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Practice Questions
Corporate Finance (BUSI 408)
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1) Which one of the following is a working capital decision? a) How much cash should the firm keep in reserve 2) Which one of the following is a capital structure decision? a) Establishing the preferred debt-equity level 3) Working capital management included which one of the following? a) Determining which customers will be granted credit 4) The daily financial operations of a firm are primarily controlled by managing the a) Working capital 5) The primary goal of financial management is most associated with increasing the a) Market value of the firm 6) Net working capital increases when a) Inventory is sold at a profit 7) Shareholders equity is equal to a) Net fixed assets - LTD + NWC 8) A firm’s liquidity level decreases when a) Inventory is purchased with cash 9) The market value a) Of an asset tends to provide a better guide to the actual worth of the asset than does the book value 10) Which one of the following statements concerning the balance sheet is correct? a) Assets are listed in descending order of liquidity 11) Net income increases when a) Revenue increases 12) The concept of marginal taxation is best exemplified by which one of the following? a) Mitchell’s Grocer increased its sales by $52k last year and had to pay an additional $16k in taxes 13) A negative cash flow to stockholders indicates a firm a) Received more from selling stock than it paid out to shareholders 14) If a firm has a negative cash flow from assets every year for several years, the firm a) May be continually increasing in size 15) An increase in which one of the following will increase OCF for a profitable, tax-paying firm? a) Depreciation 16) Cash flow to creditors increases when: a) Long-term debt is repaid 17) Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period? a) Positive cash flow from assets 18) Wes Motors has total assets of $98300, NWC of $11,300, OE’s of $41,600, and LTD of $38,600. What is the value of the current assets? a) $29,400 19) Leslie Printing has net income of $26,310 for the year. At the beginning of the year, the firm had common stock of $55,000, paid-in surplus of $11,200, and retained earning of $48,420. At the end of the year, the firm had total equity of $142,430. The firm paid dividends of $32,500. What is the amount of the net new equity raised during the year? a) $34,000 20) The Embroidery Shoppe had beginning retained earnings of $18,670. During the year, the company reported sales of $83,490, costs of $68,406, depreciation of $8,2000, dividends of $950, and interest paid of $478. The tax rate is 34%. What is the retained earnings balance at the end of the year? a) $21,947 21) Last year, the Pizza Joint added $6230 to retained earnings from sales of $104,650. The company costs of $87,300, dividends of $2,500, and interest of $1,620. Given a tax rate of 34%, what was the amount of the depreciation expense? a) $2503 22) MNM & Co incurred depreciation expenses of $36,810 last year. The sales were $903,480 and the addition to retained earnings was $11,530. The firm paid interest of $7,711 and dividends of $7,500. The tax rate was 33%. What was the amount of the costs incurred by the company? i)
Practice Questions
Course: Corporate Finance (BUSI 408)
University: University of North Carolina at Chapel Hill
