FIN 534 TEST 2

FIN 534 TEST 2 - FIN 534 TEST 2 Question 1 Which of the...

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FIN 534 TEST 2 Question 1 Which of the following items is NOT included in current assets? Answer Correct Answer: Bonds. Question 2 The CFO of Shalit Industries plans to have the company issue $300 million of new common stock and use the proceeds to pay off some of its outstanding bonds. Assume that the company, which does not pay any dividends, takes this action, and that total assets, operating income (EBIT), and its tax rate all remain constant. Which of the following would occur? Answer Correct Answer: The company’s net income would increase. Question 3 The Nantell Corporation just
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purchased an expensive piece of equipment. Assume that the firm planned to depreciate the equipment over 5 years on a straight- line basis, but Congress then passed a provision that requires the company to depreciate the equipment on a straight-line basis over 7 years. Other things held constant, which of the following will occur as a result of this Congressional action? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes. Answer Correct Answer: Nantell’s net fixed assets as shown on the balance sheet will be higher at the end the year. Question 4 A security analyst obtained the following information from Prestopino Products’ financial statements: − Retained earnings at the end of 2009 were $700,000, but retained earnings at
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the end of 2010 had declined to $320,000. − The company does not pay dividends. – The company’s depreciation expense is its only non-cash expense; it has no amortization charges. – The company has no non-cash revenues. –The company’s net cash flow (NCF) for 2010 was $150,000. On the basis of this information, which of the following statements is CORRECT? Answer Correct Answer: Prestopino had negative net income in 2010. Question 5 Which of the following statements is CORRECT? Answer Correct Answer: The balance sheet gives us a picture of the firm’s financial position at a point in Question 6 Analysts who follow Howe Industries recently noted that,
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relative to the previous year, the company’s operating net cash flow increased , yet cash as reported on the balance sheet decreased . Which of the following factors could explain this situation? Answer Correct Answer: The company made a large investment in a profitable new plant. Question 7
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FIN 534 TEST 2 - FIN 534 TEST 2 Question 1 Which of the...

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