age 1 of 221
FINA 5320 FINAL EXAM STUDY GUIDE 2025/2026
COMPLETE QUESTIONS WITH CORRECT DETAILED
ANSWERS || 100% GUARANTEED PASS <BRAND
NEW VERSION>
A firm wants a sustainable growth rate of 3.23 percent while
maintaining a dividend payout ratio of 29 percent and a profit
margin of 8 percent. The firm has a capital intensity ratio of 2.
What is the debt-equity ratio that is required to achieve the
firm's desired rate of growth? .....Answer.......Sustainable growth
rate = .0323 = [ROE × (1 - .29)]/{1 - [ROE × (1 - .29)]}
ROE = .04407
ROE = .04407 = .08 × (1/2) × Equity multiplier
Equity multiplier = 1.10
,age 2 of 221
Debt-equity ratio = 1.10 - 1
= .10 times
Which one of these represents the best means of increasing
current shareholder value? .....Answer.......Increasing the current
value of the overall firm
Which form of business structure typically has the greatest
potential for agency problems? .....Answer.......Corporation
The basic regulatory framework for the public trading of
securities in the United States was provided by the:
.....Answer.......Securities Act of 1933 and the Securities Exchange
Act of 1934.
Muffy's Muffins had net income of $2,535. The firm retains 70
percent of net income. During the year, the company sold $475
,age 3 of 221
in common stock. What was the cash flow to shareholders?
.....Answer.......Cash flow to stockholders = (1 − .70) × $2,535 −
475
= $286
Red Barchetta Co. paid $27,500 in dividends and $28,311 in
interest over the past year. During the year, net working capital
increased from $13,506 to $18,219. The company purchased
$42,000 in fixed assets and had a depreciation expense of
$16,805. During the year, the company issued $25,000 in new
equity and paid off $21,000 in long-term debt. What was the
company's cash flow from assets? .....Answer.......Cash flow from
assets = ($28,311 + 21,000) + ($27,500 − 25,000) =
$51,811
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Free cash flow is: .....Answer.......cash that the firm can distribute
to creditors and stockholders.
Ratios that measure a firm's financial leverage are known as
________ ratios. .....Answer.......long-term solvency
A firm has a return on equity of 19 percent. The total asset
turnover is 1.8 and the profit margin is 7 percent. The total
equity is $3,700. What is the net income? .....Answer.......Net
income = .19 × $3,700 = $703
Mario's Home Systems has sales of $2,790, costs of goods sold
of $2,130, inventory of $498, and accounts receivable of $427.
How many days, on average, does it take Mario's to sell its
inventory? .....Answer.......Inventory turnover = $2,130/$498 =
4.2771
Days' sales in inventory = 365 days/4.2771 = 85.34 days
FINA 5320 FINAL EXAM STUDY GUIDE 2025/2026
COMPLETE QUESTIONS WITH CORRECT DETAILED
ANSWERS || 100% GUARANTEED PASS <BRAND
NEW VERSION>
A firm wants a sustainable growth rate of 3.23 percent while
maintaining a dividend payout ratio of 29 percent and a profit
margin of 8 percent. The firm has a capital intensity ratio of 2.
What is the debt-equity ratio that is required to achieve the
firm's desired rate of growth? .....Answer.......Sustainable growth
rate = .0323 = [ROE × (1 - .29)]/{1 - [ROE × (1 - .29)]}
ROE = .04407
ROE = .04407 = .08 × (1/2) × Equity multiplier
Equity multiplier = 1.10
,age 2 of 221
Debt-equity ratio = 1.10 - 1
= .10 times
Which one of these represents the best means of increasing
current shareholder value? .....Answer.......Increasing the current
value of the overall firm
Which form of business structure typically has the greatest
potential for agency problems? .....Answer.......Corporation
The basic regulatory framework for the public trading of
securities in the United States was provided by the:
.....Answer.......Securities Act of 1933 and the Securities Exchange
Act of 1934.
Muffy's Muffins had net income of $2,535. The firm retains 70
percent of net income. During the year, the company sold $475
,age 3 of 221
in common stock. What was the cash flow to shareholders?
.....Answer.......Cash flow to stockholders = (1 − .70) × $2,535 −
475
= $286
Red Barchetta Co. paid $27,500 in dividends and $28,311 in
interest over the past year. During the year, net working capital
increased from $13,506 to $18,219. The company purchased
$42,000 in fixed assets and had a depreciation expense of
$16,805. During the year, the company issued $25,000 in new
equity and paid off $21,000 in long-term debt. What was the
company's cash flow from assets? .....Answer.......Cash flow from
assets = ($28,311 + 21,000) + ($27,500 − 25,000) =
$51,811
, age 4 of 221
Free cash flow is: .....Answer.......cash that the firm can distribute
to creditors and stockholders.
Ratios that measure a firm's financial leverage are known as
________ ratios. .....Answer.......long-term solvency
A firm has a return on equity of 19 percent. The total asset
turnover is 1.8 and the profit margin is 7 percent. The total
equity is $3,700. What is the net income? .....Answer.......Net
income = .19 × $3,700 = $703
Mario's Home Systems has sales of $2,790, costs of goods sold
of $2,130, inventory of $498, and accounts receivable of $427.
How many days, on average, does it take Mario's to sell its
inventory? .....Answer.......Inventory turnover = $2,130/$498 =
4.2771
Days' sales in inventory = 365 days/4.2771 = 85.34 days
