summer2009Exam 1_solution

# Summer2009Exam - FINC3131 Business Finance Summer 2009 Student Name Exam 1 Solution 1 The primary goal for a publicly traded firms financial

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FINC3131 Business Finance Summer 2009 Exam 1 Solution Student Name: 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 stock price. d. To maximize the net profit of the current year e. To smooth the firm’s earnings so they are positive and always growing 2. Jennings, Inc. reported the total dividends paid of \$6,379,100 for the fiscal year ending December 31, 2006. If Jennings reported Retained earnings of \$43,886,600 for 2005 and Retained earnings of \$46,920,100 for 2006, what net income did Jennings report in their 2006 income statement? a. \$9,412,600 b. \$53,299,200 c. \$50,265,700 d. \$90,806,700 e. None of the above is within \$1,000 of the correct answer (46920100-43886600)+6379100=9412600 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. A decrease in Gross property, plant and equipment d. A decrease in Accumulated depreciation e. Both a and c 4. If a firm's net profit margin is 5%, its total asset turnover ratio is 1.5 times, and its debt-to- equity ratio is 0.25, what is its return on equity (ROE)? a. 1.875% b. 5.625% c. 7.500% d. 9.375% e. 10% Debt to equity ratio is 0.25, so Debt ratio =0.2 0.05*1.5*[1/(1-0.2)]=0.09375 5. You are given the following data in 2006 financial report for ARC Inc: operating income was \$50,400, net income was \$32,000, net sale was \$60,000, total asset was \$ 420,000. What was the net profit margin in 2006? a. 7.6% b. 12% c. 53% d. 84% - 1 -

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e. None of the answers above is correct 32000/60000 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? a.
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## This note was uploaded on 10/13/2010 for the course USMLE na taught by Professor Na during the Spring '10 term at St. Matthew's University.

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Summer2009Exam - FINC3131 Business Finance Summer 2009 Student Name Exam 1 Solution 1 The primary goal for a publicly traded firms financial

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