Question 1 1 / 1 point
All else equal, excess capacity means that more external financing is required to support increases in sales than would be needed if the firm previously operated full capacity.
Question options:
True
False
Question 2 1 / 1 point
A good control system helps to ensure that plans are executed properly and to facilitate a timely modification of plans if the assumptions upon which the initial plans are based turn out to be inaccurate.
Question options:
True
False
Question 3 1 / 1 point
The inventory turnover and current ratios are related. The combination of a high current ratio and a low inventory turnover ratio relative to the industry norm might indicate that the firm is maintaining too high an inventory level or that part of the inventory is obsolete or damaged.
Question options:
True
False
Question 4 1 / 1 point
Refer to Trident Food Corporation. What is the degree of total leverage for Trident Foods?
Question options:
a) 42.86
b) 10.71
c) 71.43
d) 17.86
e) 6.43
View Feedback
Question 5 1 / 1 point
The ____ shows the investments made by the firm in the form of assets and the means by which the assets were financed.
Question options:
a) income statement
b) balance sheet
c) statement of cash flows
d) statement of retained earnings
Question 6 1 / 1 point
Hensley Corporation uses breakeven analysis to study the effects of expansion projects it considers. Currently, the firm's plastic bag business segment has fixed operating costs of $120,000, while its unit price per carton is $1.20 and its variable unit cost is $0.60. The firm is considering a new bag machine and an automatic carton folder as modifications to its existing production lines. With the expansion, fixed costs would rise to $240,000, but variable cost would drop to $0.41 per unit. One key benefit is that Hensley can lower its wholesale price to its distributors to $1.05 per carton (i.e., its selling price), and this would likely more than double its market share, as it will become the lowest cost producer. What is the change in the operating breakeven volume with the proposed project?
Question options:
a) 100,000 units
b) 175,000 units
c) 75,000 units
d) 200,000 units
e) 0 units
View Feedback
Question 7 1 / 1 point
Potential changes in sales prices, fixed operating costs and/or variable costs should be taken into account when using breakeven analysis.
Question options:
True
False
Question 8 1 / 1 point
Compuvac Company has just completed its first pass forecast using the projected balance sheet method. The firm has determined that it needs $4 million in new debt which can be sold at par with a 10% annual coupon. Additionally, the firm will sell 500,000 shares of new common equity at $18.10 per share. Next year's expected dividend is $0.48 per share. The firm expects that taxes will be $160,000 less under the second pass than they were under the first pass based on a 40% tax rate. Given this information, what is the incremental change in AFN for Compuvac going from the first pass to the second pass?
Question options:
a) $240,000
b) $0
c) $480,000
d) $160,000
e) $640,000
Question 9 1 / 1 point
In the event of a firm's liquidation, the order in which claimholders are paid off is
Question options:
a) debtholders, common stockholders, preferred stockholders
b) common stockholders, preferred stockholders, debtholders
c) debtholders, preferred stockholders, common stockholders
d) common stockholders, debtholders, preferred stockholders
Question 10 1 / 1 point
With lumpy assets, a small projected increase in sales could potentially mandate a significant increase in plant and equipment, which would lead to a very large financial requirement.
Question options:
True
False
All else equal, excess capacity means that more external financing is required to support increases in sales than would be needed if the firm previously operated full capacity.
Question options:
True
False
Question 2 1 / 1 point
A good control system helps to ensure that plans are executed properly and to facilitate a timely modification of plans if the assumptions upon which the initial plans are based turn out to be inaccurate.
Question options:
True
False
Question 3 1 / 1 point
The inventory turnover and current ratios are related. The combination of a high current ratio and a low inventory turnover ratio relative to the industry norm might indicate that the firm is maintaining too high an inventory level or that part of the inventory is obsolete or damaged.
Question options:
True
False
Question 4 1 / 1 point
Refer to Trident Food Corporation. What is the degree of total leverage for Trident Foods?
Question options:
a) 42.86
b) 10.71
c) 71.43
d) 17.86
e) 6.43
View Feedback
Question 5 1 / 1 point
The ____ shows the investments made by the firm in the form of assets and the means by which the assets were financed.
Question options:
a) income statement
b) balance sheet
c) statement of cash flows
d) statement of retained earnings
Question 6 1 / 1 point
Hensley Corporation uses breakeven analysis to study the effects of expansion projects it considers. Currently, the firm's plastic bag business segment has fixed operating costs of $120,000, while its unit price per carton is $1.20 and its variable unit cost is $0.60. The firm is considering a new bag machine and an automatic carton folder as modifications to its existing production lines. With the expansion, fixed costs would rise to $240,000, but variable cost would drop to $0.41 per unit. One key benefit is that Hensley can lower its wholesale price to its distributors to $1.05 per carton (i.e., its selling price), and this would likely more than double its market share, as it will become the lowest cost producer. What is the change in the operating breakeven volume with the proposed project?
Question options:
a) 100,000 units
b) 175,000 units
c) 75,000 units
d) 200,000 units
e) 0 units
View Feedback
Question 7 1 / 1 point
Potential changes in sales prices, fixed operating costs and/or variable costs should be taken into account when using breakeven analysis.
Question options:
True
False
Question 8 1 / 1 point
Compuvac Company has just completed its first pass forecast using the projected balance sheet method. The firm has determined that it needs $4 million in new debt which can be sold at par with a 10% annual coupon. Additionally, the firm will sell 500,000 shares of new common equity at $18.10 per share. Next year's expected dividend is $0.48 per share. The firm expects that taxes will be $160,000 less under the second pass than they were under the first pass based on a 40% tax rate. Given this information, what is the incremental change in AFN for Compuvac going from the first pass to the second pass?
Question options:
a) $240,000
b) $0
c) $480,000
d) $160,000
e) $640,000
Question 9 1 / 1 point
In the event of a firm's liquidation, the order in which claimholders are paid off is
Question options:
a) debtholders, common stockholders, preferred stockholders
b) common stockholders, preferred stockholders, debtholders
c) debtholders, preferred stockholders, common stockholders
d) common stockholders, debtholders, preferred stockholders
Question 10 1 / 1 point
With lumpy assets, a small projected increase in sales could potentially mandate a significant increase in plant and equipment, which would lead to a very large financial requirement.
Question options:
True
False
