FINC400 I004 quiz 3

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FINC400 I004 Sum 13

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Question 1 of 25

4.0 Points

A lower price for the firm's product will reduce the firm's breakeven point.

[removed] A. True

[removed] B. False

uestion 2 of 25

4.0 Points

(point) Profit is generally adequate to finance significant growth.

[removed] A. True

[removed] B. False

Question 5 of 25

4.0 Points

The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.

[removed] A. True

[removed] B. False

Question 6 of 25

4.0 Points

If fixed costs rise while other variables stay constant

[removed] A.the breakeven point rises.
[removed] B.degree of operating leverage increases.
[removed] C.total profit declines.
[removed] D.all of these

Question 7 of 25

4.0 Points

Operating leverage emphasizes the impact of using fixed assets in the business.

[removed] A. True

[removed] B. False

Question 8 of 25

4.0 Points

(point) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced

[removed] A.is higher.
[removed] B.is lower.
[removed] C.is the same.
[removed] D.can be either higher or lower.

Question 9 of 25

4.0 Points

The contribution margin is equal to price per unit minus total costs per unit.

[removed] A. True

[removed] B. False

Question 10 of 25

4.0 Points

(point) Which of the following is most likely to increase the final number for notes payable in the pro forma balance sheet?

[removed] A.decrease in inventory.
[removed] B.increase in retained earnings.
[removed] C.decrease in accounts payable.
[removed] D.decrease in accounts receivable.

estion 11 of 25

4.0 Points

An increase in sales and profits generates the necessary cash required for economic growth.

[removed] A. True

[removed] B. False

Question 12 of 25

4.0 Points

The percent-of-sales forecast is likely to be most accurate when used with cyclical companies.

[removed] A. True

[removed] B. False

Question 13 of 25

4.0 Points

Pro forma financial statements are

[removed] A.the most comprehensive means of financial forecasting.
[removed] B.often required by prospective creditors.
[removed] C.projections of financial statements for a future period.
[removed] D.all of these.

Question 14 of 25

4.0 Points

(point) When the cost of raw materials is increasing, FIFO accounting

[removed] A.yields higher ending inventory values than LIFO.
[removed] B.produces higher unit sales than using LIFO.
[removed] C.yields higher cost of goods sold than LIFO.
[removed] D.All of these.

Question 15 of 25

4.0 Points

(point) If sales volume exceeds the break-even point, the firm will experience

[removed] A.an operating loss.
[removed] B.an operating profit.
[removed] C.an increase in plant and equipment.
[removed] D.an increase in stock price.

Question 16 of 25

4.0 Points

The value of ending inventory should be equal to beginning inventory plus total production costs minus cost of goods sold.

[removed] A. True

[removed] B. False

Question 17 of 25

4.0 Points

(point) Leverage works best when volume is increasing.

[removed] A. True

[removed] B. False

Question 18 of 25

4.0 Points

(point) The percent-of-sales method would be more accurate under a steady sales assumption than cyclical sales.

[removed] A. True

[removed] B. False

Question 19 of 25

4.0 Points

If the price per unit decreases because of competition but the cost structure remains the same

[removed] A.the breakeven point rises.
[removed] B.the degree of combined leverage declines.
[removed] C.the degree of financial leverage declines.
[removed] D.All of these

Question 20 of 25

4.0 Points

Sales (100,000 units)	$ 1,000,000
Variable costs	300,000
Contribution margin	700,000
Fixed manufacturing costs	200,000
Operating income	500,000
Interest	75,000
Earnings before taxes	425,000
Taxes (30%)	127,500
Net Income	$ 297,500

Refer to the figure above. The Degree of Operating Leverage is

[removed] A.1.40x
[removed] B.1.56x
[removed] C.3.33x
[removed] D.2.22x

Question 21 of 25

4.0 Points

(point) The percent-of-sales method for financial forecasting assumes that balance sheet accounts maintain a constant relationship to sales.

[removed] A. True

[removed] B. False

Question 22 of 25

4.0 Points

(point) As the contribution margin rises, the breakeven point goes down.

[removed] A. True

[removed] B. False

Question 23 of 25

4.0 Points

(point) In the percent-of-sales method, an increase in dividends

[removed] A.will increase required new funds.
[removed] B.will decrease required new funds.
[removed] C.has no effect on required new funds.
[removed] D.more information is needed.

uestion 24 of 25

4.0 Points

Which of the following is not true about leverage?

[removed] A.operating leverage influences the top half of the income statement, determining EBIT.
[removed] B.financial leverage deals with the bottom half of the income statement, determining EPS
[removed] C.combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.
[removed] D.none of these

Question 25 of 25

4.0 Points

The finance department should work independently without the input of other departments because there may be significant biases when creating proformas.

[removed] A. True

[removed] B. False

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