1. In 2020, a firms ratio of current assets to total assets is 0.4:1. In 2021, this ratio is 0.6:1. Given the change in the ratio, what would be the possible effect on the firms profit?Single choice.

(1 Point)

the profit is more likely to decrease

no effect on profit

the profit is more likely to increase

the profit is more likely to remain stable

2. What is the capital intensity ratio if total assets are $2,000, current liabilities are $500, and sales for the base year are $4,000?Single choice.

(2 Points)

0.375

0.625

1

0.5

3. ABC firm uses the internal rate of return (IRR) to select projects. Calculate the IRR for each of the given two projects and recommend a better project based on IRR. Project T-Shirt requires an initial investment of $15,000 and generates cash inflows of $8,000 per year for 4 years. Project Board Shorts requires an initial investment of $25,000 and produces cash inflows of $12,000 per year for 5 years.Single choice.

(2 Points)

Based on IRR analysis, ABC firm should choose project T-Shirt.

Based on IRR analysis, ABC firm Tech should choose nothing.

Based on IRR analysis, ABC firm should choose project Board Shorts.

Based on IRR analysis, ABC firm should choose both the projects.

4. A firm can increase its profit by:Single choice.

(1 Point)

not following the COVID-19 SOPs

only if the firm increases its costs of production

decreasing revenues and increasing costs

increasing revenues and decreasing costs

5. ABC firm is considering an investment in a project. The project involves an overhaul of the existing system; it will cost $45,000 and generate cash inflows of $20,000 per year for the next 3 years. Using an 8% cost of capital, what is the projects NPV?Single choice.

(2 Points)

$4,242 (Approx.)

$2,242 (Approx.)

$6,542 (Approx.)

-$6,992 (Approx.)

6. If a firms dividend payout ratio is 33%, its retention ratio must be:Single choice.

(1 Point)

76%

50%

67%

100%

7.Rapidly growing companies usually require:Single choice.

(1 Point)

less increase in sales

less increase in assets

large increase in assets

decrease in sales

8.The current assets and total assets of ABC firm were $500 and $800 in 2020, respectively. In 2021, the firm has current assets of $300 and total assets of $800. Given these changes, what would be the effect on the firms risk?Single choice.

(1 Point)

the risk is more likely to decrease

the risk is more likely to increase

the risk is more likely to remain stable

no effect on risk

9.Which of the following statement is correct?Single choice.

(1 Point)

Accounts payable do not change the number of days a firms resources are tied up in the operating cycle.

Accounts payable increase the number of days a firms resources are tied up in the operating cycle.

Accounts payable reduce the number of days a firms resources are tied up in the operating cycle.

Accounts receivables reduce the number of days a firms resources are tied up in the operating cycle.

10.ABC Firm turns over its inventory five times each year, has an average payment period of 25 days, and has an average collection period of 50 days. The firms annual sales are $3.5 million. Assume there is no difference in the investment per dollar of sales in inventory, receivables, and that there is a 180-day year. What is the firms daily cash operating expenditure?Single choice.

(3 Points)

$19,444

86 days

61 days

$9,722

11.Given that a firms sales are cyclic and its investment in operating assets also varies according to its sales cycle, which of the following statements is correct?Single choice.

(1 Point)

The firm will need seasonal funds only

The firm will need both seasonal and permanent funds

The firm will need permanent funds only

The firm does not need funds

12.A benefit of relying on long term funds is:Single choice.

(1 Point)

Long term funds are usually cheaper than short term funds

Long term funds are usually expensive than long term funds

Long term funds ensure that the funds are available when needed

Long term funds are usually costly than short term funds

13.A companys total assets are $1,300, spontaneous liabilities are $300, the profit margin is 4%, the dividend payout ratio is 40%, current year sales are $3,000, and expected sales for the next year are $3,500. What is the AFN?Single choice.

(3 Points)

$81

$96

$67

$56

14.ABC firm is considering a capital expenditure that requires an initial investment of $45,000 and returns after-tax cash inflows of $7,000 per year for 10 years. The firm has a maximum acceptable payback period of 8 years. Based on the determination of the payback period for this project, the company should:Single choice.

