VoyForums
[ Show ]
Support VoyForums
[ Shrink ]
VoyForums Announcement: Programming and providing support for this service has been a labor of love since 1997. We are one of the few services online who values our users' privacy, and have never sold your information. We have even fought hard to defend your privacy in legal cases; however, we've done it with almost no financial support -- paying out of pocket to continue providing the service. Due to the issues imposed on us by advertisers, we also stopped hosting most ads on the forums many years ago. We hope you appreciate our efforts.

Show your support by donating any amount. (Note: We are still technically a for-profit company, so your contribution is not tax-deductible.) PayPal Acct: Feedback:

Donate to VoyForums (PayPal):

[ Login ] [ Contact Forum Admin ] [ Main index ] [ Post a new message ] [ Search | Check update time | Archives: 1, [2] ]

[ Next Thread | Previous Thread | Next Message | Previous Message ]

Date Posted: 06:59:53 06/25/01 Mon
Author: Charles Hodges
Subject: Here are two sample Exam 1 from Hodges

EXAM 1 FINANCE 3300 SPRING 1999

NAME ________________________ Student # _____________________

YOU HAVE 1 ½ HOURS TO COMPLETE THIS EXAM

Instructions:
1) The exam is closed book and closed notes. No scrap paper is allowed, use the back of the exam if necessary.
2) Read the entire exam before starting. The best strategy is generally to “cherry pick”. In other words, solve the easiest (and/or most familiar) problems first. This will save time (and energy) that can be expended on the more difficult problems.
3) Partial points are based on readily observable evidence that you know at least part of the solution concept. The more evidence presented (and the clearer the evidence), the better the chance for partial points. In other words, SHOW ALL WORK!
4) If you have additional time remaining, give your work one last check.
5) True/False questions are worth 1 1/2 points. Multiple choice questions are worth 3 points. Number one is b. Short answer questions usually take less than three sentences and are worth 4 points. Problems are worth the number of points listed in the question.

PART I. CONCEPT QUESTIONS

1. The goal of the financial manager should be to maximize earnings per share.
A. True B. False

2. In which financial statement does one find the account “Additional Paid-in Capital” ? What would cause the amount listed in “Additional Paid-in Capital” to change from year to year?





3. Suppose a profitable firm wants to maintain a specific TIE ratio. If the firm knows the level of its debt, the interest rate it will pay on that debt and the applicable tax rate, the firm can then calculate the Net Income level required to maintain its target TIE ratio.
a. True b. False

4. Which of the following would not be listed in a profitable firm’s income statement?
A. Operating Profit.
B. Interest Paid.
C. Depreciation.
D. Cost of goods sold.
E. All of the above would be listed in a profitable firm’s income statement.

5. List the three basic methods of manipulating financial statements as discussed in class.
6. (Fill in the blanks) Finance would suggest that ____________(Historical/Future) ______________ (Earnings/Cash Flows) are most important when valuing any investment.

7. You have loaned money to a company. The company is supposed to repay the loan in 60 days. As a short-term creditor concerned only with a company's ability to meet its financial obligation to you, which one of the following combinations of ratios would you most likely prefer?
Current Debt
ratio TIE ratio
a. 0.5 0.5 0.33
b. 1.0 1.0 0.50
c. 1.5 1.5 0.50
d. 2.0 1.0 0.67
e. 2.5 0.5 0.71

8. What is the purpose of the Income Statement? Does the Income Statement cover a period of time or a point in time?


9. What are Asset Management ratios intended to measure? List one example of an Asset Management ratio.





10. Your profitable, tax-paying firm is buying a machine to perform some task and will pay cash for the machine on the last day of the year. You are considering two machines that are completely equal (i.e., they have identical levels of performance, efficiency, expected maintenance costs, depreciation periods, etc.), except that one machine costs more than the other machine. Given this information, which of the following is true about next year’s financial statements?
A. We will have lower net income and lower cash flow with the more expensive machine.
B. We will have higher net income and higher cash flow with the more expensive machine.
C. We will have higher net income and lower cash flow with the more expensive machine.
D. We will have lower net income and higher cash flow with the more expensive machine.
E. We do not have enough information to answer the question.

