Kaplan Mt482 week 8 quiz

QUESTION

Question

Question
1.1.The residual income model defines stock price as book value plus the
present value of residual income. What is the effect on stock price in a given
period if the firm’s cost of capital is greater than its return on
equity?(Points : 2)
Cannot
be determined
No
effect
Stock
price increases
Stock
price decreases
Question
2.2.Gupta Corporation has forecasted its need for external funding in
the following year. It needs to raise $2M in either debt or equity. It would
like to minimize its need for external funding without decreasing its projected
growth. Which of the following would reduce its need for additional
funding?(Points : 2)
An
increase in the dividend payout ratio
An
increase in days sales outstanding
An
increase in accounts payable
A
decrease in inventory turnover
Question
3.3.The treasurer of Simmons Corporation, a newly formed software
company is trying to ascertain Simmons cash flows for the next three months.
Expected sales are:
50%
of sales are made for cash. Simmons expects to receive 25% in the month
following the sale and 20% in the second month following the sale. The
remaining 5% are expected to be un-collectible. Gross margin is 20%, and
purchases are made one month prior to sale. Purchases are paid one month after
received
Cash
outflows in March for purchases will be:(Points : 2)
$240
$220
$200
$176
Question
4.4.Below is selected data for Gertup Corporation as of 12/31/05:
If
sales increased by 10% per annum for the next 20 years, sales for year 2025
would be closest to:(Points : 2)
$407,000
$124,459
$113,000
$55,500
Question
5.5.What is the correct order of the following steps in preparing a
projected balance sheet (not all steps may be shown)?
I. Project future cash
II. Project future accounts receivable
III. Project future accounts payable
IV. Project future property plant and equipment(Points : 2)
I,
II, IV, III
II,
IV, III, I
I,
III, II, IV
I,
III, IV, II
Question
6.6.The statement of cash flows for Georgey Company for 2004 and 2005 is
as follows:
Which
of the following statements iscorrect?(Points : 2)
Restructuring
is a major source of cash for Georgey
Accounts
receivable increased in 2005
Depreciation
is a major source of cash for Georgey
Major
use of cash resulted in decreased leverage
Question
7.7.Hiruit company’s sales in December were $5,500. They expect sales to
increase 10% in January and February and 15% in March. All of its sales are
made on credit. The typical collection pattern is:
Gross margin is 30%. Inventory levels at the end of December are $900 and are
expected to grow at the same rate as sales. Purchases are paid for the month
after they are made. Net accounts receivable at the end of December are $400.
In March Hiruit should collect how much cash from sales made in March and
previous months:(Points : 2)
$7,653.25
$6,331.3
$7,030.1
$6,331.3
Question
8.8.Which of the following statements isincorrect?(Points : 2)
It
is possible for a profitable company to go out of business because of
short-term liquidity problems
If
a company has a current ratio greater than 2, it will never go out of business
because of liquidity problems
The
current ratio is always greater than or equal to the quick ratio
The
accuracy of a cash flow forecast is inversely related to the forecast horizon
Question
9.9.The reliability of a short-term cash forecast depends most heavily
on the quality of:(Points : 2)
Cost
of goods sold forecast
Current
ratio forecast
Sales
forecast
Shares
outstanding forecast
Question 10.10.Below is selected data for Gertup Corporation as of
12/31/05:
Due
to competitive pressures, Gertup has had to increase credit terms to customers
to maintain sales. This resulted in Gertup’s accounts receivable doubling from
12/31/04 to 12/31/05. The average accounts receivable turnover was 30 days.
Without the increased credit terms accounts receivable turnover would have
remained at 12/31/04 levels. The impact of the change in credit policy
was:(Points : 2)
None
as sales remained the same
Decrease
liquidity, and decrease available cash
Increased
current ratio and liquidity of the company
Current
ratio stayed the same and liquidity remained constant

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