American Public University FINC

Finc400 quiz 1-8

art 1 of 1 – Week 1
Quiz

Question 1 of 25

4.0
Points

The firm’s
price-earnings (P/E) ratio is influenced by its

A.capital
structure.

B.earnings
volatility.

C.sales,
profit margins, and earnings.

D.all
of these.

Question 2 of 25

4.0 Points

The primary disadvantage
of accrual accounting is that

A.it
does not match revenues and expenses in the period in which they are
incurred.

B.it
does not appropriately measure accounting profit.

C.it
does not recognize accounts receivable.

D.it
does not adequately show the actual cash flow position of the firm

Question 3 of 25

4.0
Points

Total assets of a firm are
financed with liabilities and stockholders’ equity.

True

False

.

Question 4 of 25

4.0
Points

Gross profit is equal
to

A.sales
minus cost of goods sold.

B.sales
minus (selling and administrative expenses).

C.sales
minus (cost of goods sold and selling and administrative expenses).

D.sales
minus (cost of goods sold and depreciation expense).

Question 5 of 25

4.0 Points

The higher the profit of
a firm, the higher the value the firm is assured of receiving in the market.

A.
True

B.
False

uestion
6 of 25

4.0 Points

Ratios are used to
compare different firms in the same industry.

A.
True

B.
False


Question 7 of 25

4.0
Points

The Sarbanes-Oxley Act
was passed in an effort to

A.protect
small business from large corporations dominating the market.

B.ensure
that partnerships divide profits among partners in a fair manner.

C.guarantee
outside auditors can control corporate accounting practices.

D.control
corrupt corporate behavior.

uestion 8 of 25

4.0 Points

Which of the following
is not subtracted out in arriving at operating income?

A.interest
expense

B.cost
of goods sold

C.depreciation

D.selling
and administrative expense

Question 9 of 25

4.0 Points

Which of the following
is not a primary source of capital to the firm?

A.assets

B.common
stock

C.preferred
stock

D.bonds

Question 10 of 25

4.0 Points

A firm has $1,500,000 in
its common stock account and $1,000,000 in its paid-in capital account. The
firm issued 100,000 shares of common stock. What was the original issue price
if only one stock issue has ever been sold?

A.$35
per share

B.$25
per share

C.$15
per share

D.Not
enough information to tell

Question 11 of 25

4.0 Points

Debt utilization ratios
are used to evaluate the firm’s debt position with regard to its asset base and
earning power.

A.
True

B.
False

uestion 12 of 25

4.0 Points

A firm with earnings per
share of $3 and a price-earnings ratio of 20 will have a stock price of

A.$60.00

B.$15.00

C.$6.67

D.the
market assigns a stock price independent of EPS and the P/E ratio.

Question 13 of 25

4.0 Points

The P/E ratio is
strongly related to the past performance of the firm.

A.
True

B.
False

Question 14 of 25

4.0 Points

Money markets would
include which of the following securities?

A.common
stock and corporate bonds.

B.treasury
bills and commercial paper.

C.certificates
of deposit and preferred stock.

D.all
of these.

uestion 15 of 25

4.0 Points

Agency theory assumes
that corporate managers act to increase the wealth of corporate shareholders.

A.
True

B.
False

Question 16 of 25

4.0 Points

Preferred stock is
excluded from stockholders equity because it does not have full voting rights.

A.
True

B.
False

Question 17 of 25

4.0 Points

Sales minus cost of
goods sold is equal to earnings before taxes.

A.
True

B.
False

Question 18 of 25

4.0
Points

Asset utilization ratios

A.relate
balance sheet assets to income statement sales.

B.measure
how much cash is available for reinvestment into current assets.

C.are
most important to stockholders.

D.measures
the firm’s ability to generate a profit on sales.

Question 19 of 25

4.0
Points

The P/E ratio provides no
indication of investors’ expectations about the future of a company.

A.
True

B.
False


Question 20 of 25

4.0 Points

Asset utilization ratios
relate balance sheet assets to income statement sales.

A.
True

B.
False

Question 21 of 25

4.0 Points

Financial markets exist
as a vast global network of individuals and financial institutions that may be
lenders, borrowers, or owners of public companies worldwide.

A.
True

B.
False

Question 22 of 25

4.0 Points

Which of the following
is an outflow of cash?

A.profitable
operations

B.the
sale of equipment

C.the
sale of the company’s common stock

D.the
payment of cash dividends

uestion 23 of 25

4.0 Points

The Bubba Corp. had
earnings before taxes of $400,000 and sales of $2,000,000. If it is in the 40%
tax bracket its after-tax profit margin is:

A.40%

B.12%

C.20%

D.25%

Question 24 of 25

4.0 Points

The income statement is
the major device for measuring the profitability of a firm over a period of
time.

A.
True

B.
False

Question 25 of 25

4.0 Points

Which of the following
is an inflow of cash?

