FINC400 I004 quiz 3

FINC400 I004 Sum
13

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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

uestion
2 of 25

4.0 Points

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

A.
True

B.
False

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.

estion
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.

uestion
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

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