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

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Unformatted text preview: 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 firms 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 firms 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? a. $6,379,100 b. $53,299,200 c. $50,265,700 d. $90,806,700 e. Need more information to answer the question 9412600- (46920100-43886600) 3. Which of the following represents an Investing cash outflow? a. An increase in holdings of stocks of other companies b. A decrease in Accounts payable c. An increase in Gross property, plant and equipment d. A decrease in Accumulated depreciation e. Both a and c 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)? a. 25% b. 33% c. 50% d. 75% e. 83% 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 - 6. The ABC Company has net sales of $700,000, a gross profit margin of 35%, operating expenses (excluding depreciation) of $120,000, depreciation expense of $18,000, interest expense of $26,000, taxes of $45,000 and dividends paid of $8,000. What is ABC's net income?...
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Fall2009Exam 1_solution - FINC3131-Business Finance Fall...

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