### Study Guide

Exam 1 FIN370 Fall 2011 – Version B Key 1. You are analyzing a company that has cash of $2,000, accounts receivable of $3,700, fixed assets of $10,900, accounts payable of $6,600, and inventory of $4,100. What is the quick ratio? a. 1. 48 B. .86 c. 3. 30 d. .67 e. .30 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 003 #45 SECTION: 3. 2 TOPIC: QUICK RATIO TYPE: PROBLEMS 2. Solomon, Inc. has net sales of $745,100 and costs of $590,800. The depreciation expense is $82,600 and the interest paid is $15,500.

What is the amount of the firm’s operating cash flow if the tax rate is 35 percent? a. $46,605 b. $52,030 c. $71,700 D. $134,630 e. $105,720 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 002 #83 SECTION: 2. 4 TOPIC: OPERATING CASH FLOW TYPE: PROBLEMS 3. Which one of the following statements is correct? A. The NYSE has the most stringent listing requirements. b. The trading floor for NASDAQ is located in Chicago. c. The majority of the publicly traded firms in the U. S. are listed on the NYSE. d. NASDAQ is an auction market. e. The NYSE is a dealer market.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 001 #59 SECTION: 1. 6 TOPIC: STOCK EXCHANGES TYPE: CONCEPTS 4. The Laptop Company has sales of $874,000, a profit margin of 9 percent, a total asset turnover rate of . 80, and an equity multiplier of 1. 75. What is the return on equity? a. 15. 75 percent B. 12. 60 percent c. 10. 86 percent d. 7. 20 percent e. 5. 14 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 003 #81 SECTION: 3. 3 TOPIC: DU PONT IDENTITY TYPE: PROBLEMS 5. A sole proprietorship: . is taxed as a separate legal entity. b. involves significant legal costs during the formation process. c. can generally raise significant capital from non-owner sources. d. has an unlimited life. E. is relatively easy to create. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 001 #22 SECTION: 1. 3 TOPIC: SOLE PROPRIETORSHIP TYPE: CONCEPTS 6. Which of the following correctly describe a dealer market? I. Dealers match buyers with sellers. II. Dealers buy and sell for themselves at their own risk. III. Dealer trading occurs over-the-counter. IV.

Dealer transactions occur on a trading floor. a. I and III only b. I and IV only c. II and IV only d. I, II, and III only E. II and III only BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 001 #57 SECTION: 1. 6 TOPIC: DEALER MARKET TYPE: CONCEPTS 7. Which one of the following will increase the future value of a lump sum invested today? a. shortening the investment time period b. decreasing the amount of the lump sum C. increasing the rate of interest d. paying interest only at the end of the investment period e. paying simple interest rather than compound interest

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 004 #10 SECTION: 4. 1 TOPIC: FUTURE VALUE TYPE: CONCEPTS 8. Karen has $16,000 that she wants to invest for 1 year. She can invest this amount at The North Bank and earn 5. 50 percent simple interest. Or, she can open an account at The South Bank and earn 5. 39 percent interest, compounded monthly. If Karen decides to invest at The North Bank, she will: a. have a total balance of $16,862. 40 in her account after 1 year. b. have a total balance of $16,800 in her account after 1 year. c. arn the same amount as if she had invested with The South Bank. D. earn $4. 03 less than if she had invested with The South Bank. e. earn $17. 60 more than if she had invested with The South Bank. BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 004 #33 SECTION: 4. 1 TOPIC: SIMPLE VERSUS COMPOUND INTEREST TYPE: PROBLEMS 9. You want to invest an amount of money today and receive back twice that amount in the future. You expect to earn 6 percent interest. Approximately how long must you wait for your investment to double in value? . 6 years b. 10 years c. 9 years D. 12 years e. 8 years BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 004 #27 SECTION: 4. 3 TOPIC: RULE OF 72 TYPE: CONCEPTS 10. You have $2,000 today and want to quadruple your money in 10 years. What interest rate must you earn? a. 23. 11 percent b. 11. 61 percent c. 20. 13 percent d. 7. 18 percent E. 14. 87 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 004 #50 SECTION: 4. 3 TOPIC: INTEREST RATE TYPE: PROBLEMS 11.

Which one of the following actions will decrease the current ratio, all else constant? Assume the current ratio is greater than 1. 0. a. collecting payment from a customer B. purchasing inventory on credit c. selling inventory at a profit in a charge sale d. paying an account payable e. selling inventory at cost in a cash sale BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 003 #11 SECTION: 3. 2 TOPIC: CURRENT RATIO TYPE: CONCEPTS 12. Today, you deposit $10,750 in a bank account that pays 3 percent simple interest.

