Megaframe computer company
It has $900,000 in long-term debt. The stockholders equity is $900,000. What is the total debt to asset ratio? A)45% (correct) B)40% C)55% D)none of the above 6. At the break-even point, a firm’s profits are A)greater than zero. B)less than zero. C)equal to zero. (correct) D)Not enough information to tell 7. If a firm has a break-even point of 20,000 units and the contribution margin on the firm’s single product is $3. 00 per unit and fixed costs are $60,000, what will the firm’s net income be at sales of 30,000 units? A)$90,000 (correct) B)$30,000 C)$15,000 D)$45,000
A firm has forecasted sales of $3,000 in April, $4,500 in May and $6,500 in June. All sales are on credit. 30% is collected the month of sale and the remainder the following month. What will be balance in accounts receivable at the beginning of July? A)$1,950 B)$6,500 C)$4,550 (correct) D)$5,100 9. Mr. Blochirt is creating a college investment fund for his daughter.
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He will put in $850 per year for the next 15 years and expects to earn a 8% annual rate of return. How much money will his daughter have when she starts college? A)$11,250 B)$12,263 C)$24,003 D)$23,079
None of the above 10. In determining the future value of a single amount, one measures A)the future value of periodic payments at a given interest rate. B)the present value of an amount discounted at a given interest rate. (correct) C)the future value of an amount allowed to grow at a given interest rate. D)the present value of periodic payments at a given interest rate. 11. Companies that have higher risk than a competitor in the same industry will generally have A)to pay a higher interest rate than its competitors. B)a lower relative stock price than its competitors.
A higher cost of funds than its competitors. D)all of the above. (correct) 12. The statement of cash flows does not include which of the following sections? A)cash flows from operating activities B)cash flows from sales activities (correct) C)cash flows from investing activities D)cash flows from financing activities 13. A firm has $200,000 in current assets, $400,000 in long-term assets, $80,000 in current liabilities, and $200,000 in long-term liabilities. What is its net working capital? A)$120,000 (correct) B)$320,000 C)$520,000 D)none of the above 14. TRUE OR FALSE?
The first Nobel Prizes given to finance professors was for their contributions to capital structure theory and portfolio theories of risk and return. (true) Use the following to answer questions 15-16: MEGAFRAME COMPUTER COMPANY Balance Sheet As of December 31, 2003 ASSETS Cash $ 40,000 Accounts Receivable 60,000 Inventory 90,000 New Plant and Equipment 220,000 Total Assets $410,000 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts Payable $ 60,000 Accrued Expenses 40,000 Long-Term debt 130,000 Common Stock 60,000 Paid-In capita 20,000 Retained earnings 100,000.
Total Liabilities and Stockholders’ Equity $410,000 MEGAFRAME COMPUTER COMPANY Income Statement For the Year Ended December 31, 2003 Sales (all on credit) $720,000 Cost of Goods Sold 500,000 Gross Profit 220,000 Sales and Administrative Expense 20,000 Depreciation 40,000 Operating Profit 160,000 Interest Expense 16,000 Profit before Taxes 144,000 Taxes (30%) 43,200 Net Income $100,800 15. Using the DuPont method, return on assets (investment) for Megaframe computer is approximately A)15% B)25% C)29% D)35% (correct) 16. The firm’s debt to asset ratio is A)56. 1% B)47. 22% C)33. 33% D)none of the above (correct)