(2 Points)

Reject the project

Do nothing

Accept the project

Hire a marketing manager to determine the payback period

15.ABC firm has been buying an item in lots of 900 units, which is three months supply. The cost per unit is $12 and the order cost is $16 per order and the carrying cost is 25%.Single choice.

(2 Points)

147 units

196 units

98 units

85 units

16.A firm should try:Single choice.

(1 Point)

breaching the COVID-19 SOPs

to maximize the length of the cash conversion cycle

to minimize the length of the cash conversion cycle

delaying the collection from accounts receivables

17.Which of the following statements is NOT true?Single choice.

(1 Point)

Preparing cash budget is a key aspect of a firms cash planning

The financial planning process always begins with the preparation of short term plans that guide the preparation of long term plans

Short term plans are devised from the long term plans

Strategic plans guide the formulation of operating plans

18.Given that a firms current liabilities to total assets ratio is increased by 30% in 2021 as compared to 2020, what might be its effect on the firms profitability?Single choice.

(1 Point)

no effect on profit

the profit is more likely to remain unchanged

the profit is more likely to decrease

the profit is more likely to increase

19.ABC firm has cash = $4,565, closing inventory = $2,756, accounts payables = $1,768, accounts receivables = $3,489, truck = $2,793. What is the firms net working capital?Single choice.

(1 Point)

$9,024

$6,249

$11,835

$9,042

20.Under the ABC inventory system, the two-bin method is usually suitable for the:Single choice.

(1 Point)

A group items

C group items

Both A and B group items

B group items

21.36. What is the total amount of spontaneous liabilities if cash = $900, accounts payables & accruals = $800, and bank loan = $50?Single choice.

(2 Points)

$50

$100

$950

$800

22.If a companys net income is $50,000 and wishes to retain 60% of its net income, what would be its amount of dividend for the current year?Single choice.

(2 Points)

$30,000

$0

$50,000

$20,000

23.A companys total assets are $2,500, spontaneous liabilities are $500, the profit margin is 4%, the dividend payout ratio is 40%, current year sales are $6,000, and expected sales for the next year are $8,000. What is the projected increase in the assets of the company?Single choice.

(3 Points)

$667

$500

$833

$625

24.In January, a companys cash receipts are $420, cash disbursements are $426, and the opening cash balance is $100. In February, the companys cash receipts are $640 and cash disbursements are $836. In March, the companys cash receipts are $680 and cash disbursements are $610. Assume that the company wishes to maintain a minimum cash balance of $50 each month. What is the required total financing OR excess cash balance in the month of March?Single choice.

(3 Points)

In March, the company requires total financing of $82

In March, the company has excess cash balance of $82

In March, the company requires total financing of $41

In March, the company has excess cash balance of $41

25.Given that a firms sales and its investment in operating assets are constant, which of the following statements is correct?Single choice.

(1 Point)

The firm will need permanent funds only

The firm will need both seasonal and permanent funds

The firm will need seasonal funds only

The firm does not need funds

26.A companys sales are $4,000, the cost is $3,000, and net income is $40. What is the companys profit margin?Single choice.

(2 Points)

0.1%

4%

1%

0.01%

27.If a companys retention ratio is 25% and it has paid $30,000 dividend to its shareholders, what was the net income of the company?Single choice.

(2 Points)

$40,000

$0

$10,000

$30,000

28.A companys capital intensity ratio is 0.8:1, spontaneous liabilities to sales ratio is 0.05:1, the profit margin is 5%, the dividend payout ratio is 25%, current year sales are $2,000, and expected sales for the next year are $3,500. How many external funds (AFN) the company needs to meet its expected growth of sales in the next year?Single choice.

(3 Points)

$563.75

$993.75

$665.25

$1,081.25

29.The economic order quantity (EOQ) model is usually suitable for the management of:Single choice.

(1 Point)

only B group items

only A group items

only C group items

Both A and B group items

30.Using the Hamada equation, what is the unlevered beta for Firm A with the following data: bL = 1.25; T = 40%; Debt/Assets = 0.42.Single choice.

(2 Points)

1.32

0.8714

0.6572

0.7841