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2018_2019_winter_fisv_2000_mid_term_exam__part_1_individual__chapters_1_2_3_5__due_via_ulearn_no_later_than_midnight_january_19_2019.docx

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Name______________________Date: DUE via uLearn no later than midnight January 19, 2019
2018 -2019 Winter Term
FISV 2000
Part 1- individually- 50 points
Chapters 1,2,3,5
Due via ulearn no later than midnight Saturday January 19, 2019
Instructions
1. Please type answers into this word document. For problems show calculations and
answers. If using excel, attach excel worksheet (or copy/paste into this document)
2. Submit via uLearn on or before Due Date
3. You may use your textbook to answer these questions.
4. You may not collaborate/co-author with another student or any other individual to
write answers for this exam. This assignment is for a grade and must be the student’s
individual work.
5. NO LATE Assignment WILL BE ACCEPTED.
Part 1 Critical Thinking (5 points each)
Chapter 1
1.
What are the three types of financial management decisions? For each type of decision, give an
example of a business transaction that would be relevant.
ANSWER:
2.
What are the four primary disadvantages of a sole proprietorship and partnership forms of
business organization? What benefits are there to these types of business organizations as
opposed to the corporate form?
ANSWER:
3.
What is the primary disadvantage of the corporate form of organization? Name at least two
advantages of corporate organization.
ANSWER:
4.
What goal should always motivate the actions of a firm’s financial manager?
ANSWER:
5.
Who owns a corporation? Describe the process whereby the owner’s control the firm’s
management. What is the main reason an agency relationship exists in the corporate form of
organization? In this context, what kinds of problems can arise?
ANSWER:
1
Name______________________Date: DUE via uLearn no later than midnight January 19, 2019
Critical Thinking Questions
Chapter 2
1.
What does liquidity measure? Explain the trade-off a firm faces between high liquidity and
low liquidity levels.
Answer:
2.
Why might the revenue and cost figures shown on a standard income statement not be
representative of the actual cash inflows and outflows that occurred during a period?
Answer:
3.
In preparing a balance sheet, why do you think standard accounting practice focuses on
historical cost rather than market value?
Answer:
4.
Under standard accounting rules, it is possible for a company’s liabilities to exceed its
assets. When this occurs, the owner’s equity is negative. Can this happen with market
values? Why or why not?
Answer:
5. Could a company’s change in NWC be negative in a given year? (hint, yes). Explain how this
might come about. What about net capital spending?
Answer:
Critical Thinking Questions
Chapter 3
1. In recent years, Dixie Co. has greatly increased its current ratio. At the same time, the quick
ratio has fallen. What has happened? Has the liquidity of the company changed?
Answer:
2
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2. Explain what it means for a firm to have a current ratio equal to .50. Would the firm be
better off if the current ratio were 1.50? What if it were 15.0? Explain your answers.
Answer:
3. Fully explain the kind of information the following financial ratios provide about a firm:
a.
Quick Ratio
Answer:
b. Cash Ratio
Answer:
c. Total Asset turnover
Answer:
d. Equity multiplier
Answer:
e. Long-term debt ratio
Answer:
f. Times Interest earned ratio
Answer:
g. Profit Margin
Answer:
h. Return on Assets
Answer:
i. Return on Equity
Answer:
3
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j. Price Earnings Ratio
Answer:
Critical Thinking Questions
Chapter 5
1. The basic present value equation has four parts. What are they?
Answer:
2. What is compounding? What is discounting?
Answer:
3. Would you be willing today $24,099 today in exchange for $100,000 in 30 years? What
would be the key considerations in answering yes or no? Would your answer depend on
who is making the promise to repay?
Answer:
Part 2 Problems (4 points each)
1. SDJ, Inc., has a net working capital of $1,920, current liabilities of $4,380, and inventory of
$3,750. What is the Current Ratio? What is the Quick Ratio?
Calculations:
Answers:
Current Ratio: ____
Quick Ratio: ____
2. Shelton, Inc., has sales of $17.5 million, total assets of $13.1 million, and total debt of $5.7
million. If the profit margin is 6 percent, what is net income? What is ROA? What is ROE?
Calculations:
Answers:
Net Income: ____
ROA: ____
ROE: ____
4
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3. Aguilera Corp. has a current accounts receivable balance of $438,720. Credit sales for the
year just ended were $5,173,820. What is the receivables turnover? The days’ sales in
receivables? How long did it take on average for credit customers to pay off their accounts
during the past year?
Calculations:
Answers:
Receivables turnover: ____
Days’ sales in receivables: ____
Average number of days for credit customers to pay off their accounts: ____
4. The Green Corporation has ending inventory of $417,381, and cost of goods sold for the
year just ended was $4,682,715. What is the inventory turnover? The days’ sales in
inventory? How long on average did a unit of inventory sit on the shelf before it was sold?
Calculations:
Answers:
Inventory turnover: ____
Days sales inventory: ____
Number of days’ inventory sat on shelf: ____
5. Levine, Inc., has a total debt ratio of 0.53. What is the debt-equity ratio? What is the equity
multiplier?
Calculations:
Answers:
Debt-equity ratio: ____
Equity multiplier: ____
5

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