How much interest will you earn over the next 7 years? a. $2,086. 06 B. $2,257. 50 c. $2,471. 14 d. $2,580. 00 e. $1,935. 00 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 004 #28 SECTION: 4. 1 TOPIC: SIMPLE INTEREST TYPE: PROBLEMS 13. Grandel, Inc. has current liabilities of $10,200 and accounts receivable of $14,800. The firm has total assets of $39,700 and net fixed assets of $18,900. The owners’ equity has a book value of $16,500. What is the amount of the net working capital? a. $23,200 B. $10,600 c. $20,800 d. $31,000 e. 25,400 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 002 #59 SECTION: 2. 1 TOPIC: NET WORKING CAPITAL TYPE: PROBLEMS 14. A firm has a return on equity of 14 percent, a return on assets of 9. 5 percent, and a 30 percent dividend payout ratio. What is the sustainable growth rate? A. 10. 86 percent b. 7. 12 percent c. 9. 58 percent d. 4. 38 percent e. 2. 93 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 003 #102 SECTION: 3. 4 TOPIC: SUSTAINABLE GROWTH RATE TYPE: PROBLEMS 15.

The value of an investment after one or more time periods is called the: a. complex value. B. future value. c. true value. d. present value. e. discounted value. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEVEL OF DIFFICULTY: BASIC Ross – Chapter 004 #1 SECTION: 4. 1 TOPIC: FUTURE VALUE TYPE: DEFINITIONS 16. A firm has inventory of $1,200, accounts payable of $600, cash of $130, net fixed assets of $2,100, long-term debt of $1,900, accounts receivable of $400, and total equity of $1,330. What is the common-size percentage for the net fixed assets? a. 56. 76 percent B. 54. 83 percent c. 65. 02 percent . 61. 22 percent e. 63. 36 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 003 #37 SECTION: 3. 1 TOPIC: COMMON-SIZE STATEMENTS TYPE: PROBLEMS 17. The Fruit Co. has total assets of $7,800, fixed assets of $7,100, current liabilities of $1,500, and long-term liabilities of $4,600. What is the total debt ratio? a. .60 b. .86 C. .78 d. .65 e. .41 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 003 #49 SECTION: 3. 2 TOPIC: TOTAL DEBT RATIO TYPE: PROBLEMS 18.

The financial statements of Classic Collectables reflect cash of $15,800, accounts receivable of $31,600, accounts payable of $40,100, inventory of $54,700, long-term debt of $60,000, and net fixed assets of $99,500. The firm estimates that if it wanted to cease operations today it could sell the inventory for $39,000 and the fixed assets for $77,000. What is the market value of the assets? a. $63,300 b. $181,700 c. $201,600 D. $163,400 e. $101,500 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 002 #70 SECTION: 2. 1 TOPIC: MARKET VALUE

TYPE: PROBLEMS 19. Theresa sold 300 shares of MNO stock on the NYSE today. This transaction occurred in: a. a private placement. b. the over-the-counter market. C. the secondary market. d. a dealer market. e. the primary market. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEVEL OF DIFFICULTY: BASIC Ross – Chapter 001 #53 SECTION: 1. 6 TOPIC: SECONDARY MARKET TYPE: CONCEPTS 20. The Bake Shoppe has net working capital of $6,100, long-term debt of $10,400, total debt of $15,200, and owners’ equity of $18,900. What is the value of The Bake Shoppe’s net fixed assets? A. $23,200 b. $16,500 c. $12,800 d. 21,300 e. $18,900 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 002 #56 SECTION: 2. 1 TOPIC: NET FIXED ASSETS TYPE: PROBLEMS 21. A common-size income statement: I. expresses all values as a percent of total assets. II. should reflect a relatively constant cost of goods sold unless a firm changed the percent that it uses to mark up the wholesale price to get the retail price. III. expresses net income as 100 percent. IV. can be used to compare the performance of a firm both over time and against its industry. a. II, III, and IV only B. II and IV only c.

I and III only d. III and IV only e. I, II, and III only BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 003 #8 SECTION: 3. 1 TOPIC: COMMON-SIZE STATEMENT TYPE: CONCEPTS 22. An increase in which of the following will increase the future value of a lump sum investment made today assuming that all interest is reinvested? Assume the interest rate is a positive value. I. interest rate II. amount of the lump sum III. frequency of the interest payments IV. length of the investment period a. II, III, and IV only B. I, II, III, and IV . II and IV only d. I, II, and IV only e. I and III only BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 004 #17 SECTION: 4. 1 TOPIC: FUTURE VALUE TYPE: CONCEPTS 23. An expense that lowers net income but does not affect a firm’s cash flow is referred to as a(n): a. direct cost. B. noncash item. c. variable cost. d. period cost. e. indirect cost. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 002 #4 SECTION: 2. 2 TOPIC: NONCASH ITEMS TYPE: DEFINITIONS 24.

