Why is the examination of the balance sheet and income statement only not an adequate evaluation of a firm? What else should be done? What will be an ideal response? ANSWER The most obvious part missing is an examination of the statement of cash flows. Understanding cash flow statements helps identify the extent […]
Date: September 19th, 2020
Your new firm just purchased a storage building and property for $40,000 that was paid for with a $20,000 long-term loan and a new infusion of $20,000 from the owners. Which of the following accounting entries is most appropriate? A) $40,000 increase in plant, property and equipment, a $20,000 decrease in long-term debt, and a […]
Date: September 19th, 2020
Tangshan Mining has extended credit terms of 3/15 net 30 EOM. The cost of giving up the cash discount, assuming payment would be made on the last day of the credit period, would be ________. A) 75.26% B) 3.1% C) 72.99% D) 37.12% ANSWER A
Date: September 19th, 2020
The purpose of a reverse stock split is to ________. A) issue additional shares B) increase the dividend C) increase the price of a stock D) decrease trading activity ANSWER C
Date: September 19th, 2020
A ________ has an effect on a firm’s share price similar to that of a ________. A) stock repurchase; stock split B) stock dividend; stock split C) cash dividend; stock dividend D) cash dividend; stock split ANSWER B
Date: September 19th, 2020
What is the WACC for Bacon Signs Inc, if the after-tax cost of long-term debt is 6.3% and the before tax cost of equity is 10.4%. A) 8.02% B) 8.91% C) 9.58% D) Without a corporate tax rate, we cannot answer this question as written. ANSWER B Explanation: B) WACC = 6.3% * […]
Date: September 19th, 2020
Market values for equity are calculated as: A) the sum of the value of equity and accumulated retained earnings as found on the balance sheet. B) the price per share multiplied by the number of shares outstanding. C) the price per share multiplied by the number of shares outstanding plus the accumulated retained earnings. D) […]
Date: September 19th, 2020
In order to understand a firm’s current and anticipated financial position and needs, we must first: A) understand overall economic conditions. B) understand the industry in which it operates. C) understand the strengths and weaknesses of the firm itself. D) All of t he above. ANSWER D
Date: September 19th, 2020
The IRR rule states that a firm should accept any project with an internal rate of return greater than or equal to a pre-specified hurdle rate. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
It would be a financially sound decision to pay employees once every two weeks rather than once a month. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
