1 points Save Answer QUESTION 1 While the distinctions are becoming blurred, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties. O a. True Ob. False QUESTION 2 1 points Save Answer Which of the following statements is CORRECT? Oa. Hedge funds are legal in Europe and Asia, but they are not permitted to operate in the United States O. Hedge funds are legal in the United States, but they are not permitted to operate in Europe or Asia Hedge funds have more in common with investment banks than with any other type of financial institution Hedge funds are not as highly regulated as most other types of financial institutions. The justification for this light regulation is that only "sophisticated" investors (i.e., those with Od high net worths and high incomes) are permitted to invest in these funds, and these investors supposedly can do any necessary due diligence on their own rather than have it done by the SEC or some other regulator. QUESTION 3 1 points Save Answer The value of any asset is the present value of the cash flows the asset is expected to provide The cash flows a business is able to provide to its investors is its free cash flow. This is the reason that FCF is so important in finance. O a. True b. False 1 points Save Answer QUESTION 4 If a firm is reporting its income in accordance with generally accepted accounting principles, then its net income as reported on the income statement should be equal to its free cash flow. O a. True b. False QUESTIONS 1 points Save Answer Free cash flow is the amount of cash that, if withdrawn, would harm the firm's ability to operato and to produce future cash flows. a. True Ob. False QUESTION 6 1 points Save Ans Which of the following statements is CORRECT? Most rapidly growing companies have positive free cash flows because cash flows from Oa.existing operations generally exceed fixed asset purchases and changes to net operating working capital. Ob.Changes in working capital have no effect on free cash flow, Free cash flow (FCF) is defined as follows: FCF - EBIT(1-1) Oc. + Depreciation Capital expenditures required to sustain operations - Required changes in net operating working capital. Free cash flow (FCF) is defined as follows: Od FCF = EBIT(1 - T) + Capital expenditures. QUESTION 7 1 points Save Answer Suppose that last year, XYZ company had (1) negative cash flow from operations, (2) a negative free cash flow, and (3) an increase in cash as reported on its balance sheet. Which of the following factors could explain this situation? O a. The company had a sharp increase in its inventories. Ob. The company had a sharp increase in its accrued liabilities. Oc. The company sold a new issue of common stock. Od. The company made a large capital investment early in the year. QUESTIONS 1 points Saved Which of the following statements is CORRECT? Free cash flow (FCF) is essentially, the cash flow that is available for interest and dividends after the Oa.company has made the investments in current and fixed assets that are necessary to sustain ongoing operations Ob. After-tax operating income is calculated as EBIT(1 - T) + Depreciation. Two firms with identical sales and operating costs but with different amounts of debt and tax rates will have different operating incomes by definition. If a firm is reporting its income in accordance with generally accepted accounting principles, then its net income as reported on the income statement should be equal to its free cash flow. QUESTION 9 1 points Saved Target Company's balance sheet showed total current assets of $2,500, all of which were required in operations. Its current liabilities consisted of $975 of accounts payable, $600 of 6% short-term notes payable to the bank, and $250 of accrued wages and taxes. What was its net operating working capitan a $1,173 Ob.$1,199 Oc. $1,301 Od. $1,326 Oe. $1,275 QUESTION 10 1 points Save Answer Walmart recently reported operating income of $3.00 million, depreciation of $1.20 million, and had a tax rate of 40%. The firm's expenditures on fixed assets and net operating working capital totaled $0.60 million. How much was its free cash flow, in millions? a $2.83 Ob.$1.82 Oc. $2.40 Od. $2.50 QUESTION 11 1 points Save Answer Walgreens has the following income statement. How much after-tax operating income does the firm have? Sales $3,150.00 Costs 1,850.00 Depreciation 192.00 EBIT $1,108.00 Interest expense 285.00 EBT $823.00 Taxes (35%) 288.05 Net income $534.95 O a. $583.36 Ob $900.25 Oc. $821.03 Od. $720.20 QUESTION 12 1 points Save Answer Other things held constant, the more debt a firm uses, the lower the firm's profit margin will be a. True b. False QUESTION 13 1 points Save Answer If a firm's ROE is equal to 9% and its ROA is equal to 5%, its equity multiplier must be 1.5. O a. True Ob.False QUESTION 14 1 points Sive Answer XYZ had a profit margin of 5.2%, a quick ratio of 1.4, a total assets turnover of 1.5, and an equity multiplier of 1.3. What was the firm's ROE? a. 10.92% b. 9.46% Oc 10.14% d. 13.84% QUESTION 15 1 points Save Answer Suppose all firms follow similar financing policies, face similar risks, have equal access to capital, and operate in competitive product and capital markets. However, firms face different operating conditions because, for example, the grocery store industry is different from the airline industry. Under these conditions, firms with high profit margins will tend to have high asset turnover ratios, and firms with low profit margins will tend to have low turnover ratios. Oa. True Ob. False QUESTION 16 1 points Save Answer O Which of the following statements is CORRECT? Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%. The firm finances using only debt and common equity, and total assets equal total invested capital. Under these conditions, the ROE will increase. Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its Ob profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60% The firm finances using only debt and common equity, and total assets equal total invested capital. Without additional information, we cannot tell what will happen to the ROE. . The DuPont equation provides information about how operations affect the ROE, but the equation does not include the effects of debt on the ROE. QUESTION 17 1 points Save Answer Companies HD and LD are both profitable, and they have the same total assets (TA), total invested capital, sales (S), return on assets (ROA), and profit margin (PM). Both firms finance using only debt and common equity. However, Company HD has the higher total debt to total capital ratio. Which of the following statements is CORRECT? Oa. Company HD has a lower total assets turnover than Company LD. Ob. Company HD has a lower equity multiplier than Company LD. Oc Company HD has a higher ROE than Company LD. QUESTION 18 1 points Swe Answer The present value of a future sum decreases as either the discount rate or the number of periods per year increases, other things held constant. OaTrue b. False 1 points Save Ameer QUESTION 19 Tom has $2,500 invested in a bank that pays 5.4% annually. How long will it take for his funds to double? Ca. 13.44 years Ob.16.34 years Oc 13.18 years Od. 14.89 years QUESTION 20 1 points Your bank account pays a 8% nominal rate of interest. The interest is compounded quarterly Which of the following statements is CORRECT? Oa. The periodic rate of interest is 1.5% and the effective rate of interest is 3%. Ob. The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%. Oc. The periode te oferis und the festive role of interest is greater than 6% Od. The periodic rate of interest is 3% and the effective rate of ate of interest in 8% Click Save and Submit to save and subtle See All Answer to save alla Save Allers Save and Submit MacBook Air $ * 5 & 7 6 8 9 O R T Y U 0 P G H J K L V B N M > *