Exam2 FIN470 Spring 2008 Key

Exam2 FIN470 Spring 2008 Key - Exam2 FIN470 Spring 2008 Key...

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Exam2 FIN470 Spring 2008 Key 1. When considering a capital budgeting project the financial manager should consider the: I. size of the project. II. timing of the project's cash flows. III. risk associated with the project's cash flows. A. I only B. II only C. I and III only D. II and III only E. I, II, and III Ross - Chapter 001 #25 SECTION: 1.1 TOPIC: CAPITAL BUDGETING TYPE: CONCEPTS 2. Which term relates to the cash flow which results from a firm's ongoing, normal business activities? Ross - Chapter 002 #11 SECTION: 2.4 TOPIC: OPERATING CASH FLOW TYPE: DEFINITIONS 3. A firm has net working capital of $820. Long-term debt is $3,260, total assets are $5,920 and fixed assets are $3,410. What is the amount of the total liabilities? Current assets = $5,920 $3,410 = $2,510; Current liabilities = $2,510 $820 = $1,690; Total liabilities = $1,690 + $3,260 = $4,950 AACSB TOPIC: ANALYTIC Ross - Chapter 002 #49 SECTION: 2.1 TOPIC: TOTAL LIABILITIES TYPE: PROBLEMS
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4. If a firm produces a twelve percent return on assets and also a twelve percent return on equity, then the firm: Ross - Chapter 003 #58 SECTION: 3.3 TOPIC: PROFITABILITY RATIOS TYPE: CONCEPTS 5. A firm has sales of $1,640, net income of $135, net fixed assets of $1,200, and current assets of $530. The firm has $280 in inventory. What is the common-size statement value of inventory? A. 15.01 percent B. 15.68 percent C. 16.18 percent D. 30.42 percent E. 52.83 percent Common-size inventory = $280 ($1,200 + $530) = .1618497 = 16.18 percent AACSB TOPIC: ANALYTIC Ross - Chapter 003 #75 SECTION: 3.2 TOPIC: COMMON-SIZE STATEMENTS TYPE: PROBLEMS 6. A firm is currently operating at full capacity. Net working capital, costs, and all assets vary directly with sales. The firm does not wish to obtain any additional equity financing. The dividend payout ratio is constant at 40 percent. If the firm has a positive EFN, that need will be met by: Ross - Chapter 004 #20 SECTION: 4.3 TOPIC: PRO FORMA STATEMENTS TYPE: CONCEPTS
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7. Jed's Designer Clothes has $1,800 of sales and $1,630 of total assets. The firm is operating at 75 percent of capacity. What is the capital intensity ratio at full capacity? Full-capacity sales = $1,800 / .75 = $2,400; Capital intensity ratio = $1,630 / $2,400 = .68 AACSB TOPIC: ANALYTIC Ross - Chapter 004 #48 SECTION: 4.3 TOPIC: CAPITAL INTENSITY RATIO TYPE: PROBLEMS
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