# Finance Quiz

Pages: 5 (605 words) Published: April 21, 2012
1.| Question :| Li Retailing reported the following items for the current year: Sales = \$3,000,000; Cost of Goods Sold = \$1,500,000; Depreciation Expense = \$170,000; Administrative Expenses = \$150,000; Interest Expense = \$30,000; Marketing Expenses = \$80,000; and Taxes = \$300,000; Li's operating profit margin is equal to|

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| Student Answer:| | 25.67% |
| | | 35.67% |
| | | 36.67% |
| | | 50.00%
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| Instructor Explanation:| Operating Profit Margin = EBIT/Sales = \$1,100,000/\$3,000,000 = 36.67% AACSB: Analytic skills|
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| Points Received:| 0 of 1 |
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2.| Question :| Corporation B reported earnings per share of \$10. Corporation B has 100,000 shares of common stock outstanding and reported an increase in owners equity of \$400,000 for the period. Corporation B paid \$50,000 in interest expense during the period. Corporation B paid dividends per share of|

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| Student Answer:| | \$6.00. |
| | | \$5.50. |
| | | \$6.50. |
| | | \$14.003. |
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| Points Received:| 0 of 1 |
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3.| Question :| Which of the following statements is most correct concerning flotation costs?|
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| Student Answer:| | flotation costs are the same for common stock, preferred stock and bonds because they reflect mainly printing costs and legal fees. |  | | | flotation costs are generally higher for bonds rather than stocks because the dollar amounts involved are much higher, allowing for economies of scale |  | | | flotation costs as a percentage of gross proceeds increase as the size of the security issue increases |  | | | flotation costs are higher for common stocks than for preferred stocks and bonds due to the higher level of risk associated with owning common stock | |

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| Points Received:| 1 of 1 |
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4.| Question :| During the period 1984 to 2008, the average yield on 3-Month U.S. Treasury bills was 4.76%, the average inflation rate was 2.97%, the average yield on 30-year Treasury bonds was 6.89%, and the average return on 30-year Aaa-Rated Corporate Bonds was 7.73%. The real risk-free short-term interest rate is|

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| Student Answer:| | 1.79%. |
| | | 2.13%. |
| | | 2.97%. |
| | | 4.76%. |
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| Points Received:| 1 of 1 |
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5.| Question :| A firm paid dividends of \$10,000, paid interest of \$20,000, reduced debt principal outstanding (paid off debt) in the amount of \$100,000, and sold new stock for \$150,000. What was the firm's cash flow from financing activities?|

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| Student Answer:| | +\$20,000 (\$20,000 flowed into the firm) |  | | | -\$20,000 (\$20,000 flowed out of the firm) |
| | | +\$280,000 (\$280,000 flowed into the firm) |
| | | -\$280,000 (\$280,000 flowed out of the firm) |
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| Points Received:| 1 of 1 |
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6.| Question :| PDQ Corp. has sales of \$4,000,000; the firm's cost of goods sold is \$2,500,000; and its total operating expenses are \$600,000. What is PDQ's EBIT?|
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| Student Answer:| | \$850,000 |
| | | \$875,000 |
| | | \$900,000 |
| | | \$1,300,000 |
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| Points Received:| 1 of 1 |
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7.| Question :| Net working capital is equal to|
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| Student Answer:| | total assets minus total liabilities. |  | | | current assets minus total liabilities. |
| | | total operating capital minus net income. |
| | | current assets minus current liabilities. |
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| Points Received:| 1 of 1 |
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8.| Question :| What was the average annual rate of return on 3-month U.S. Treasury bills during the period 1984 to 2008?|
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| Student Answer:| | 3.84% |
| | | 4.23% |
| | | 4.76% |
| | | 5.68% |
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