Finance 320 Final Exam

Topics: Net present value, Asset, Cash flow Pages: 18 (2599 words) Published: December 20, 2013
SampleFinal
Finance 320
Finance Department

Name___________________________________

Chapters: 1, 2, 3, 4, 5, 6, 7, 8, 9, 11, 12, and 13

1) A C corporation earns $4.50 per share before taxes. The corporate tax rate is 35%, the personal tax rate on dividends is 20%, and the personal tax rate on non-dividend income is 39%. What is the total amount of taxes paid if the company pays a $2.00 dividend?

A) $2.48
B) $1.98
C) $0.90
D) $1.58
2) Why in general do financial managers make financial decisions in a corporation, rather than the owners making these decisions themselves?
A) The interests of the various owners may conflict with each other. B) It is best for the control of the finances of a corporation to be in the hands of a disinterested third party. C) The owners may not be U.S. citizens or residents.

D) There are often many owners, and they can often change as they buy and sell stock. 3) Which of the following is NOT a function of the board of directors? A) answering to shareholders of the company

B) monitoring the performance of the company
C) determining how top executives should be compensated
D) day-to-day running of the company
4) Which of the following is a measure of the aggregate price level of collections of pre-selected stocks? A) Euronext
B) NYSE
C) S&P 500
D) NASDAQ
5) Which of the following is not a role of financial institutions? A) Printing money for borrowers.
B) Moving funds from savers to borrowers.
C) Spreading out risk-bearing.
D) Moving funds though time.
6) In the United States, publicly traded companies can choose whether or not they wish to release periodic financial statements.
A) True
B) False
7) A company that produces drugs is preparing a balance sheet. Which of the following would be most likely to be considered a long-term asset on this balance sheet?
A) a patent for a drug held by the company
B) the cash reserves of the company
C) commercial paper held by the company
D) the inventory of chemicals used to produce the drugs made by the company

1

Use the table for the question(s) below.
Luther Corporation
Consolidated Balance Sheet
December 31, 2006 and 2005 (in $ millions)
Liabilities and
Assets
2006
2005
Stockholders' Equity
Current Assets
Current Liabilities
Cash
63.6
58.5
Accounts payable
Notes payable /
Accounts receivable
55.5
39.6
short-term debt
Current maturities of
Inventories
45.9
42.9
long-term debt
Other current assets
6.0
3.0
Other current liabilities
Total current assets 171.0 144.0
Total current liabilities
Long-Term Assets
Land
Buildings
Equipment
Less accumulated
depreciation
Net property, plant, and
equipment
Goodwill
Other long-term assets
Total long-term assets

Total Assets

Long-Term Liabilities
Long-term debt
Capital lease obligations
Total Debt

2006 2005
87.6 73.5
10.5 9.6
39.9 36.9
6.0 12.0
144.0 132.0

66.6
109.5
119.1

62.1
91.5
99.6

(56.1)

(52.5)

Deferred taxes

239.1
60.0
63.0
362.1

200.7
-42.0
242.7

Other long-term liabilities
Total long-term liabilities
Total liabilities
Stockholders' Equity

--- --262.5 191.1
406.5 323.1
126.6 63.6

386.7

Total liabilities and
Stockholders' Equity

533.1 386.7

533.1

239.7 168.9
--- --239.7 168.9
22.8 22.2

8) Refer to the balance sheet above. If in 2006 Luther has 10.2 million shares outstanding and these shares are trading at $16 per share, then Luther's market-to-book ratio would be closest to: A) 0.39

B) 0.76
C) 1.29
D) 2.57
9) Which of the following statements regarding the income statement is INCORRECT? A) The first line of an income statement lists the revenues from the sales of products or services. B) The income statement shows the earnings and expenses at a given point in time. C) The income statement shows the flow of earnings and expenses generated by the firm between two dates. D) The last or "bottom" line of the income statement shows the firm's net income.

2...
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