Exam 1 Solutions

Exam 1 Solutions - BUSI 105 Exam 1: Spring 2007 Name: _ 1....

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BUSI 105 Exam 1: Spring 2007 Name: ______________________________ 1. (5 points) Financial managers are responsible for making both capital budgeting and financing decisions. Indicate for each of the following whether it is a capital budgeting or financing decision. Circle C for capital budgeting of F for financing. a. Ford Motor decides to invest $400 million to build a new plant C F b. MacDonald’s spends $1 million to develop a new sandwich C F c. Pepsico borrows $200 million from Wells Fargo C F d. Pepsi uses the $200 million to acquire a new line of snack foods C F e. Google issues new shares of stock to acquire UTube C F 2. (5 points) A company’s balance sheet reports both real and financial assets. Indicate which of the following are real assets and which are financial assets. Circle R for real and F for financial. a. Ford’s new plant R F b. The new sandwich developed by MacDonalds R F c. The loan made by Wells Fargo to Pepsi R F d. A share of stock issued by Google R F e. The rights to use the name “YouTube” R F The following multiple choice problems are each worth 2 points: 3. Previously issued shares of stock are traded among investors in the __________markets. a. capital b. primary c. secondary d. derivative e. commodity 4. The markets for long-term debt and equity are called _________ markets. a. capital b. primary c. secondary d. derivative e. commodity
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5. Many companies use a type of financing provided by their suppliers in which they pay 30 days or more after receipt of the materials purchased. This type of financing results in an increase to which account on the balance sheet. a. Current Portion of Long Term Debt b. Accounts Receivable c. Bonds d. Accounts Payable e. Accounts Receivable 6. Which of the following would not be considered a real asset? a. A corporate bond b. A machine c. A patent d. A factory 7. When an investment pays only simple interest, this means: a. the interest rate is lower than on comparable investments. b.
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Exam 1 Solutions - BUSI 105 Exam 1: Spring 2007 Name: _ 1....

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