FI360 Final Exam Study Guide

FI360 Final Exam Study Guide - FI360 Final Exam Study Guide...

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FI360 Final Exam Study Guide 1. Maximizing profit as the manager’s goal has several flaws, including: a. Earnings figures focus on past performance rather than current or future performance b. The timing of the profits may be ignored c. Focusing on earnings does not mean that the firm will necessarily have enough cash on hand to pay its bills d. Risk is ignored e. All of the above 2. Working capital management: a. Involves managing the firm’s long-term assets, such as plant and equipment b. Requires very little in terms of people skills as it mostly involves analyzing numbers c. Deals with the firm’s seasonal financing, inventory needs, collecting accounts receivable and investing surplus cash d. All of the above e. None of the above 3. What is the goal of financial management? a. Maximize corporate profits. b. Maximize shareholder wealth . c. Minimize costs. d. Maximize earnings. 4. Which of the following statements is true? a. Net working capital is a firm’s current assets divided by its current liabilities. b. Net working capital is a firm's current assets minus its current liabilities. c. Net working capital measures a firm's ability to meet its short-term obligations. d. All of the above statements are false. 5. Which financial ratio measures the effectiveness of management in generating returns to common stockholders with its available assets? a. Gross profit margin b. Return on equity c. Return on assets d. Current ratio
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Stone Cold Incorporated Balance Sheet: 12/31/04 Assets 2004 2003 Cash and Marketable Securities 10 80 Accounts Receivable 375 315 Inventories 615 415 Total Current Assets 1,000 810 Net plant and equipment 1,000 870 TOTAL ASSETS 2,000 1,680 Liabilities and Equity 2004 2003 Accounts Payable 60 40 Notes Payable 140 60 Accruals 110 130 Total Current Liabilities 310 230 Long Term Bonds 754 580 TOTAL DEBT 1,064 810 Preferred Stock 40 40 Common Stock 130 130 Retained earnings 766 700 TOTAL COMMON EQUITY 896 830 TOTAL LIABILITIES AND EQUITY 2,000 1,680 Income Statement: 12/31/04 2004 2003 Net Sales 3,200 2,850 Operating Costs (excludes Dep/Amortization) 2,700 2,497 EBITDA 500 353 Depreciation 100 90 Amortization 0 0 Depreciation and Amortization 100 90 EBIT 400 263 Less Interest 88 60 EBT 312 203 Taxes (40%) 124.8 81.2 NET INCOME (before Preferred Dividends) 187.2 121.8 Preferred Dividends 4 4 NET INCOME 183.2 117.8 Common Dividends 117 53 Addition to Retained Earnings 66.2 64.8 6. Refer to Stone Cold. For 2004, what was the return on assets? a. 9.16% (183.2/2000=9.16%) b. 12.40% c. 15.60% d. 20.00%
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7. Refer to Stone Cold. For 2004, what was the debt-to-equity ratio? a. 0.81 (754/(896+40)=.81) b. 0.84 c. 0.98 d. 1.19 8. Refer to Stone Cold. For 2004, what was the times interest earned ratio for 2004? a.
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This note was uploaded on 08/23/2011 for the course CS 300 taught by Professor Matthewhoward during the Fall '09 term at Park.

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FI360 Final Exam Study Guide - FI360 Final Exam Study Guide...

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