FIN 320 Week 8 Quiz – Strayer



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Quiz 6 Chapter 14 and 15
Chapter 14: ___________________________________________________________________________
1.
Which of the following assets is most liquid? 
 

A. 
Cash equivalents

B. 
Receivables

C. 
Inventories

D. 
Plant and equipment

2.
Cost of goods sold refers to ___________. 
 

A. 
direct costs attributable to producing the product sold by the firm

B. 
salaries, advertising, and selling expenses

C. 
payments to the firm's creditors

D. 
payments to federal and local governments

3.
Many observers believe that firms "manage" their income statements to _______. 
 

A. 
minimize taxes over time

B. 
maximize expenditures

C. 
smooth their earnings over time

D. 
generate level sales

4.
Depreciation expense is in what broad category of expenditures? 
 

A. 
Operating expenses

B. 
General and administrative expenses

C. 
Debt interest expense

D. 
Tax expenditures

5.
Firm A acquires firm B when firm B has a book value of assets of $155 million and a book value of liabilities of $35 million. Firm A actually pays $175 million for firm B. This purchase would result in goodwill for firm A equal to _____. 
 

A. 
$175 million

B. 
$155 million

C. 
$120 million

D. 
$55 million

6.
One of the biggest impediments to a global capital market has been _________. 
 

A. 
volatile exchange rates

B. 
the lack of common accounting standards

C. 
lower disclosure standards in the United States than abroad

D. 
the lack of transparent reporting standards across the EU

7.
Benjamin Graham thought that the benefits from detailed analysis of a firm's financial statements had _________ over his long professional life. 
 

A. 
increased greatly

B. 
increased slightly

C. 
remained constant

D. 
decreased

8.
If the interest rate on debt is higher than the ROA, then a firm's ROE will _________. 
 

A. 
decrease

B. 
increase

C. 
not change

D. 
change but in an indeterminable manner

9.
Which of the following is not one of the three key financial statements available to investors in publicly traded firms? 
 

A. 
Income statement

B. 
Balance sheet

C. 
Statement of operating earnings

D. 
Statement of cash flows

10.
In 2006 Hewlett-Packard repurchased shares of common stock worth $5,241 million and made dividend payments of $894 million. Other financing activities raised $196 million, and Hewlett-Packard's total cash flow from financing was -$6,077 million. How much did the long-term debt accounts of Hewlett-Packard change? 
 

A. 
Increased $138 million

B. 
Decreased $138 million

C. 
Increased $836 million

D. 
Decreased $836 million

11.
  

What must cash flow from financing have been in 2008 for Interceptors, Inc.? 
 

A. 
$5

B. 
$28

C. 
$30

D. 
$33

12.
  
Based on the cash flow data in the table for Interceptors Inc., which of the following statements is (are) correct?

I. This firm appears to be a good investment because of its steady growth in cash.
II. This firm has been able to generate growing cash flows only by borrowing or selling equity to offset declining operating cash flows.
III. Financing activities have been increasingly important for this firm's operations, at least in the short run. 
 

A. 
I only

B. 
II and III only

C. 
II only

D. 
I and II only

13.
Common-size balance sheets are prepared by dividing all quantities by ____________. 
 

A. 
total assets

B. 
total liabilities

C. 
shareholders' equity

D. 
fixed assets

14.
Operating ROA is calculated as __________, while ROE is calculated as _________. 
 

A. 
EBIT/Total assets; Net profit/Total assets

B. 
Net profit/Total assets; EBIT/Total assets

C. 
EBIT/Total assets; Net profit/Equity

D. 
Net profit/EBIT; Sales/Total assets

15.
A firm increases its financial leverage when its ROA is greater than the cost of debt. Everything else equal, this change will probably increase the firm's:

I. Beta
II. Earnings variability over the business cycle
III. ROE
IV. Stock price 
 

A. 
I and II only

B. 
III and IV only

C. 
I, III, and IV only

D. 
I, II, and III only

16.
The highest possible value for the interest-burden ratio is ______, and this occurs when the firm _________. 
 

A. 
0; uses as much debt as possible

B. 
1; uses debt to the point where ROA = interest cost of debt

C. 
1; uses no interest-bearing debt

D. 
-1; pays down its existing debts

17.
Which one of the following ratios is used to calculate the times-interest-earned ratio? 
 

A. 
Net profit/Interest expense

B. 
Pretax profit/EBIT

C. 
EBIT/Sales

D. 
EBIT/Interest expense


18.
The process of decomposing ROE into a series of component ratios is called ______________. 
 

A. 
DuPont analysis

B. 
technical analysis

C. 
comparative analysis

D. 
liquidity analysis

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