11. We often look for “evidence” of a company’s positive (or negative) cash flow. List some things that an employee might see if a profitable firm was experiencing cash flow difficulties?
12. In the statement of cash flows, which of the following is a source of funds?
A. Increases in accounts receivable.
B. Increases in prepaid expenses.
C. Increase in notes payable.
D. Increase in fixed assets.
E. All of the above are sources of cash.

13. List the three areas of finance.





14. According to the book, What is the purpose of Financial Forecasting?




15. For firms using accrual accounting, the financial statement that lists a firm’s investing cash flows and operating expenses over a period of time is the:
A. Income Statement.
B. Balance Sheet.
C. Statement of Cash Flows.
D. Sources and Uses of Funds statement.
E. None of the above.

16. What are three limitations of ratio analysis?







17. Net Fixed Assets are always less than, or equal to, Gross fixed assets.
A. True B. False

18. A profitable firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio?
(a) liquidity.
(b) leverage.
(c) efficiency.
(d) profitability.
(e) none of the above.

PART II. PROBLEMS
1. Fill in the missing numbers for the Aboutt, Inc. 1997 annual financial statements. Assume all balance sheet accounts are 1997 ending balances unless other wise noted. Missing numbers are worth 1 1/2 points unless otherwise noted.

Profit before taxes $ 162 Accrued Wages $________
Depreciation $90 Income tax $ ________
Net income $ ________(3 points) Total current liabilities$ __________
Long term debt $ 205 Net sales $ 907
Total liabilities and owner's equity $_____ Beginning Retained Earnings $132
Additional Paid-in Capital $94 Common stock ($.03 par) $ 24
Ending retained earnings $ 143 Cost of goods sold ________
Beginning Net Fixed Assets $351 Cash $ ____________
Accounts payable $ 193 Accounts receivable $230
Inventories $ 95
Gross profit $ 467 Rent $70
Total Assets $ ___________ Research and Development Expense $7
Advertising $110 Operating Profit $ _________
Interest expense $8 Total Current assets $ 421
Ending Net fixed assets $ 397 Dividends $74























Fill in the blanks below:
Purchase of Fixed Assets ________(3 points)
Dividends per Share ________(3 points)
2. Use this information to answer the questions below. Assume all sales are credit sales.
Balance Sheet 12/31/96 12/31/97
Cash $ 315 $ 155
Accounts Receivable 275 275
Inventory 600 320
Total Current Assets 1,190 750
Plant and Equipment 1,648 2,313
Less: Acc Depr (500) (730)
Net plant and equipment 1,148 1,583
Long Term Investments 52 27
Total assets $2,390 $2,360

Accounts payable $ 150 $ 315
Notes payable 125 106
Total Current liabilities 275 421
Bonds 500 430
Common Stock (.05 par) 175 165
Paid-in-capital 775 644
Retained earnings 665 700
Total owners' equity 1,615 1,509
Total liabilities and
owners' equity $2,390 $2,360

Income Statement (1996) (1997)
Sales (100% credit) $1,100 $1,330
Cost of Goods Sold 600 760
Gross profit 500 570
Operating expenses 20 170
Depreciation 160 230
Net operating income 320 170
Interest expense 64 57
Net income before taxes 256 113
Taxes 87 66
Net income $ 169 $ 47

2a. (2 points) For this firm, what was the smallest source of funds in 1997?

2b. (2 points) What was the firm’s 1997 Net Cash Flow?

2c. (2 points) Calculate the 1997 Gross Profit Margin?


2d. (2 points) Calculate the 1997 Current Ratio?


2e. (2 points) Calculate the 1997 Inventory Turnover Ratio?


2f. (2 points) What is the firm’s Debt Ratio?

2g. (3 points) Do a common size analysis on the 1997 Balance Sheet.
________________________________________________
The following problems do not use the financial statements from the previous page.

3. Last year your company had; sales = $150, Net Profit Margin = 12%, Assets = $80, and a debt-to-equity ratio=3. Calculate the Return on Assets (2 points) and Return on Equity (3 points).





4. (4 points) The Atlanta Company has determined that it return on equity is 15%. You have the following information, debt ratio = 45% and Total Asset Turnover = 2.8. What is the firm’s profit margin?






