QUESTION 26

. A fire has destroyed a large percentage of the financial records of the Strongwell Co. You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 13.8 percent. Sales were $979,000, the total debt ratio was 0.42, and total debt was $548,000. What is the return on assets?

.

.

. 6.92 percent

.

.

. 8.00 percent

.

.

. 8.45 percent

.

.

. 9.03 percent

.

.

. 9.29 percent

.

2 points  

QUESTION 27

. Which one of the following occupations best fits into the international area of finance?

.

.

. Bank teller

.

.

. Treasury bill analyst

.

.

. Currency trader

.

.

. Insurance risk manager

.

.

. Local bank manager

.

2 points  

QUESTION 28

. True Blue Transport has a current stock price of $27. For the past year, the company had net income of $2,187,400, total equity of $13,892,300, sales of $26,511,000, and 2.5 million shares outstanding. What is the market-to-book ratio?

.

.

. 3.54

.

.

. 3.81

.

.

. 3.99

.

.

. 4.27

.

.

. 4.86

.

2 points  

QUESTION 29

. Adell Furniture has a profit margin of 8.2 percent and a dividend payout ratio of 40 percent. What is the plowback ratio?

.

.

. 8.20 percent

.

.

. 27.33 percent

.

.

. 54.60 percent

.

.

. 60.00 percent

.

.

. 68.20 percent

.

2 points  

QUESTION 30

. The Medicine Shoppe has a return on equity of 19.2 percent, a profit margin of 11.6 percent, and total equity of $738,000. What is the net income?

.

.

. $85,608

.

.

. $113,875

.

.

. $141,696

.

.

. $146,542

.

.

. $149,897

.

2 points  

QUESTION 31

. Andersen’s Nursery has sales of $318,400, costs of $199,400, depreciation expense of $28,600, interest expense of $1,100, and a tax rate of 34 percent. The firm paid out $16,500 in dividends. What is the addition to retained earnings?

.

.

. $36,909

.

.

. $42,438

.

.

. $44,141

.

.

. $47,208

.

.

. $47,615

.

2 points  

QUESTION 32

. Which one of the following is a working capital decision?

.

.

. How should the firm raise additional capital to fund its expansion?

.

.

. What debt-equity ratio is best suited to the firm?

.

.

. What is the cost of debt financing?

.

.

. Which type of debt is best suited to finance the inventory?

.

.

. How much cash should the firm keep in reserve?

.

2 points  

QUESTION 33

. Earth Fare Foods has total assets of $229,800, net fixed assets of $71,500, long-term debt of $52,000, and total debt of $78,700. If inventory is $45,000, what is the current ratio?

.

.

. 0.20

.

.

. 0.46

.

.

. 0.84

.

.

. 1.18

.

.

. 5.93

.

2 points  

QUESTION 34

. Your firm has cash of $3,800, accounts receivable of $8,600, inventory of $33,100, and net working capital of $1,100. What is the cash ratio?

.

.

. 0.08

.

.

. 0.09

.

.

. 0.90

.

.

. 1.21

.

.

. 3.45

.

2 points  

QUESTION 35

. Baugh and Essary reports the following account balances: inventory of $17,600, equipment of $128,300, accounts payable of $24,700, cash of $11,900, and accounts receivable of $31,900. What is the amount of the current assets?

.

.

. $46,700

.

.

. $56,000

.

.

. $61,400

.

.

. $175,000

.

.

. $199,700

.

2 points  

QUESTION 36

. Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the profits or losses. Which type of business did they create if they both have full personal liability for the firm’s debts?

.

.

. Sole proprietorship

.

.

. Limited partnership

.

.

. Corporation

.

.

. Joint stock company

.

.

. General partnership

.

2 points  

QUESTION 37

. Underwood Homes Sales has total assets of $589,900 and total debt of $318,000. What is the equity multiplier?

.

.

. 0.46

.

.

. 0.54

.

.

. 1.21

.

.

. 1.85

.

.

. 2.17

.

2 points  

QUESTION 38

. Maria is the sole proprietor of an antique store that she has operated at the same location for the past 16 years. The store rents the space in which it is located but does own all of the inventory and fixtures. The store has an outstanding loan with the local bank but no other debt obligations. There are no specific loan covenants or assets pledged as security for the loan. Due to a sudden and unexpected downturn in the economy, the store is unable to generate sufficient funds to pay the loan payments due to the bank. Which of the following options does the bank have to collect the money it is owed?

.

. I. Sell the inventory and use the cash raised to apply to the debt

. II. Sell the store fixtures and use the cash raised to apply to the debt

. III. Take funds from Maria‘s personal account at the bank to pay the store‘s debt

. IV. Sell any assets Maria personally owns and apply the proceeds to the store‘s debt

.