A.funds
spent in normal business operations

B.the
purchase of a new factory

C.the
sale of the firm’s bonds

D.the
retirement of the firm’s bonds

Week 2

Question 1 of 25 4.0
Points

A lower price for the firm’s product will reduce the firm’s
breakeven point.

A. True

B. False

Question 2 of 25 4.0
Points

(point) Profit is generally adequate to finance significant
growth.

A. True

B. False

Question 3 of 25 4.0
Points

If a firm has a break-even point of 40,000 units and the
contribution margin on the firm’s single product is $4.00 per unit and fixed
costs are $60,000, what will the firm’s operating profit be at sales of 40,000
units?

A.$100,000

B.$30,000

C.$15,000

D.$145,000

Question 4 of 25 4.0
Points

(point) The break-even point can be calculated as

A.variable costs divided by contribution
margin.

B.total costs divided by contribution margin.

C.variable cost times contribution margin.

D.fixed cost divided by contribution margin.

Question 5 of 25 4.0
Points

The degree of combined leverage is the sum of the degree of
operating leverage and the degree of financial leverage.

A. True

B. False

Question 6 of 25 4.0
Points

If fixed costs rise while other variables stay constant

A.the breakeven point rises.

B.degree of operating leverage increases.

C.total profit declines.

D.all of these

Question 7 of 25 4.0
Points

Operating leverage emphasizes the impact of using fixed
assets in the business.

A. True

B. False

Question 8 of 25 4.0
Points

(point) In financial statements, the number of units shown
in cost of goods sold as compared to the number of the units actually produced

A.is higher.

B.is lower.

C.is the same.

D.can be either higher or lower.

Question 9 of 25 4.0
Points

The contribution margin is equal to price per unit minus
total costs per unit.

A. True

B. False

Question 10 of 25 4.0
Points

(point) Which of the following is most likely to increase
the final number for notes payable in the pro forma balance sheet?

A.decrease in inventory.

B.increase in retained earnings.

C.decrease in accounts payable.

D.decrease in accounts receivable.

Question 11 of 25 4.0
Points

An increase in sales and profits generates the necessary
cash required for economic growth.

A. True

B. False

Question 12 of 25 4.0
Points

The percent-of-sales forecast is likely to be most accurate
when used with cyclical companies.

A. True

B. False

Question 13 of 25 4.0
Points

Pro forma financial statements are

A.the most comprehensive means of financial
forecasting.

B.often required by prospective creditors.

C.projections of financial statements for a
future period.

D.all of these.

Question 14 of 25 4.0
Points

(point) When the cost of raw materials is increasing, FIFO
accounting

A.yields higher ending inventory values than
LIFO.

B.produces higher unit sales than using LIFO.

C.yields higher cost of goods sold than LIFO.

D.All of these.

Question 15 of 25 4.0
Points

(point) If sales volume exceeds the break-even point, the
firm will experience

A.an operating loss.

B.an operating profit.

C.an increase in plant and equipment.

D.an increase in stock price.

Question 16 of 25 4.0
Points

The value of ending inventory should be equal to beginning
inventory plus total production costs minus cost of goods sold.

A. True

B. False

Question 17 of 25 4.0
Points

(point) Leverage works best when volume is increasing.

A. True

B. False

Question 18 of 25 4.0
Points

(point) The percent-of-sales method would be more accurate
under a steady sales assumption than cyclical sales.

A. True

B. False

Question 19 of 25 4.0
Points

If the price per unit decreases because of competition but
the cost structure remains the same

A.the breakeven point rises.

B.the degree of combined leverage declines.

C.the degree of financial leverage declines.

D.All of these

Question 20 of 25 4.0
Points

Sales (100,000 units)
$ 1,000,000

Variable costs 300,000

Contribution margin 700,000

Fixed manufacturing costs 200,000

Operating income 500,000

Interest 75,000

Earnings before taxes 425,000

Taxes (30%) 127,500

Net Income
$ 297,500

Refer to the figure above. The Degree of Operating Leverage
is

A.1.40x

B.1.56x

C.3.33x

D.2.22x

Question 21 of 25 4.0
Points

(point) The percent-of-sales method for financial
forecasting assumes that balance sheet accounts maintain a constant
relationship to sales.

A. True

B. False

Question 22 of 25 4.0
Points

(point) As the contribution margin rises, the breakeven
point goes down.

A. True

B. False

Question 23 of 25 4.0
Points

(point) In the percent-of-sales method, an increase in
dividends

A.will increase required new funds.

B.will decrease required new funds.

C.has no effect on required new funds.

D.more information is needed.

Question 24 of 25 4.0
Points

Which of the following is not true about leverage?

A.operating leverage influences the top half
of the income statement, determining EBIT.

B.financial leverage deals with the bottom
half of the income statement, determining EPS

C.combined leverage utilizes the entire income
statement, showing the impact of change in volume on EBIT.

D.none of these

Question 25 of 25 4.0
Points

The finance department should work independently without the
input of other departments because there may be significant biases when
creating proformas.

A. True

B. False

Week 3

All rest attached in the docment