Corporate Finance – Exam Questions
With New Update Solutions
/. Jenna has been promoted and is now in charge of all external financing. In other
words, she is in charge of: - Answer-✅Capital Structure Management
/.Matt and Alicia created a firm that is a separate legal entity and will share ownership of
that firm on a 75/25 basis. Which type of entity did they create if they have no personal
liability for the firm's debts? - Answer-✅Corporation
/.Which one of the following statements about a limited partnership is correct? - Answer-
✅TBD
/.One advantage of the corporate form of organization is the: - Answer-✅Ability to raise
larger sums of equity capital than other organizational forms.
/.The Sarbanes-Oxley Act of 2002 has: - Answer-✅essentially made officers of publicly
traded firms personally responsible for the firm's financial statements.
/.Which one of the following situations is most apt to create an agency conflict? -
Answer-✅Basing management bonuses on the length of employment.
/.An agency issue is most apt to develop when: - Answer-✅the control of a firm is
separated from the firm's ownership.
/.A firm has common stock of $99, paid-in surplus of $360, total liabilities of $455,
current assets of $480, and net fixed assets of $690. What is the amount of the
shareholders' equity? - Answer-✅$715
/.Recently, the owner of Martha's Wares encountered severe legal problems and is
trying to sell her business. The company built a building at a cost of $1,270,000 that is
currently appraised at $1,470,000. The equipment originally cost $750,000 and is
currently valued at $497,000. The inventory is valued on the balance sheet at $440,000
but has a market value of only one-half of that amount. The owner expects to collect 98
percent of the $240,200 in accounts receivable. The firm has $10,800 in cash and owes
a total of $1,470,000. The legal problems are personal and unrelated to the actual
business. What is the market value of this firm? - Answer-✅$963,196
/.Ivan's, Inc., paid $470 in dividends and $580 in interest this past year. Common stock
increased by $190 and retained earnings decreased by $116. What is the net income
for the year? - Answer-✅$354
, /.You find the following financial information about a company: net working capital =
$1,140; fixed assets = $6,345; total assets = $8,670; and long-term debt = $4,671. What
are the company's total liabilities? - Answer-✅$5,856
/.You find the following financial information about a company: net working capital =
$963; fixed assets = $7,041; total assets = $11,558; and long-term debt = $4,277. What
is the company's total equity? - Answer-✅$3,727
/.At the beginning of the year, Shinedown, Corp., had a long-term debt balance of
$45,630. During the year, the company repaid a long-term loan in the amount of
$11,055. The company paid $3,940 in interest during the year, and opened a new long-
term loan for $9,840. How much is the ending long-term debt account on the company's
balance sheet? - Answer-✅$44,415
/.A firm has sales of $1,210, net income of $225, net fixed assets of $542, and current
assets of $298. The firm has $100 in inventory. What is the common-size balance sheet
value of inventory? - Answer-✅11.90%
/.A firm has total debt of $1,410 and a debt-equity ratio of .26. What is the value of the
total assets? - Answer-✅$6,833.08
/.Lee Sun's has sales of $3,450, total assets of $3,150, and a profit margin of 6 percent.
The firm has a total debt ratio of 42 percent. What is the return on equity? - Answer-
✅11.33 percent
/.Jupiter Explorers has $8,800 in sales. The profit margin is 4 percent. There are 5,300
shares of stock outstanding, with a price of $1.60 per share. What is the company's
price-earnings ratio? - Answer-✅24.09 times
/.A firm has a return on equity of 23 percent. The total asset turnover is 2.2 and the
profit margin is 6 percent. The total equity is $5,600. What is the net income? - Answer-
✅$1,288
/.Windswept, Inc.
2017 Income Statement
($ in millions)
Net sales$12,050
Cost of goods sold 7,800
Depreciation 480
Earnings before interest and taxes $3,770
Interest paid 94
Taxable income $3,676
Taxes 1,287
With New Update Solutions
/. Jenna has been promoted and is now in charge of all external financing. In other
words, she is in charge of: - Answer-✅Capital Structure Management
/.Matt and Alicia created a firm that is a separate legal entity and will share ownership of
that firm on a 75/25 basis. Which type of entity did they create if they have no personal
liability for the firm's debts? - Answer-✅Corporation
/.Which one of the following statements about a limited partnership is correct? - Answer-
✅TBD
/.One advantage of the corporate form of organization is the: - Answer-✅Ability to raise
larger sums of equity capital than other organizational forms.
/.The Sarbanes-Oxley Act of 2002 has: - Answer-✅essentially made officers of publicly
traded firms personally responsible for the firm's financial statements.
/.Which one of the following situations is most apt to create an agency conflict? -
Answer-✅Basing management bonuses on the length of employment.
/.An agency issue is most apt to develop when: - Answer-✅the control of a firm is
separated from the firm's ownership.
/.A firm has common stock of $99, paid-in surplus of $360, total liabilities of $455,
current assets of $480, and net fixed assets of $690. What is the amount of the
shareholders' equity? - Answer-✅$715
/.Recently, the owner of Martha's Wares encountered severe legal problems and is
trying to sell her business. The company built a building at a cost of $1,270,000 that is
currently appraised at $1,470,000. The equipment originally cost $750,000 and is
currently valued at $497,000. The inventory is valued on the balance sheet at $440,000
but has a market value of only one-half of that amount. The owner expects to collect 98
percent of the $240,200 in accounts receivable. The firm has $10,800 in cash and owes
a total of $1,470,000. The legal problems are personal and unrelated to the actual
business. What is the market value of this firm? - Answer-✅$963,196
/.Ivan's, Inc., paid $470 in dividends and $580 in interest this past year. Common stock
increased by $190 and retained earnings decreased by $116. What is the net income
for the year? - Answer-✅$354
, /.You find the following financial information about a company: net working capital =
$1,140; fixed assets = $6,345; total assets = $8,670; and long-term debt = $4,671. What
are the company's total liabilities? - Answer-✅$5,856
/.You find the following financial information about a company: net working capital =
$963; fixed assets = $7,041; total assets = $11,558; and long-term debt = $4,277. What
is the company's total equity? - Answer-✅$3,727
/.At the beginning of the year, Shinedown, Corp., had a long-term debt balance of
$45,630. During the year, the company repaid a long-term loan in the amount of
$11,055. The company paid $3,940 in interest during the year, and opened a new long-
term loan for $9,840. How much is the ending long-term debt account on the company's
balance sheet? - Answer-✅$44,415
/.A firm has sales of $1,210, net income of $225, net fixed assets of $542, and current
assets of $298. The firm has $100 in inventory. What is the common-size balance sheet
value of inventory? - Answer-✅11.90%
/.A firm has total debt of $1,410 and a debt-equity ratio of .26. What is the value of the
total assets? - Answer-✅$6,833.08
/.Lee Sun's has sales of $3,450, total assets of $3,150, and a profit margin of 6 percent.
The firm has a total debt ratio of 42 percent. What is the return on equity? - Answer-
✅11.33 percent
/.Jupiter Explorers has $8,800 in sales. The profit margin is 4 percent. There are 5,300
shares of stock outstanding, with a price of $1.60 per share. What is the company's
price-earnings ratio? - Answer-✅24.09 times
/.A firm has a return on equity of 23 percent. The total asset turnover is 2.2 and the
profit margin is 6 percent. The total equity is $5,600. What is the net income? - Answer-
✅$1,288
/.Windswept, Inc.
2017 Income Statement
($ in millions)
Net sales$12,050
Cost of goods sold 7,800
Depreciation 480
Earnings before interest and taxes $3,770
Interest paid 94
Taxable income $3,676
Taxes 1,287