.

. I only

.

.

. III only

.

.

. I and II only

.

.

. I, II, and III only

.

.

. I, II, III, and IV

.

2 points  

QUESTION 39

. The Blue Lagoon has a return on equity of 18.9 percent, an equity multiplier of 1.9, and a total asset turnover of 1.45. What is the profit margin?

.

.

. 2.76 percent

.

.

. 3.57 percent

.

.

. 4.90 percent

.

.

. 6.85 percent

.

.

. 14.60 percent

.

2 points  

QUESTION 40

. The Carpentry Shop has sales of $398,600, costs of $254,800, depreciation expense of $26,400, interest expense of $1,600, and a tax rate of 34 percent. What is the net income for this firm?

.

.

. $61,930

.

.

. $66,211

.

.

. $67,516

.

.

. $76,428

.

.

. $83,219

.

2 points  

QUESTION 41

. Whole Foods has a book value per share of $13.50, earnings per share of $1.21, and a price-earnings ratio of 17.6. What is the market-to-book ratio?

.

.

. 1.08

.

.

. 1.58

.

.

. 1.99

.

.

. 2.47

.

.

. 11.16

.

2 points  

QUESTION 42

. Bama & Co. owes a total of $21,684 in taxes for this year. The taxable income is $61,509. If the firm earns $100 more in income, it will owe an additional $56 in taxes. What is the average tax rate on income of $71,609?

.

.

. 28.00 percent

.

.

. 30.33 percent

.

.

. 33.33 percent

.

.

. 35.00 percent

.

.

. 35.29 percent

.

2 points  

QUESTION 43

. Which one of the following situations is most apt to create an agency conflict?

.

.

. Compensating a manager based on his or her division’s net income

.

.

. Giving all employees a bonus if a certain level of efficiency is maintained

.

.

. Hiring an independent consultant to study the operating efficiency of the firm

.

.

. Rejecting a profitable project to protect employee jobs

.

.

. Selling an underproducing segment of the firm

.

2 points  

QUESTION 44

. Which one of the following will increase the cash flow from assets for a tax-paying firm, all else constant?

.

.

. An increase in net capital spending

.

.

. A decrease in the cash flow to creditors

.

.

. An increase in depreciation

.

.

. An increase in the change in net working capital

.

.

. A decrease in dividends paid

.

2 points  

QUESTION 45

. Which one of the following is most apt to align management’s priorities with shareholders’ interests?

.

.

. Increasing employee retirement benefits

.

.

. Compensating managers with shares of stock that must be held for three years before the shares can be sold

.

.

. Allowing a manager to decorate his or her own office once he or she has been in that office for a period of three years or more

.

.

. Increasing the number of paid holidays that long-term employees are entitled to receive

.

.

. Allowing employees to retire early with full retirement benefits

.

2 points  

QUESTION 46

. Donner United has total owners’ equity of $18,800. The firm has current assets of $23,100, current liabilities of $12,200, and total assets of $36,400. What is the value of the long-term debt?

.

.

. $5,400

.

.

. $12,500

.

.

. $13,700

.

.

. $29,800

.

.

. $43,000

.

2 points  

QUESTION 47

. The recognition principle states that:

.

.

. costs should be recorded on the income statement whenever those costs can be reliably determined.

.

.

. costs should be recorded when paid.

.

.

. the costs of producing an item should be recorded when the sale of that item is recorded as revenue.

.

.

. sales should be recorded when the payment for that sale is received.

.

.

. sales should be recorded when the earnings process is virtually completed and the value of the sale can be determined.

.

2 points  

QUESTION 48

. Which one of the following will increase the profit margin of a firm, all else constant?

.

.

. Increase in interest paid

.

.

. Increase in fixed costs

.

.

. Increase in depreciation expense

.

.

. Decrease in the tax rate

.

.

. Decrease in sales

.

2 points  

QUESTION 49

. The balance sheet of a firm shows current liabilities of $56,300 and long-term debt of $289,200 as of last year. Current liabilities are $76,900 and long-term debt is $248,750 as of today, which is the end of the current year. The financial statements for the current year reflect an interest paid amount of $29,700 and dividends of $19,000. What is the amount of the net new borrowing?

.

.

. -$40,450

.

.

. $40,450

.

.

. $64,750

.

.

. $70,150

.

.

. $78,250

.

2 points  

QUESTION 50

. The Berry Patch has sales of $438,000, cost of goods sold of $369,000, depreciation of $37,400, and interest expense of $13,800. The tax rate is 35 percent. What is the times interest earned ratio?

.

.

. 2.29

.

.

. 3.46

.

.

. 3.87

.

.

. 4.38

.

.

. 4.79

.
 
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