5. (4 points) Indicate how the following ratios match up to industry averages. (Interpret them in relation to the category in which they would be classified.)
AAAAA Company Industry Interpretation
Current ratio 2.0 2.7
Return on Assets 4% 8%
Inventory turnover 17.5 9.9
Times interest
earned 13.2 15.4

TEST 1 FINANCE 3300 SPRING 1999

NAME ________________________ Student # _____________________

YOU HAVE 1 ½ HOURS TO COMPLETE THIS EXAM

Instructions:
1) The exam is closed book and closed notes. No scrap paper is allowed, use the back of the exam if necessary.
2) Read the entire exam before starting. The best strategy is generally to “cherry pick”. In other words, solve the easiest (and/or most familiar) problems first. This will save time (and energy) that can be expended on the more difficult problems.
3) Partial points are based on readily observable evidence that you know at least part of the solution concept. The more evidence presented (and the clearer the evidence), the better the chance for partial points. In other words, SHOW ALL WORK!
4) If you have additional time remaining, give your work one last check.
5) True/False questions are worth 1 1/2 points. Multiple choice questions are worth 3 points. Number one is b. Short answer questions usually take less than three sentences and are worth 4 points. Problems are worth the number of points listed in the question.

PART I. CONCEPT QUESTIONS

1. The goal of the financial manager should be to maximize earnings per share.
A. True B. False

2. In which financial statement does one find the account “Additional Paid-in Capital”? What would cause the amount listed in “Additional Paid-in Capital” to change from year to year?





3. List the three basic methods of manipulating financial statements as discussed in class.





4. (Fill in the blanks) Finance would suggest that ____________(Historical/Future) ______________ (Earnings/Cash Flows) are most important when valuing any investment.

5. What are Profitability ratios intended to measure? List one example of a Profitability ratio.
6. You have loaned money to a company. The company is supposed to repay the loan in 60 days. As a short-term creditor concerned only with a company's ability to meet its financial obligation to you, which one of the following combinations of ratios would you most likely prefer?
Current Debt
ratio TIE ratio
a. 0.5 0.5 0.33
b. 1.0 1.0 0.50
c. 1.5 1.5 0.50
d. 2.0 1.0 0.67
e. 2.5 0.5 0.71

7. What is the purpose of the Income Statement? Does the Income Statement cover a period of time or a point in time?





8. Your profitable, tax-paying firm is buying a machine to perform some task and will pay cash for the machine on the last day of the year. You are considering two machines that are completely equal (i.e., they have identical levels of performance, efficiency, expected maintenance costs, depreciation periods, etc.), except that one machine costs more than the other machine. Given this information, which of the following is true about next year’s financial statements?
A. We will have lower net income and lower cash flow with the more expensive machine.
B. We will have higher net income and higher cash flow with the more expensive machine.
C. We will have higher net income and lower cash flow with the more expensive machine.
D. We will have lower net income and higher cash flow with the more expensive machine.
E. We do not have enough information to answer the question.

9. We often look for “evidence” of a company’s positive (or negative) cash flow. List some things that an employee might see if a profitable firm was experiencing cash flow difficulties?





10. List the three areas of finance.
11. In the statement of cash flows, which of the following is a use of funds?
A. Decreases in accounts receivable.
B. Decrease in prepaid expenses.
C. Decrease in notes payable.
D. Decrease in fixed assets.
F. All of the above are uses of cash.


12. According to the book, What is the purpose of Financial Forecasting?



13. For firms using accrual accounting, the financial statement that lists a firm’s investing cash flows and operating expenses over a period of time is the:
A. Income Statement. B. Balance Sheet.
C. Statement of Cash Flows. D. Sources and Uses of Funds statement.
E. None of the above.

14. What are three limitations of ratio analysis?







15. Gross Fixed Assets are always greater than, or equal to, net fixed assets.
A. True B. False

16. A profitable firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio?
(a) liquidity. (b) leverage.
(c) efficiency. (d) profitability.
(e) none of the above.

