PracticeExam1 - Business Finance 620 Practice Exam 1 _ 1....

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Business Finance 620 Practice Exam 1 ____ 1. Which of the following statements provides the most plausible explanation for a company whose statement of cash flows exhibits an increase in the ending cash balance, at the same time cash flows from both operations and financing are negative? A. The firm has relatively low depreciation expense. B. The firm did not pay any cash dividends during the year. C. The firm sold more equipment than it purchased during the year. D. The interest rate on the firm’s long-term debt is relatively low. ____ 2. Which of the following actions would be most detrimental to a company’s current ratio if that ratio currently stands at 2.0? A. Buy raw materials on credit. B. Sell marketable securities at cost. C. Use cash to reduce accounts payable. D. Use cash to pay down long-term debt. ____ 3. Which of the following actions represents a source of cash to the firm? A. Increase in accounts payable B. Increase in inventories C. Repurchase of common stock D. Increase in accounts receivable ____ 4. All the following statements concerning business organization are correct EXCEPT: A. General partners have unlimited personal liability for business debts in a limited partnership. B. The separation of ownership and management is a distinguishing characteristic of corporations. C. The liability of sole proprietors is limited to the amount of their investment in the company. D. A limited liability company combines key tax and liability benefits of partnerships and corporations. ____ 5. A firm with a $350,000 annual depreciation charge has a times interest earned ratio of 7.0. This indicates the firm: A. has a relatively low tax liability. B. pays seven times its EBIT in interest expense. C. earns significantly more than its debt service. D. has $7 of cash for each dollar of interest expense. ____ 6. Which of the following statements is correct for a firm whose plowback ratio last year was 40%, whose EPS was $2.75, and whose marginal income tax bracket was 35%? A. DPS increased by 40%. B. Taxable income was negative.
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This note was uploaded on 03/10/2012 for the course BUS-FIN 620 taught by Professor Busfin620 during the Spring '12 term at Ohio State.

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PracticeExam1 - Business Finance 620 Practice Exam 1 _ 1....

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