str 581 capstone final exam part 2

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STR 581 Capstone Final Examination Part 2
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• Q1. Internal reports that review the actual
  impact of decisions are prepared by          
• the controller
• department heads   
• factory workers        
• management accountants
• Q2. Horizontal analysis is also known
  as         
• trend analysis          
• vertical analysis      
• linear analysis         
• common size analysis
•  Q3. Which of the following is an advantage of
  corporations relative to partnerships and sole
  proprietorships?   
• most common form of organization         
• reduced legal liability for investors          
• lower taxes   
• harder to transfer ownership

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•  Q4. Serox stock was selling for 20 two years
  ago. The stock sold for 25 one year ago, and it
  is currently selling for 28.  Serox pays a 1.10
  dividend per year.  What was the rate of return
  for owning Serox in the most recent year? (Round
  to the nearest percent.)          
• 32   
• 16   
• 12   
• 40
• Q5. External financing needed Jockey Company has
  total assets worth 4,417,665. At year-end it
  will have net income of 2,771,342 and pay out 60
  percent as dividends. If the firm wants no
  external financing, what is the growth rate it
  can support?          
• 30.3
• 27.3
• 32.9
• 25.1

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• Q6. An unrealistic budget is more likely to
  result when it    
• has been developed by all levels of
  management.      
• has been developed in a top down fashion.     
• has been developed in a bottom up fashion.
• is developed with performance appraisal usages in
  mind.
•  
•  
• Q7. Which of the following financial statements
  is concerned with the company at a point in
  time?           
• balance sheet          
• retained earnings statement         
• statement of cash flows
• income statement
•  

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• Q8. Next year Jenkins Traders will pay a dividend
  of 3.00.  It expects to increase its dividend by
  0.25 in each of the following three years.  If
  their required rate of return if 14 percent, what
  is the present value of their dividends over the
  next four years?    
• 12.50           
• 11.63           
• 9.72 
• 13.50
•  
•  Q9. An activity that has a direct cause-effect
  relationship with the resources consumed is
  a(n)           
• product activity        
• cost driver     
• cost pool       
• overhead rate

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• Q10. The major element in budgetary control
  is        
• the approval of the budget by the stockholders
• the valuation of inventories          
• the preparation of long-term plans          
• the comparison of actual results with planned
  objectives.
•  
•  Q11. Tule Time Comics is considering a new show
  that will generate annual cash flows of 100,000
  into the infinite future. If the initial outlay
  for such a production is 1,500,000 and the
  appropriate discount rate is 6 percent for the
  cash flows, then what is the profitability index
  for the project?
• 0.11   
• 1.11   
• 0.90   
• 1.90

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•  Q12. How firms estimate their cost of capital
  The WACC for a firm is 13.00 percent. You know
  that the firms cost of debt capital is 10
  percent and the cost of equity capital is 20
  What proportion of the firm is financed with
  debt?
• 70   
• 50   
• 33   
• 30
• Q13. The most important information needed to
  determine if companies can pay their current
  obligations is the 
• relationship between current assets and current
  liabilities     
• relationship between short-term and long-term
  liabilities        
• projected net income for next year           
• net income for this year

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• Q14. Process costing is used when      
• dissimilar products are involved   
• production is aimed at fulfilling a specific
  customer order.     
• the production process is continuous.    
• costs are to be assigned to specific jobs.
•  Q15. A cost which remains constant per unit at
  various levels of activity is a   
• fixed cost      
• mixed cost    
• manufacturing cost
• variable cost
•  Q16.The group of users of accounting information
  charged with achieving the goals of the business
  is its       
• investors       
• auditors         
• creditors        
• managers

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• Q17. Teakap, Inc. has current assets of
  1,456,312 and total assets of 4,812,369 for the
  year ending September 30, 2006.  It also has
  current liabilities of 1,041,012, common equity
  of 1,500,000 and retained earnings of
  1,468,347. How much long-term debt does the firm
  have?           
• 803,010      
• 2,303,010   
• 1,844,022   
• 2,123,612
•  Q18. The cash conversion cycle?           
• begins when the firm invests cash to purchase the
  raw materials that would be used to produce the
  goods that the firm manufactures.
• estimates how long it takes on average for the
  firm to collect its outstanding accounts
  receivables balance.          
• begins when the firm uses its cash to purchase
  raw materials and ends when the firm collects
  cash payments on its credit sales.           
• shows how long the firm keeps its inventory
  before selling it.
•  

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• Q19. Ajax Corp. is expecting the following cash
  flows - 79,000, 112,000, 164,000, 84,000, and
  242,000 over the next five years.  If the
  companys opportunity cost is 15 percent, what is
  the present value of these cash flows? (Round to
  the nearest dollar.)  
• 480,906      
• 429,560      
• 414,322      
• 477,235
•  Q20. Jack Robbins is saving for a new car. He
  needs to have 21,000 for the car in three years.
  How much will he have to invest today in an
  account paying 8 percent annually to achieve his
  target? (Round to nearest dollar)         
• 26,454         
• 19,444         
• 22,680         
• 16,670
•  

