FIN 300 Midterm Exam |Questions and Answers Latest
Updated 2026/2027 (Graded A+)- Toronto Metropolitan
University
1. The retention ratio equals one the ?
A) Minus, capital intensity ratio
B) Plus, dividend payout ratio
C) Plus, total asset turnover ratio
D) Minus, dividend payout ratio
E) Plus, capital intensity ratio
2. 123 Inc has a profit margin of 15%. Its total asset turnover ratio is 2 and its dividend
payout ratio is 60%. What is the company's internal growth rate?
A) 42.86%
B) 13.64%
C) 18.00%
D) 21.95%
E) 12.00%
3. 456 Inc has a profit margin of 12%. It has a capital intensity ratio of 0.80 and its
debt/equity ratio is 2. The company's net income was $100,000 and company paid a
dividend of $70,000. What is the sustainable growth rate?
A) 15.61%
B) 18.64%
C) 12.00%
D) 21.95%
E) 13.50%
4. DEF Inc is operating at 70% of fixed asset capacity. Current Sales are $500,000. By
how much can sales increase before the company must add to its fixed assets?
A) $214,286
B) $150,000
Version A Page 1
, C) $166,667
D) $125,000
E) $200,000
5. You have been told that a company had sales of $20,000 last year. The company's costs
were $16,000 last year. The company's tax rate is 30%. The company paid a dividend of
$1,120 last year. The company had assets of $50,000. It had debt of $20,000 and total
equity of $30,000. Assets and costs are proportional to sales (therefore, assets and costs
increase at the same rate as sales). The company's dividend payout ratio will not change
next year. Next year's sales are projected to be $30,000. If debt does not change next
year, and no new shares are issued by the firm, what is the amount of the external
financing needed?
A) $22,900
B) $22,480
C) $24,160
D) $23,740
E) $23,320
6. Given the following information: current assets = $400; fixed assets = $500; accounts
payable = $100; notes payable = $45; long-term debt = $455; equity = $300; sales =
$450; costs = $400; tax rate = 34%. Suppose that current assets, costs, and accounts
payable maintain a constant ratio to sales. If the firm is producing at 80% capacity, what
is the total external financing needed if sales increase 25%? Assume the firm pays no
dividends.
A) $66.25
B) $380.25
C) $33.75
D) $143.75
E) $172.50
7. You invest $500 in an account that pays 6 percent simple interest per year. How much
more could you have earned over a thirty year period if the interest had compounded
annually?
A) $1,804.25
B) $1,471.75
Version A Page 2
Updated 2026/2027 (Graded A+)- Toronto Metropolitan
University
1. The retention ratio equals one the ?
A) Minus, capital intensity ratio
B) Plus, dividend payout ratio
C) Plus, total asset turnover ratio
D) Minus, dividend payout ratio
E) Plus, capital intensity ratio
2. 123 Inc has a profit margin of 15%. Its total asset turnover ratio is 2 and its dividend
payout ratio is 60%. What is the company's internal growth rate?
A) 42.86%
B) 13.64%
C) 18.00%
D) 21.95%
E) 12.00%
3. 456 Inc has a profit margin of 12%. It has a capital intensity ratio of 0.80 and its
debt/equity ratio is 2. The company's net income was $100,000 and company paid a
dividend of $70,000. What is the sustainable growth rate?
A) 15.61%
B) 18.64%
C) 12.00%
D) 21.95%
E) 13.50%
4. DEF Inc is operating at 70% of fixed asset capacity. Current Sales are $500,000. By
how much can sales increase before the company must add to its fixed assets?
A) $214,286
B) $150,000
Version A Page 1
, C) $166,667
D) $125,000
E) $200,000
5. You have been told that a company had sales of $20,000 last year. The company's costs
were $16,000 last year. The company's tax rate is 30%. The company paid a dividend of
$1,120 last year. The company had assets of $50,000. It had debt of $20,000 and total
equity of $30,000. Assets and costs are proportional to sales (therefore, assets and costs
increase at the same rate as sales). The company's dividend payout ratio will not change
next year. Next year's sales are projected to be $30,000. If debt does not change next
year, and no new shares are issued by the firm, what is the amount of the external
financing needed?
A) $22,900
B) $22,480
C) $24,160
D) $23,740
E) $23,320
6. Given the following information: current assets = $400; fixed assets = $500; accounts
payable = $100; notes payable = $45; long-term debt = $455; equity = $300; sales =
$450; costs = $400; tax rate = 34%. Suppose that current assets, costs, and accounts
payable maintain a constant ratio to sales. If the firm is producing at 80% capacity, what
is the total external financing needed if sales increase 25%? Assume the firm pays no
dividends.
A) $66.25
B) $380.25
C) $33.75
D) $143.75
E) $172.50
7. You invest $500 in an account that pays 6 percent simple interest per year. How much
more could you have earned over a thirty year period if the interest had compounded
annually?
A) $1,804.25
B) $1,471.75
Version A Page 2