By definition, a bank that pays simple interest on a savings account will pay interest: a. on both the initial investment and all prior interest payments that are reinvested. b. only if all previous interest payments are reinvested. c. only at the end of the investment period. D. only on the initial investment. e. only at the beginning of the investment period. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEVEL OF DIFFICULTY: BASIC Ross – Chapter 004 #5 SECTION: 4. 1 TOPIC: SIMPLE INTEREST TYPE: DEFINITIONS 25. Working capital management includes which of the following? I. establishing the inventory level II. eciding when to pay suppliers III. determining the amount of cash needed on a daily basis IV. establishing credit terms for customers a. I and II only b. I, II, and III only c. I, II, and IV only D. I, II, III, and IV e. III and IV only BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 001 #20 SECTION: 1. 2 TOPIC: WORKING CAPITAL MANAGEMENT TYPE: CONCEPTS 26. The financial statement that summarizes a firm’s operations over a period of time is called a(n): A. income statement. b. production report. c. cash flow statement. d. balance sheet. e. eriodic operating statement. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 002 #3 SECTION: 2. 2 TOPIC: INCOME STATEMENT TYPE: DEFINITIONS 27. The average tax rate is defined as the: A. total taxes divided by total taxable income. b. total tax paid divided by total revenue. c. amount of tax due on the next dollar of taxable income. d. amount of tax due on the next dollar of revenue. e. total tax paid divided by total assets. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 002 #5 SECTION: 2. TOPIC: AVERAGE TAX RATE TYPE: DEFINITIONS 28. The potential conflict of interest between a firm’s owners and its managers is referred to as a(n): a. structure problem. b. organizational problem. c. control issue. d. management conflict. E. agency problem. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 001 #7 SECTION: 1. 5 TOPIC: AGENCY PROBLEM TYPE: DEFINITIONS 29. Anderson Enterprises currently has $400 in cash. The company owes $1,200 to suppliers for merchandise and $4,500 to the bank for a long-term loan. Customers owe Anderson’s $1,900.

The inventory has a book value of $3,700 and an estimated market value of $4,400. If Anderson’s compiled a financial statement today, how much would it show as the value of the current assets? a. $6,700 b. $5,200 c. $5,600 D. $6,000 e. $6,300 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEVEL OF DIFFICULTY: BASIC Ross – Chapter 002 #55 SECTION: 2. 1 TOPIC: CURRENT ASSETS TYPE: PROBLEMS 30. The internal growth rate is best described as the _____ growth rate achievable _____. A. maximum; without any additional external financing of any type b. minimum; if a firm maintains a constant debt-equity ratio c. aximum; without any additional external equity financing d. minimum; if a firm retains all of its net income e. maximum; if external debt financing is maximized BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 003 #4 SECTION: 3. 4 TOPIC: INTERNAL GROWTH RATE TYPE: DEFINITIONS 31. A business organization owned by two or more individuals or entities, each of whom has unlimited liability for the firm’s debts, is called a: a. dual company. b. joint stock company. c. limited partnership. D. general partnership. e. limited liability company.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 001 #5 SECTION: 1. 3 TOPIC: GENERAL PARTNERSHIP TYPE: DEFINITIONS 32. Thirteen years from now, you will be inheriting $30,000. What is this inheritance worth to you today if you can earn 4 percent interest compounded annually? A. $18,017. 22 b. $20,741. 87 c. $28,846. 15 d. $23,190. 98 e. $26,359. 88 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 004 #43 SECTION: 4. 2 TOPIC: PRESENT VALUE TYPE: PROBLEMS 33. A firm has a times interest earned ratio of 2.