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•  Q21. Which of the following presents a summary
  of changes in a firms balance sheet from the
  beginning of an accounting period to the end of
  that accounting period?      
• the statement of net worth 
• the statement of cash flows          
• the statement of working capital  
• the statement of retained earnings
•  Q22. MM Proposition 1 Dynamo Corp. produces
  annual cash flows of 150 and is expected to
  exist forever. The company is currently financed
  with 75 percent equity and 25 percent debt. Your
  analysis tells you that the appropriate discount
  rates are 10 percent for the cash flows, and 7
  percent for the debt. You currently own 10
  percent of the stock.
• If Dynamo wishes to change its capital structure
  from 75 percent equity to 60 percent equity and
  use the debt proceeds to pay a special dividend
  to shareholders, how much debt should they
  use?    
• 225  
• 600  
• 375  
• 321

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• Q23. Horizontal analysis is a technique for
  evaluating a series of financial statement data
  over a period of time        
• that has been arranged from the highest number to
  the lowest number.    
• to determine the amount and/or percentage
  increase or decrease that has taken place. 
• to determine which items are in error.     
• that has been arranged from the lowest number to
  the highest number.
•  Q24. Jayadev Athreya has started his first job.
  He will invest 5,000 at the end of each year for
  the next 45 years in a fund that will earn a
  return of 10 percent.  How much will Jayadev have
  at the end of 45 years?    
• 2,667,904   
• 5,233,442   
• 1,745,600   
• 3,594,524

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• Q25. Turnbull Corp. had an EBIT of 247 million
  in the last fiscal year.  Its depreciation and
  amortization expenses amounted to 84 million. 
  The firm has 135 million shares outstanding and a
  share price of 12.80. A competing firm that is
  very similar to Turnbull has an enterprise
  value/EBITDA multiple of 5.40.
• What is the enterprise value of Turnbull Corp.?
  Round to the nearest million dollars.         
• 1,344 million          
• 453.6 million          
• 1,315 million
• 1,787 million
•  Q26. Firms that achieve higher growth rates
  without seeking external financing        
• Have a low plowback ratio
• are highly leveraged          
• have less equity and/or are able to generate high
  net income leading to a high ROE.    
• None of these

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•  Q27. In a process cost system, product costs are
  summarized    
• on job cost sheets.  
• when the products are sold.         
• after each unit is produced.          
• on production cost reports.
•  
•  Q28. The convention of consistency refers to
  consistent use of accounting principles        
• within industries     
• among accounting periods           
• throughout the accounting period           
• among firms

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• Q29. If a companys weighted average cost of
  capital is less than  the required return on
  equity, then the firm          
• is financed with more than 50 debt      
• is perceived to be safe       
• partnership   
• has debt in its capital structure
•  
•  Q30. Your firm has an equity multiplier of
  2.47.  What is the debt-to-equity ratio?         
  
• 0         
• 1.74   
• 0.60   
• 1.47

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•  Q31. The accumulation of accounting data on the
  basis of the individual manager who has the
  authority to make day-to-day decisions about
  activities in an area is called  
• master budgeting    
• static reporting         
• responsibility accounting
• flexible accounting
•  
• Q32. Regatta, Inc., has six-year bonds
  outstanding that pay a 8.25 percent coupon rate.
  Investors buying the bond today can expect to
  earn a yield to maturity of 6.875 percent. What
  should the companys bonds be priced at today?
  Assume annual coupon payments. (Round to the
  nearest dollar.)       
• 1014
• 972  
• 923  
• 1,066

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• Q33. Variance reports are 
• internal reports for management  
• SEC financial reports         
• external financial reports
• all of these
•  
•  Q34. The break-even point is where      
• contribution margin equals total fixed
  costs.     
• total sales equal total variable costs.       
• total sales equal total fixed costs.
• total variable costs equal total fixed costs.

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• Q35. When a company assigns the costs of direct
  materials, direct labor, and both variable and
  fixed manufacturing overhead to products, that
  company is using      
• operations costing  
• product costing        
• absorption costing  
• variable costing
•  
•  Q36. Which of the following is considered a
  hybrid organizational form?           
• sole proprietorship  
• partnership   
• limited liability partnership
• corporation

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• Q38. The process of evaluating financial data
  that change under alternative courses of action
  is called           
• incremental analysis          
• contribution margin analysis        
• cost-benefit analysis          
• double entry analysis
•  
• Q39. What decision criteria should managers use
  in selecting projects when there is not enough
  capital to invest in all available positive NPV
  projects?     
• the modified internal rate of return          
• the profitability index          
• the discounted payback    
• the internal rate of return

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