Finance Questions - Multiple Choice/True or False Quiz

Question #1 (1 point)

Huffy Inc. manufactures a line of bicycles. Their average selling price is $200 per unit with a variable cost of $120 per unit. Huffy's annual fixed expenses are $240,000 per year. What is the break-even point in units for the company?

5,000

4,000

3,000

2,000

Question #2 (1 point)

A company expects to receive the following cash flows at the end of each respective period: Year 1 - $1,000; Year 2 - $1,200; Year 3 - $2,200; and then $1,300 each year for the next five years after (years 4 through 8). With a discount rate of 5%, what is the present value of the cash flows?

$8,429

$8,803

$7,262

$6,943

Question #3 (1 point)

If shareholder wealth is measured by the market capitalization of the firm, what would be the total shareholder wealth of a firm that has 150,000 common shares outstanding and 25,000 preferred shares issued? Its current common stock price is $50.00, and its current preferred stock price per share is $25.00.

$8,750,000

$8,000,000

$7,500,000

$7,000,000

Question #4 (1 point)

Huffy Inc. manufactures a line of bicycles. Their average selling price is $200 per unit with a variable cost of $120 per unit. Huffy's annual fixed expenses are $240,000 per year. Calculate the company's EBIT at 9,000 units.

$160,000

$800,000

$480,000

$0

Question #5 (1 point)

In 2011, Whitetree Inc. had a net income of $240,000, depreciation expense of $30,000, a decrease in accounts receivable of $35,000, an increase in inventory of $20,000, a decrease in accounts payable of $25,000, an increase in plant and equipment of $200,000, an increase in bonds payable of $70,000, and $80,000 of common stock dividends paid. What is the net increase (decrease) in Whitetree Inc.'s cash flows?

net increase of $25,000

net increase of $50,000

net decrease of $25,000

net decrease of $50,000

Question #6 (1 point)

Friedrich Inc. has total assets of $580,000, total liabilities of $210,000, a preferred stock obligation of $20,000, and 50,000 outstanding shares of common stock. What is Friedrich Inc.'s book value per share?

7.8

7.4

7.0

8.0

Question #7 (1 point)

In 2012, Dunlop Corp. had sales of $1.5 million, a profit margin of 10%, common stock of $250,000 and retained earnings of $500,000. What was Dunlop's return on equity?

20%

5%

15%

10%

Question #8 (1 point)

We wish to accumulate $10,000 after 5 years. If we can secure an interest rate of 6%, how much must be set aside at the end of each of the five periods?

$1,470

$1,774

$1,528

$1,684

Question #9 (1 point)

The following data can be found on Jorgonson Inc.'s balance sheet: Cash of $300,000; marketable securities of $120,000; accounts receivable of $1,000,000; inventory of $750,000; net plant and equipment of $900,000; and total current liabilities of $960,000. Calculate Jorgonson Inc.'s quick ratio.

2.26

3.20

1.48

2.42

Question #10 (1 point)

Ludwig Corp. has $750,000 in assets and $250,000 of debt. They report net income of $125,000. What is the return on the stockholders’ equity?

18.3%

25.0%

16.7%

10.0%

Question #11 (1 point)

Money markets refer to those markets dealing with securities that have a life of one year or less and capital markets refer to those markets where securities have a life greater than one year.

True

False

Question #12 (1 point)

Assume a company anticipates selling 10,000 units a year. Each order will cost the company $40 to place; and the price per unit is $16 with a 20% carrying cost to maintain the average inventory. Please find the EOQ.

250

500

1000

750

Question #13 (1 point)

A firm sells 60,000 units, and their fixed costs are $50,000, variable cost per unit is $4.00, and the price per unit is $5.00. If a firm has $2,000 in interest payments, what is the firm's degree of combined leverage?

12.5

7.5

15.0

10.0

Question #14 (1 point)

Manchester Building Inc. has beginning inventory of 25,000 units, will sell 100,000 units for the month, and desires to reduce ending inventory to 50% of beginning inventory. How many units should Manchester produce?

75,000

62,500

125,000

87,500

Question #15 (1 point)

Inventory is generally considered less liquid than cash.

False

True

Question #16 (1 point)

When a corporation uses the financial markets to raise new funds, the sale of securities is said to be made in the secondary market.

True

False

Question #17 (1 point)

Assume that George will need $10,000 in eight years. How much will he need to deposit today if his bank can guarantee him an interest rate of 6%?

$6,274

$5,836

$7,234

$6,753

Question #18 (1 point)

Assume an investor has $4,000. What is the worth after ten years if it grows at 6% each year?

$4,953

$4,386

$7,163

$5,234