This means that the firm has twice as much: A. earnings before interest and taxes as it does interest expense. b. interest expense as it does earnings before interest and taxes. c. interest expense as it does net income. d. operating cash flow as it does interest expense. e. net income as it does interest expense. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 003 #16 SECTION: 3. 2 TOPIC: TIMES INTEREST EARNED TYPE: CONCEPTS 34. The process of adding the interest earned on an investment to the original investment in order to earn more interest is called: A. ompounding. b. multiplying. c. discounting. d. indexing. e. duplicating. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEVEL OF DIFFICULTY: BASIC Ross – Chapter 004 #2 SECTION: 4. 1 TOPIC: COMPOUNDING TYPE: DEFINITIONS 35. The current value of future cash flows discounted at the appropriate discount rate is called the: a. principal value. b. future value. c. simple value. d. complex value. E. present value. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEVEL OF DIFFICULTY: BASIC Ross – Chapter 004 #6 SECTION: 4. 2 TOPIC: PRESENT VALUE TYPE: DEFINITIONS 36. The profit margin is the amount of net profit earned for every $1 of: a. xternal financing. b. total assets. c. long-term debt. d. equity. E. sales. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 003 #21 SECTION: 3. 2 TOPIC: PROFIT MARGIN TYPE: CONCEPTS 37. The sustainable growth rate is best described as the _____ growth rate achievable _____. a. minimum; if a firm ceases all dividend payments b. maximum; if external debt financing is maximized C. maximum; if a firm maintains a constant debt-equity ratio and does not issue any additional equity securities d. maximum; without external financing of any kind e. inimum; if a firm maintains a constant equity multiplier BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 003 #5 SECTION: 3. 4 TOPIC: SUSTAINABLE GROWTH RATE TYPE: DEFINITIONS 38. Which of the following are advantages of the corporate form of organization? I. ability to raise large sums of capital II. ease of ownership transfer III. corporate taxation IV. unlimited firm life a. I and II only B. I, II, and IV only c. I, II, III, and IV d. III and IV only e. II, III, and IV only BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 3

LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 001 #32 SECTION: 1. 3 TOPIC: CORPORATION TYPE: CONCEPTS 39. When net new borrowings are subtracted from the interest payments a firm pays to its creditors the result is called the: A. cash flow to creditors. b. change in net working capital. c. cash flow from assets. d. operating cash flow. e. free cash flow. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 002 #10 SECTION: 2. 4 TOPIC: CASH FLOW TO CREDITORS TYPE: DEFINITIONS 40. The primary goal of financial management is to maximize the: A. arket value of the existing stock. b. revenue growth. c. current net income. d. net working capital. e. the number of shares outstanding. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 001 #36 SECTION: 1. 4 TOPIC: GOAL OF FINANCIAL MANAGEMENT TYPE: CONCEPTS 41. Your parents just gave you a gift of $25,000. You are investing this money for 5 years at 2. 5 percent simple interest. How much money will you have at the end of the 5 years? a. $27,595 b. $28,750 c. $28,285 d. $27,500 E. $28,125 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1

LEVEL OF DIFFICULTY: BASIC Ross – Chapter 004 #29 SECTION: 4. 1 TOPIC: SIMPLE INTEREST TYPE: PROBLEMS 42. The cash generated from a firm’s normal business activities is referred to as the firm’s: a. addition to net working capital. b. operating margin. c. net profit. D. operating cash flow. e. addition to retained earnings. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 002 #8 SECTION: 2. 4 TOPIC: OPERATING CASH FLOW TYPE: DEFINITIONS 43. Net working capital is defined as: a. cash minus current liabilities. b. current assets plus current liabilities. C. urrent assets minus current liabilities. d. cash, accounts receivable, and inventory. e. current assets. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEVEL OF DIFFICULTY: BASIC Ross – Chapter 002 #1 SECTION: 2. 1 TOPIC: NET WORKING CAPITAL TYPE: DEFINITIONS 44. Auction markets: I. match sellers with buyers. II. have a physical location. III. consist solely of electronic trades. IV. are based on dealers. a. III only B. I and II only c. II only d. III and IV only e. I, III, and IV only BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 001 #58 SECTION: 1. 6 TOPIC: AUCTION MARKET TYPE: CONCEPTS 5. A firm has total assets of $456,000 and total equity of $217,000. What is the debt-equity ratio? a. 2. 10 b. 1. 48 c. .48 D. 1. 10 e. .68 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 003 #51 SECTION: 3. 2 TOPIC: DEBT-EQUITY RATIO TYPE: PROBLEMS 46. The process of managing a firm’s long-term investments is called: A. capital budgeting. b. working capital management. c. asset allocation. d. risk management. e. capital structure management. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 001 #1

SECTION: 1. 2 TOPIC: CAPITAL BUDGETING TYPE: DEFINITIONS 47. Baldwin, Inc. paid $18,500 in dividends and $44,600 in interest over the past year while net working capital increased from $10,200 to $28,200. The company purchased $30,000 in net new fixed assets and had depreciation expenses of $15,700. During the year, the firm issued $45,000 in net new equity and paid off $16,000 in long-term debt. What is the amount of Baldwin’s cash flow from assets? a. $48,000 b. $3,700 c. $30,200 D. $34,100 e. $18,000 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: INTERMEDIATE Ross – Chapter 002 #82

