FIN 3403 EXAM REVIEW QUESTIONS WITH
VERIFIED SOLUTIONS
Which of the following legal forms of organizations is characterized by unlimited liability?
A.
limited partnership
B.
C−corporation
C.
corporation
D.
sole proprietorship
D
The tax liability of a corporation with ordinary income of $105,000 is ________.
Range of taxable income
Marginal rate
$ 0 to $ 50,000 15%
50,000 to 75,000 25
75,000 to 100,000 34
100,000 to 335,000 39
335,000 to 10,000,000 34
10,000,000 to 15,000,000 35
A.
$24,200
Jennings, Inc. has a tax liability of $170,000 on pretax income of $500,000. What is the
average tax rate for Jennings, Inc.?
34%
In general, most corporate capital gains are taxed at ________ tax rate.
regular corporate
Firm ABC had operating profits of $100,000, taxes of $17,000, interest expense of $34,000,
and preferred dividends of $5,000. What was the firm's net profit after taxes?
49,000
Candy Corporation had pretax profits of $1.2 million, an average tax rate of 34 percent,
and it paid preferred stock dividends of $50,000. There were 100,000 shares outstanding
and no interest expense. What was Candy Corporation's earnings per share?
7.42
, Which of the following is a limitation of ratio analysis?
A.
Ratios that reveal large deviations from the norm merely indicate the possibility of a
problem.
Your answer is correct.
B.
Financial ratios cannot reveal certain specific aspects of a firm's financial position.
C.
Ratio analysis assumes that inflation has no effect on a firm's business.
D.
It is difficult to access audited financial statements for ratio analysis.
A
A firm has a current ratio of 1; in order to improve its liquidity ratios, this firm might
________.
A.
increase inventory, thereby increasing current assets and the current and quick ratios
B.
improve its collection practices and pay accounts payable, thereby decreasing current
liabilities and decreasing the current and quick ratios
C.
decrease current liabilities by utilizing more longminus−term debt, thereby increasing the
current and quick ratios
Your answer is correct.
D.
improve its collection practices by providing extended credit policy
C
Nico Corporation has cost of goods sold of $300,000 and inventory of $30,000, then the
inventory turnover is ________ and the average age of inventory is ________.
10; 36.5
A firm with sales of $1,000,000, net profits after taxes of $30,000, total assets of $1,500,000,
and common stockholders' investment of $750,000 has a return on equity of ________.
4%
Book value per share is the ratio of ________.
common stock equity to number of outstanding common shares
Other things being equal, a decrease in total asset turnover will result in ________ in the
return on total assets.
a decrease
VERIFIED SOLUTIONS
Which of the following legal forms of organizations is characterized by unlimited liability?
A.
limited partnership
B.
C−corporation
C.
corporation
D.
sole proprietorship
D
The tax liability of a corporation with ordinary income of $105,000 is ________.
Range of taxable income
Marginal rate
$ 0 to $ 50,000 15%
50,000 to 75,000 25
75,000 to 100,000 34
100,000 to 335,000 39
335,000 to 10,000,000 34
10,000,000 to 15,000,000 35
A.
$24,200
Jennings, Inc. has a tax liability of $170,000 on pretax income of $500,000. What is the
average tax rate for Jennings, Inc.?
34%
In general, most corporate capital gains are taxed at ________ tax rate.
regular corporate
Firm ABC had operating profits of $100,000, taxes of $17,000, interest expense of $34,000,
and preferred dividends of $5,000. What was the firm's net profit after taxes?
49,000
Candy Corporation had pretax profits of $1.2 million, an average tax rate of 34 percent,
and it paid preferred stock dividends of $50,000. There were 100,000 shares outstanding
and no interest expense. What was Candy Corporation's earnings per share?
7.42
, Which of the following is a limitation of ratio analysis?
A.
Ratios that reveal large deviations from the norm merely indicate the possibility of a
problem.
Your answer is correct.
B.
Financial ratios cannot reveal certain specific aspects of a firm's financial position.
C.
Ratio analysis assumes that inflation has no effect on a firm's business.
D.
It is difficult to access audited financial statements for ratio analysis.
A
A firm has a current ratio of 1; in order to improve its liquidity ratios, this firm might
________.
A.
increase inventory, thereby increasing current assets and the current and quick ratios
B.
improve its collection practices and pay accounts payable, thereby decreasing current
liabilities and decreasing the current and quick ratios
C.
decrease current liabilities by utilizing more longminus−term debt, thereby increasing the
current and quick ratios
Your answer is correct.
D.
improve its collection practices by providing extended credit policy
C
Nico Corporation has cost of goods sold of $300,000 and inventory of $30,000, then the
inventory turnover is ________ and the average age of inventory is ________.
10; 36.5
A firm with sales of $1,000,000, net profits after taxes of $30,000, total assets of $1,500,000,
and common stockholders' investment of $750,000 has a return on equity of ________.
4%
Book value per share is the ratio of ________.
common stock equity to number of outstanding common shares
Other things being equal, a decrease in total asset turnover will result in ________ in the
return on total assets.
a decrease
