SOPHIA PATHWAYS Principals of Finance Milestone 1,2,3,4 Questions and Answers 100% Correct!

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After a significant economic recession, prices and investing activity in the stock market began trending consistently upward six years ago. In the last three months, this trend has reversed and price... s have fallen steadily. How are the past three months of the stock market classified?  Primary bull market  Primary bear market  Secular bull market  Secular bear market CONCEPT Financial Markets 2 If Company A has a lower debt ratio than Company B, then Company A is likely to have __________ than Company B.  more total assets  less financial flexibility  a greater ability to borrow  a higher level of financial risk CONCEPT Debt Management Ratios 3 Ratios that measure a company's ability to manage its long-term debt are _________.  profitability ratios  leverage ratios  efficiency ratios  liquidity ratios CONCEPT Overview of Ratio Analysis 4 Preparing a cash flow forecast helps a company to avoid __________.  liquidity  net losses  higher financing costs  opportunity costs CONCEPT Building a Cash Budget 5 Xander is looking for ways to reduce his non-operating expenses to improve his company's overall financial performance, so he consults his most recent income statement. Which of the following should he focus on?  Depreciation  Income taxes  Amortization  Wages CONCEPT The Income Statement 6 The pro forma balance sheet shows how the __________ resulting from a strategic plan will be financed.  sales forecast  inventory  AFN  equity CONCEPT Forecasting the Balance Sheet 7 Capacity planning answers the question "__________"  How can we be most efficient?  What will our revenue be?  How will we decide which direction to go?  How will we finance it? CONCEPT Financial Forecasting 8 Consider the price to book ratios of the following companies:  Company A: 5.45  Company B: 14.30  Company C: 10.08  Company D: 19.62 Which company do investors believe will create the most value from its assets?  Company B  Company C  Company D  Company A CONCEPT Market Value Ratios 9 Why are ethical issues complicated for businesses that operate in the global economy?  Because their employees won't know what the laws are in other countries.  Because different cultures have different norms and values.  Because they don't have as much moral character as small, local businesses.  Because they tend to have more employees. CONCEPT Ethics: An Overview 10 Under what circumstance would agency conflict be most likely to increase?  When oversight by the board is adequate.  When the incentives of a manager align with those of owners.  When owners are very close to the business.  When owners are separated from the business. CONCEPT Agency and Conflicts of Interest 11 Which of the following would explain a company’s day sales outstanding ratio rising from 32 to 41.25?  The company's accounts receivable has decreased while the average inventory has increased.  The company's accounts receivable has decreased while total sales has increased.  The company's accounts receivable has decreased while the average inventory has remained constant.  The company's accounts receivable has remained constant while total sales has decreased. CONCEPT Asset Management Ratios 12 If net income is $90 million and total assets are $480 million, then the ROA is __________.  incalculable without EBIT data  18.75%  25.00%  incalculable without gross profit data CONCEPT Profitability Ratios 13 In which scenario would benchmarking be least useful?  Comparing financial ratios of a company in an extractive industry and a tertiary industry  Comparing financial ratios of a company in a tertiary industry and a service industry  Comparing financial ratios of a company in a primary industry and an extractive industry  Comparing financial ratios of a company in a secondary industry and a manufacturing industry CONCEPT Using Financial Ratios for Analysis 14 If a sales increase is forecasted, how will it affect expenses on the pro forma income statement if market conditions are expected to remain stable?  Expenses will increase.  Expenses will decrease.  It depends on the type of product being sold.  There will be no effect on expenses. CONCEPT Forecasting the Income Statement 15 Lucas is worried about his company's short-term viability. What type of financial statement should he look at?  Cash flow statement  Income statement  Statement of changes in equity  Balance sheet CONCEPT Introducing Financial Statements 16 Consider the following information: Total current assets $62,301 Deferred income taxes $1,345 Inventories $5,664 Prepaid expenses $2,034 Other assets $2,906 Total current liabilities $29,748 What is the quick ratio?  1.90  2.09  2.02  1.82 CONCEPT Liquidity Ratios 17 Which method of depreciation calculation gives a company an equal tax benefit from one year to the next?  Declining balance  Straight line  Salvage  Activity-based CONCEPT Tax Considerations 18 Valuation of a business relies on __________.  maximizing shareholder value  maximizing market value  strengthening corporate governance  keeping accurate financial statements CONCEPT Goals of Financial Management 19 Roger is a graphic designer who is in the early phases of launching his own business. So far he has only a handful of employees, and he prefers to make all of the operational decisions for the business himself. Which form of business structure would clearly meet Roger's needs?  Functional  Matrix  Pre-bureaucratic  Divisional CONCEPT Types of Business Organizations 20 What principle of corporate governance requires public clarification of the roles and responsibilities of board and management in order to provide stakeholders with a level of accountability?  Integrity and ethical behavior  Shareholder rights  Disclosure and transparency  Interests of other stakeholders CONCEPT Corporate Governance 21 What is a question that should be asked about inventory when forecasting?  What are the current storage costs?  What is the anticipated ratio of credit to cash sales?  How quickly can we collect cash receipts?  Is the company's liquidity sufficient? CONCEPT Analyzing Forecasts 22 Under GAAP, how would dividends paid to company stockholders be accounted for on the statement of cash flows?  As an increase in cash flow from financing  As a decrease in cash flow from financing  As an increase in cash flow from operations  As a decrease in cash flow from investment CONCEPT The Statement of Cash Flows 23 The primary factor behind al [Show More]

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