Busn 379 Hw Week 1

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Question :
(TCO 1) Which of the following statements is true regarding the goal of financial management?

Student Answer: A US company considering international operations will have a different goal than a company that only conducts operations in the US. The firm’s structure (i.e. corporation, sole proprietorship, partnership) is not relevant to the goal of financial management. CORRECT A way of aligning management goals to shareholder’s interest is to tie managerial compensation to the market value of the firm’s stock. None of the above are true.

Points Received: 3 of 3
Comments:

2. Question :
(TCO 1) Book values are different to market values because:

Student Answer: INCORRECT Book values reflect the value of the asset based on generally-accepted accounting principles. Book values are used in the company's balance sheet. Book values do not reflect the amount someone is willing to pay today for an asset. CORRECT All of the above

Points Received: 0 of 3
Comments:

3. Question :
For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows: Cost of goods sold............................... $1.2 million Administrative expenses........................ $250,000 Marketing and selling expenses............... $175,000 Depreciation........................................ $500,000 Interest expense.................................. $200,000 Dividends paid..................................... $150,000

(TCO 1) Suppose that Sports Baseball has 30,000 shares of stock. What is the dividends per share figure?

Student Answer: CORRECT 5.0
INCORRECT 8.75
5.25
8.50
Instructor Explanation: Chapter 2, page 28, Net Income/Total Shares Outstanding= $150,000 /30,000=$5

Points Received: 0 of 3
Comments:

4. Question :
For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows: Cost of goods sold............................... $1.2 million Administrative expenses........................ $250,000 Marketing and selling expenses............... $175,000 Depreciation........................................ $500,000 Interest expense.................................. $200,000 Dividends paid..................................... $150,000

(TCO 1) Assuming a tax rate of 30%, what is the operating cash flow for the year?

Student Answer: $1,260,000
$962,000
CORRECT $962,500
$1,265,000
Can not be determined with the information given
Instructor Explanation:
Operating Cash Flow = EBIT + Depreciation – Taxes

EBIT = $2,700,000 – ($1,200,000+250,000+175,000+500,000) = $575,000

Taxable Income = EBIT – Interest = $575,000 - $200,000 = $375,000

Taxes = $375,000 x 30% = $112,500

Operating Cash Flow = $575,000 + $500,000 - $112,500 = $962,500

Points Received: 3 of 3
Comments:

5. Question :
For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows: Cost of goods sold............................... $1.2 million Administrative expenses...........................
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