1. All of the following are major decisions in the finance area EXCEPT one. Which one?
a. How should the firm manage its short term assets and liabilities?
b. Should the firm attempt to sell our products overseas?
c. What long term investments should the firm make?
d. What is the best way to raise funds in order to finance investments?
e. All of the following are finance decisions.
2. If a company is using only 75% of its capacity and current year sales are $600,000, then
a. the company can grow by $450,000 next year without adding assets.
b. the company can grow to $675,000 next year without adding assets.
c. The company cannot grow at all without adding assets.
d. The company can grow to $800,000 next year without adding assets.
e. There is not enough information to compute growth without adding assets.
3. The used portion of a line of credit would appear on the balance sheet
a. in the footnotes
b. in the Assets
c. in the Liabilities
d. in the Owner’s Equity
e. not at all.
4. A particular product takes 3.75 man-hours to assemble and $14.59 in raw materials. These are examples of
a. fixed costs
b. variable costs
c. non-cash expenses
d. intangible assets
e. net capital spending
5. Auto Mart International Company has a debt/equity ratio of 1.16. Which of the following is FALSE?
a. This could be considered high or low, depending on the industry.
b. The equity multiplier is 2.16.
c. For every dollar of equity, there is 1.16 in debt.
d. The company has more equity than debt.
e. The total debt ratio is .54.
6. Which of the following is TRUE about External Financing Needed?
a. It must be positive; cannot be negative.
b. It is generally the amount listed under “Asset Requirements” of the Financial Planning Model.
c. It can mean bringing in additional loans or selling new equity.
d. It cannot be computed until you have IGR and SGR.
e. None of the above is true.