross - Chapter 004 #19 SECTION: 4.3 TOPIC: PRO FORMA STATEMENTS TYPE: CONCEPTS
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