FIN 301 MIDTERM EXAM QUESTIONS
& ACCURATE ANSWERS PASSED
RATED 100% COMPLETE
Using the balance sheet model of the firm, corporate finance may be thought of as the
analysis of three primary subject areas. What are these areas: - Correct Answer ✔✔
capital budgeting, capital structure, net working capital
capital structure - Correct Answer ✔✔ the mix of long-term debt and equity of a firm
Which of the following should be the main goal of the financial manager of a
corporation? - Correct Answer ✔✔ to maximize current market value per share of
company stock
Secondary market - Correct Answer ✔✔ the market for the exchange of securities that
have already been issued by a firm
The ___ of a corporation include the corporation's name, its intended life, its business
purpose, and the number of shares that can be issued. - Correct Answer ✔✔ Articles of
Incorporation
Limited liability is never a characteristic of which form(s) of an organization? - Correct
Answer ✔✔ Sole proprietorship
Operating Cash Flow - Correct Answer ✔✔ Earnings before Interest and Taxes +
Depreciation Expense - Taxes
Net Capital Spending - Correct Answer ✔✔ Ending Net Fixed Assets - Beginning Net
Fixed Assets + Depreciation Expense
Change in Net Working Capital (NWC) - Correct Answer ✔✔ Ending Networking Capital
- Beginning NWC
Cash Flow From Assets - Correct Answer ✔✔ Operating Cash flow - Net capital
spending - change in NWC
Which of the following statements does not accurately describe the relationship
between book value and market value? - Correct Answer ✔✔ market value always
exceeds book value
, The ___ tax bracket is the extra tax that would be paid if one more dollar were earned
and the ___ tax bracket is the tax bill divided by net income. - Correct Answer ✔✔
marginal, average
Current Ratio - Correct Answer ✔✔ Current Assets / Current Liabilities
Total Debt / Equity Ratio - Correct Answer ✔✔ Total Debt / Total Equity
Return on Equity - Correct Answer ✔✔ Net Income / Total Equity
Components of the DuPont Identity - Correct Answer ✔✔ operating efficiency, asset
use efficiency, financial leverage
In words, what does a profit margin of .12 mean? - Correct Answer ✔✔ For each $1 of
sales generated, the firm has a net income of twelve cents.
The adjusting factor in the creation of a common size income statement is - Correct
Answer ✔✔ sales
External Financing Needed (EFN) - Correct Answer ✔✔ "The Plug" for anything
unaccounted for
Internal Growth Rate - Correct Answer ✔✔ maximum growth rate a firm can achieve
without external financial (taking on additional long-term debt or raising new equity) of
any kind (EFN = 0)
IGR Formula - Correct Answer ✔✔ (ROA x b) / (1 - (ROA x b))
Sustainable Growth Rate - Correct Answer ✔✔ maximum growth rate a firm can
achieve without equity financing (taking on debt is ok) while maintaining the same
debt/equity ratio
SGR Formula - Correct Answer ✔✔ (ROE x b) / (1 - (ROE x b))
Six Elements of a Financial Planning Model - Correct Answer ✔✔ Economic
Assumptions
Sales Forecast
Pro Forma Statements
Asset Requirements
Financial Requirements
The Plug
Since the capital intensity ratio is the reciprocal of the ___ ratio, one could say that it is
an alternative way to measure the ability of managers to utilize assets effectively. -
Correct Answer ✔✔ Total Asset Turnover
& ACCURATE ANSWERS PASSED
RATED 100% COMPLETE
Using the balance sheet model of the firm, corporate finance may be thought of as the
analysis of three primary subject areas. What are these areas: - Correct Answer ✔✔
capital budgeting, capital structure, net working capital
capital structure - Correct Answer ✔✔ the mix of long-term debt and equity of a firm
Which of the following should be the main goal of the financial manager of a
corporation? - Correct Answer ✔✔ to maximize current market value per share of
company stock
Secondary market - Correct Answer ✔✔ the market for the exchange of securities that
have already been issued by a firm
The ___ of a corporation include the corporation's name, its intended life, its business
purpose, and the number of shares that can be issued. - Correct Answer ✔✔ Articles of
Incorporation
Limited liability is never a characteristic of which form(s) of an organization? - Correct
Answer ✔✔ Sole proprietorship
Operating Cash Flow - Correct Answer ✔✔ Earnings before Interest and Taxes +
Depreciation Expense - Taxes
Net Capital Spending - Correct Answer ✔✔ Ending Net Fixed Assets - Beginning Net
Fixed Assets + Depreciation Expense
Change in Net Working Capital (NWC) - Correct Answer ✔✔ Ending Networking Capital
- Beginning NWC
Cash Flow From Assets - Correct Answer ✔✔ Operating Cash flow - Net capital
spending - change in NWC
Which of the following statements does not accurately describe the relationship
between book value and market value? - Correct Answer ✔✔ market value always
exceeds book value
, The ___ tax bracket is the extra tax that would be paid if one more dollar were earned
and the ___ tax bracket is the tax bill divided by net income. - Correct Answer ✔✔
marginal, average
Current Ratio - Correct Answer ✔✔ Current Assets / Current Liabilities
Total Debt / Equity Ratio - Correct Answer ✔✔ Total Debt / Total Equity
Return on Equity - Correct Answer ✔✔ Net Income / Total Equity
Components of the DuPont Identity - Correct Answer ✔✔ operating efficiency, asset
use efficiency, financial leverage
In words, what does a profit margin of .12 mean? - Correct Answer ✔✔ For each $1 of
sales generated, the firm has a net income of twelve cents.
The adjusting factor in the creation of a common size income statement is - Correct
Answer ✔✔ sales
External Financing Needed (EFN) - Correct Answer ✔✔ "The Plug" for anything
unaccounted for
Internal Growth Rate - Correct Answer ✔✔ maximum growth rate a firm can achieve
without external financial (taking on additional long-term debt or raising new equity) of
any kind (EFN = 0)
IGR Formula - Correct Answer ✔✔ (ROA x b) / (1 - (ROA x b))
Sustainable Growth Rate - Correct Answer ✔✔ maximum growth rate a firm can
achieve without equity financing (taking on debt is ok) while maintaining the same
debt/equity ratio
SGR Formula - Correct Answer ✔✔ (ROE x b) / (1 - (ROE x b))
Six Elements of a Financial Planning Model - Correct Answer ✔✔ Economic
Assumptions
Sales Forecast
Pro Forma Statements
Asset Requirements
Financial Requirements
The Plug
Since the capital intensity ratio is the reciprocal of the ___ ratio, one could say that it is
an alternative way to measure the ability of managers to utilize assets effectively. -
Correct Answer ✔✔ Total Asset Turnover