17. Suppose a profitable firm wants to maintain a specific TIE ratio. If the firm knows the level of its debt, the interest rate it will pay on that debt and the applicable tax rate, the firm can then calculate the Net Income level required to maintain its target TIE ratio.
a. True b. False

18. Which of the following would not be listed in a profitable firm’s income statement?
A. Operating Profit.
B. Interest Paid.
C. Depreciation.
D. Cost of goods sold.
E. All of the above would be listed in a profitable firm’s income statement.
PART II. PROBLEMS
1. Fill in the missing numbers for the Aboutt, Inc. 1997 annual financial statements. Assume all balance sheet accounts are 1997 ending balances unless other wise noted. Missing numbers are worth 1 1/2 points unless otherwise noted.

Profit before taxes $ 162 Accrued Wages $________
Depreciation $90 Income tax $ ________
Net income $ ________(3 points) Total current liabilities __________
Long term debt $ 205 Net sales $ 807
Total liabilities and owner's equity $_____ Beginning Retained Earnings $132
Additional Paid-in Capital $85 Common stock ($.03 par) $ 24
Ending retained earnings $ 143 Cost of goods sold ________
Beginning Net Fixed Assets $351 Cash $ ____________
Accounts payable $ 193 Accounts receivable $230
Inventories $ 95
Gross profit $ 467 Rent $80
Total Assets $ ___________ Research and Development Expense $7
Advertising $110 Operating Profit $ _________
Interest expense $18 Total Current assets $ 421
Ending Net fixed assets $ 378 Dividends $94























Fill in the blanks below:
Purchase of Fixed Assets ________(3 points)
Dividends per Share ________(3 points)
2. Use this information to answer the questions below. Assume all sales are credit sales.
Balance Sheet 12/31/96 12/31/97
Cash $ 315 $ 255
Accounts Receivable 275 275
Inventory 600 220
Total Current Assets 1,190 750
Plant and Equipment 1,648 2,313
Less: Acc Depr (500) (730)
Net plant and equipment 1,148 1,583
Long Term Investments 52 27
Total assets $2,390 $2,360

Accounts payable $ 150 $ 315
Notes payable 125 106
Total Current liabilities 275 421
Bonds 500 430
Common Stock (.05 par) 175 165
Paid-in-capital 775 644
Retained earnings 665 700
Total owners' equity 1,615 1,509
Total liabilities and
owners' equity $2,390 $2,360

Income Statement (1996) (1997)
Sales (100% credit) $1,100 $1,330
Cost of Goods Sold 600 570
Gross profit 500 760
Operating expenses 20 170
Depreciation 160 230
Net operating income 320 360
Interest expense 64 57
Net income before taxes 256 303
Taxes 87 136
Net income $ 169 $ 167

2a. (2 points) For this firm, what was the smallest source of funds in 1997?

2b. (2 points) What was the firm’s 1997 Net Cash Flow?

2c. (2 points) Calculate the 1997 Gross Profit Margin?


2d. (2 points) Calculate the 1997 Quick Ratio?


2e. (2 points) Calculate the 1997 Total Asset Turnover Ratio?


2f. (2 points) What is the firm’s Debt Ratio?

2g. (3 points) Do a common size analysis on the 1997 Balance Sheet.
________________________________________________
The following problems do not use the financial statements from the previous page.

3. Last year your company had; sales = $100, Net Profit Margin = 12%, Assets = $80, and a debt-to-equity ratio=3. Calculate the Return on Assets (2 points) and Return on Equity (3 points).





4. (4 points) The Atlanta Company has determined that it return on equity is 15%. You have the following information, debt ratio = 35% and Total Asset Turnover = 2.8. What is the firm’s profit margin?






5. (4 points) Indicate how the following ratios match up to industry averages. (Interpret them in relation to the category in which they would be classified.)
AAAAA Company Industry Interpretation
Current ratio 2.0 2.7
Return on Assets 4% 8%
Inventory turnover 17.5 9.9
Times interest
earned 13.2 15.4

[ Next Thread | Previous Thread | Next Message | Previous Message ]

Replies:

[ Contact Forum Admin ]

Forum timezone: GMT-8
VF Version: 3.00b, ConfDB:
Before posting please read our privacy policy.
VoyForums(tm) is a Free Service from Voyager Info-Systems.
Copyright © 1998-2019 Voyager Info-Systems. All Rights Reserved.