SECTION: 2. 4 TOPIC: CASH FLOW FROM ASSETS TYPE: PROBLEMS 48. Capital structure refers to the: a. average amount of cash equivalents held by a firm. b. amount of cash versus other short-term assets held by a firm. c. combination of short-term and long-term assets held by a firm. D. mixture of debt and equity a firm uses to finance its operations. e. types of long-term assets a firm employs in its operations. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross – Chapter 001 #2 SECTION: 1. 2 TOPIC: CAPITAL STRUCTURE TYPE: DEFINITIONS Exam 1 FIN370 Fall 2011 Summary Category |# of Questions | |BLOOMS TAXONOMY QUESTION TYPE: APPLICATION |19 | |BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION |4 | |BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE |25 | |LEARNING OBJECTIVE NUMBER: 1 |11 | |LEARNING OBJECTIVE NUMBER: 2 |12 | |LEARNING OBJECTIVE NUMBER: 3 |7 | |LEARNING OBJECTIVE NUMBER: 4 |6 | |LEVEL OF DIFFICULTY: BASIC |34 | |LEVEL OF DIFFICULTY: INTERMEDIATE |14 | |Ross – Chapter 001 |12 | |Ross – Chapter 002 |12 | |Ross – Chapter 003 |12 | |Ross – Chapter 004 |12 | |SECTION: 1. 2 |3 | |SECTION: 1. |3 | |SECTION: 1. 4 |1 | |SECTION: 1. 5 |1 | |SECTION: 1. 6 |4 | |SECTION: 2. 1 |5 | |SECTION: 2. 2 |2 | |SECTION: 2. 3 |1 | |SECTION: 2. |4 | |SECTION: 3. 1 |2 | |SECTION: 3. 2 |6 | |SECTION: 3. 3 |1 | |SECTION: 3. 4 |3 | |SECTION: 4. 1 |8 | |SECTION: 4. 2 |2 | |SECTION: 4. |2 | |TOPIC: AGENCY PROBLEM |1 | |TOPIC: AUCTION MARKET |1 | |TOPIC: AVERAGE TAX RATE |1 | |TOPIC: CAPITAL BUDGETING |1 | |TOPIC: CAPITAL STRUCTURE |1 | |TOPIC: CASH FLOW FROM ASSETS |1 | |TOPIC: CASH FLOW TO CREDITORS 1 | |TOPIC: COMMON-SIZE STATEMENT |1 | |TOPIC: COMMON-SIZE STATEMENTS |1 | |TOPIC: COMPOUNDING |1 | |TOPIC: CORPORATION |1 | |TOPIC: CURRENT ASSETS |1 | |TOPIC: CURRENT RATIO |1 | |TOPIC: DEALER MARKET |1 | |TOPIC: DEBT-EQUITY RATIO |1 | |TOPIC: DU PONT IDENTITY |1 | |TOPIC: FUTURE VALUE |3 | |TOPIC: GENERAL PARTNERSHIP |1 | |TOPIC: GOAL OF FINANCIAL MANAGEMENT |1 | |TOPIC: INCOME STATEMENT |1 | |TOPIC: INTEREST RATE |1 | |TOPIC: INTERNAL GROWTH RATE |1 | |TOPIC: MARKET VALUE |1 | |TOPIC: NET FIXED ASSETS |1 | |TOPIC: NET WORKING CAPITAL |2 | |TOPIC: NONCASH ITEMS |1 | |TOPIC: OPERATING CASH FLOW |2 | |TOPIC: PRESENT VALUE |2 | |TOPIC: PROFIT MARGIN |1 | |TOPIC: QUICK RATIO |1 | |TOPIC: RULE OF 72 |1 | |TOPIC: SECONDARY MARKET |1 | |TOPIC: SIMPLE INTEREST |3 | |TOPIC: SIMPLE VERSUS COMPOUND INTEREST 1 | |TOPIC: SOLE PROPRIETORSHIP |1 | |TOPIC: STOCK EXCHANGES |1 | |TOPIC: SUSTAINABLE GROWTH RATE |2 | |TOPIC: TIMES INTEREST EARNED |1 | |TOPIC: TOTAL DEBT RATIO |1 | |TOPIC: WORKING CAPITAL MANAGEMENT |1 | |TYPE: CONCEPTS |15 | |TYPE: DEFINITIONS |16 | |TYPE: PROBLEMS |17 |