Each question is worth 6.25 points. Clearly fill in the appropriate answer on the scantron. Indicate the answer choice that best completes the statement or answers the question 1. The primary operating goal of a publicly-owned fimm interested in serving its stockholders should be to a. Minimize the chances of losses. b. Maximize its expected EPS. c. Maximize its expected total corporate income. d. Maximize the stock price per share over the long run, which is the stock's intrinsic value. 2. Which of the following mechanisms would be most likely to help motivate managers to act in the best interests of shareholders? a. Decrease the use of restrictive covenants in bond agreements. b. Elect a board of directors that allows managers greater freedom of action. c. Take actions that reduce the possibility of a hostile takeover. d. Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries. 3. Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and bondbolders? a. Financing risky projects with additional debt. b. The use of covenants in bond agreements that limit the firm's use of additional debt and constrain managers' actions, c. The threat of hostile takeovers. d. Compensating managers with stock options. 4. Which of the following statements is CORRECT? a. One disadvantage of operating a business as a proprietor is that the firm is subject to double taxation, because taxes are levied at both the firm level and the owner level. b. It is generally less expensive to form a corporation than a proprietorship because, with a proprietorship, extensive legal documents are required. c. Corporations face fewer regulations than proprietorships. d. One advantage of forming a corporation is that equity investors are usually exposed to less liability than they would be in a partnership 5. Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet? a. The company repurchases common stock b. The company issues new common stock c. The company gives customers more time to pay their bills. d. The company pays a dividend. monotto ben oltroqqa adinin hazlog 2. now 6. Wu Systems has the following balance sheet. Assume that all current assets are used in operations. How much net operating working capital does the firm have? Cash de blodgivni $ 100 Accounts payable to be $ 20 Accounts receivable 650 Accruals lo 15 Inventory 550 Notes payable 29 545 Current assets Total current $1,300 Hoolo bolo $ 900 liabilities Net fixed assets de $1.000 Long-term bonds ogon 600 Total liabilities Bursa Common stock iban a 300 $1,500 Retained earnings 500 Common equity $ 800 Total assets $ 2,300 Total liab. & equity $ 2,300 a. S845 b. 5860 c. $983 d. $1,021 7. Vasudevan Inc. recently reported operating income (EBIT) of $2.3 million, depreciation of million, and had a tax rate of 25%. The firm's expenditures on fixed assets and net operating wo capital totaled 50.60 million. How much was its free cash flow, in millions? a $2.325 b. $2.44 c. 52.22 d. S2.06 8. Which of the following statements is CORRECT? a. Since depreciation increases the firm's net cash provided by operating activities, the more depreciation a company has the larger its retained earnings will be other things held consta b. Common cquity includes common stock and retained carnings, less accumulated depreciatic c. A firm can show a large amount of retained earnings on its balance sheet yet need to borrow cash to make required payments. d. The retained earnings account as reported on the balance sheet shows the amount of cash tha is available for paying dividends. 9. Rao Construction recently reported $19.00 million of sales, $12.60 million of operating costs othe depreciation, and $3.00 million of depreciation. It had $8.50 million of bonds outstanding that carry 7.0% interest rate, and its federal-plus-state income tax rate was 25%. What was Rao's operating in or EBIT, in millions? a $3.40 b. $2.79 c. $4.01 d. S2.82 10. In 2020, Garner Grocers had taxable income of -$2,000,000. The corporate tax rate is 25%. Assume that the company takes full advantage of the Tax Code's carry-forward provision. In 2021, Garner has taxable income of $1,000,000. What is the amount of taxes the company paid in 2021? a. $586,500 b. SO c. $20,000 d. $90,000 11. Which of the following statements is CORRECT? a. Other things held constant, the more debt a firm uses, the higher its operating margin will be. b. Debt management ratios show the extent to which a firm's managers are attempting to magnify returns on owners' capital through the use of financial leverage. c. Other things held constant, the more debt a firm uses, the higher its profit margin will be. d. Other things held constant, the higher a firm's total debt to total capital ratio, the higher its TIE ratio will be. 12. Which of the following statements is CORRECT? a. The days sales outstanding ratio tells us how long it takes, on average, to collect after a sale is made. The DSO can be compared with the firm's credit terms to get an idea of whether customers are paying on time. b. In general, it's better to have a low inventory turnover ratio than a high one, as a low one indicates that the firm has an adequate stock of inventory relative to sales and thus will not lose sales as a result of running out of stock. c. A decline in a firm's inventory turnover ratio suggests that it is improving both its inventory management and its liquidity position, i.e., that it is becoming more liquid. d. If a firm's fixed assets turnover ratio is significantly lower than the average for its industry, then it could be that the firm uses its fixed assets very efficiently or is operating at over capacity and should probably add fixed assets. 13. Ryngard Corp's sales last year were $24.000, and its total assets were $16,000. What was its total assets turnover ratio (TATO)? a. 1.53 b. 1.50 c. 1.73 d. 1.56 Exhibit 4.15 do 100.000 The balance sheet and income statement shown below are for Koski Ine. Note that the firm has a amortization charges, it does not lease any assets, none of its debt must be retired during the next and the notes payable will be rolled over. Balance Sheet (Millions of S) Assets Cash and securities Accounts receivable Inventories Total current assets Net plant and equipment Total assets Liabilities and Equity Accounts payable Accruals Notes payable Total current liabilities 2019 $4,200 17,500 20.300 $42.000 $28.000 $70,000 $22.509 14.391 6.000 $42.900 Long-term debt Total liabilities Common stock Retained camings Total common equity Total liabilities and equity SI1,000 553,900 $3,542 12.558 $16,100 $70,000 Income Statement (Millions of S) Net sales Operating costs except depreciation Depreciation Earnings before interest and taxes (EBIT) Less interest Earnings before taxes (EBT) Taxes Net income 2019 S105,000 97.650 2,100 $5,250 1.020 $4,230 1.058 $2,538 Other data: Shares outstanding (millions) Common dividends (millions of S) Intrate on notes payable & L-T bonds Federal plus state income tax rate Year-end stock price 500.00 5888.30 6% 40% $60.91 14. Refer to Exhibit 4.1. What is the firm's debt-to-capital ratio? Do not round you calculations. a. 51.36% b. 47.76% c. 58.04% d. 43.14% 15. Refer to Exhibit 4.1. What is the firm's market-to-book ratio? Do not round you calculations. a. 1.72 b. 1.55 c. 1.82 d. 1.89 16. Last year Harrington Inc. had sales of $325,000 and a net income of $19,000, and were $250,000. The firm's total-debt-to-total-capital ratio was 10.0%. The firm finance and common equity, and its total assets equal total invested capital. Based on the DuPc was the ROE? Do not round your intermediate calculations. a. 8.78% b. 7.09% c. 8.44% d. 7.18%