FMF CGE Exam Questions and Answers – 300 Practice Questions with Solutions Newest Complete Questions And Correct Detailed Answers| Already Graded A+

FMF CGE Exam Questions and Answers – 300 Practice Questions with Solutions Newest Complete Questions And Correct Detailed Answers| Already Graded A+ Which of the following is correct? A. Issuing common stock will increase a company's financial leverage, B. As the inventory turnover increases, the number of days required to sell the inventory one time also increases. 2 FMF CGE Exam C. One would expect the book value of a share of stock to be about the same as the stock's market value. D. The acid-test ratio is always smaller than the current ratio. E. If the acid-test ratio is less than one, then paying off some current liabilities with cash will increase the acid-test (quick) ratio. – Correct Answer :D. The acid-test ratio is always smaller than the current ratio. A higher degree of operating leverage compared with the industry average implies that the firm a. Has higher variable costs. b. Has profit that is more sensitive to changes in sales volume. Is more profitable. d. Is less risky. - Correct Answer :b. Has profit that is more sensitive to changes in sales volume. Which of the following is correct? a. PM Company has estimated its economic order quantity for Part MN at 2,400 units for the coming year. If ordering costs are P200 and carrying costs are P0.50 per unit per year, the estimated total annual usage is 7,400 units. b. PM Corp.'s economic order quantity for Material QR is 500 units. This E0Q is based on annual demand of 5,000 units and ordering costs of P12.50. The annual carrying cost per unit for Material QR is 0.66. c. PM Co. produces Product Z for various retailers. For the coming year, it has estimated it will consume 500 ounces of Material Y. Its carrying costs for a year is P2 per ounce. No safety stock is maintained. If the E0 100 ounces, what is the cost per order is P20. d. PM Company buys 5,000 units of Material V annually for its Product 1267. The cost of receiving and placing an order is P20,000 including handling charges of P8,000. Annual carrying costs are – 3 FMF CGE Exam Correct Answer :c. PM Co. produces Product Z for various retailers. For the coming year, it has estimated it will consume 500 ounces of Material Y. Its carrying costs for a year is P2 per ounce. No safety stock is maintained. If the E0 100 ounces, what is the cost per order is P20. Which of the following statements is CORRECT? a. Since debt financing raises the firm's financial risk, increasing the target debt ratio will always increase the WACC. b. Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce its WACC. c. Increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing. However, this action still may raise the company's WACC. d. Increasing a company's debt ratio will typically increase the marginal costs of both debt and equity financing. However, this action still may lower the company's WACC. e. Since a firm's beta coefficient is not affected by its use of financial leverage, leverage does not affect the cost of equity. – Correct Answer :c. Increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing. However, this action still may raise the company's WACC. A weakness of the internal rate of return method for screening investment projects is that it A. does not consider the time value of money. B. implicitly assumes that the company is able to reinvest cash flows from the project at the company's discount rate. C. implicitly assumes that the company is able to reinvest cash flows from the project at the internal rate of return. D. does not take into account all of the cash flows from a project. - Correct Answer :C. implicitly assumes that the company is able to reinvest cash flows from the project at the internal rate of return.