Fall2009Exam 1_solution - FINC3131-Business Finance Student...

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FINC3131-Business Finance Fall 2009 Exam 1 Solution Student Name: Only one answer is the most correct. 1. The primary goal for a publicly traded firm’s financial managers is: a. To maximize the dividends per share paid out to shareholders b. To maximize preferred dividends c. To maximize the net profit of the current year d. To smooth the firm’s earnings so they are positive and always growing e. None of the above is correct 2. Jennings, Inc. reported $9,412,600 net income in their 2006 income statement. If in its balance sheets Jennings reported retained earnings of $43,886,600 for 2005 and Retained earnings of $46,920,100 for 2006, what is the dividend paid-out for fiscal year 2006? 9412600- (46920100-43886600) 3. Which of the following represents an Investing cash outflow? 4. If a firm's EBIT is 15 million, Net Income is 5 million, Gross Sales is 50 million, Net Sales is 45 million, Total Asset is 30 million, and its debt-to-equity ratio is 0.5, what is its return on equity (ROE)? debt to equity ratio is 0.5, so debt ratio =1/3, (5/45)*(45/30)*[1/(1-1/3)] 5. Which statement may indicate problem in the business? a. Total asset turnover is large b. Times interest earned is larger c. Day sales outstanding is large d. Inventory turnover ratio is large e. Debt ratio is low - 1 -
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