Which of the following firms would be expected to need the most cash to conduct its daily operations?

a

an airline that has many of its fares pre$-$paid by cash or credit card

b

a retail grocery store that sells on a cash only basis

c

an aircraft manufacturer with large inventory and long development and sales cycles

d

an electronics manufacturer that only assemble its goods once they have been paid for

Question $2(1$ point$)$

The Net Operating cycle $($NOC$)$ is defined as $\_\_\_\_\_\_\_\_.$

a

Inventory Operating Cycle $+$ Receivable Operating Cycle $+$ Payables Operating cycle

b

Inventory Operating Cycle $+$ Receivable Operating Cycle $-$ Payables Operating cycle

c

Inventory Operating Cycle $-$ Receivable Operating Cycle $-$ Payables Operating cycle

d

Inventory Operating Cycle $-$ Receivable Operating Cycle $+$ Payables Operating cycle

Question $3(1$ point$)$

Helen owns $10\mathrm{.}2\%$ of the stock of the Median Corporation. If Median makes a dividend payment of $$25,000,000$ paid proportionally to its shareholders, how much of this amount would Helen receive, disregarding tax?

a

$$3,060,000$

b

$$2,550,000$

c

$$3,570,000$

d

$$2,040,000$

Question $4(1$ point$)$

You are a shareholder in a corporation which has elected subchapter S tax treatment. The corporation announces a profit of $$6$ per share, of which it retains $$1$ for reinvestment and distributes the rest as dividend payments. Given that the personal tax rate is $35\%,$ how much tax must you pay per share?

a

$$2\mathrm{.}10$

b

$$2\mathrm{.}52$

c

$$0$

d

$$1\mathrm{.}75$

Question $5(1$ point$)$

Which of the following is a major duty of a financial manager?

I. To make investment decisions

II$.$ To make financing decisions

III. To manage cash flow from operating activities

a

I and II only

b

I only

c

all of the above

d

I and III only

Question $6(1$ point$)$

Outstanding debt of Home Depot trades with a yield to maturity of $7\%.$ The tax rate of Home Depot is $35\%.$ What is the effective cost of debt of Home Depot?

a

$4\mathrm{.}55\%$

b

$5\mathrm{.}69\%$

c

$5\mathrm{.}01\%$

d

$5\mathrm{.}46\%$

Question $7(1$ point$)$

Assume preferred stock of Ford Motors pays a dividend of $$4$ each year and trades at a price of $$35.$ What is the cost of preferred stock capital for Ford?

a

$11\mathrm{.}4\%$

b

$12\mathrm{.}6\%$

c

$14\mathrm{.}9\%$

d

$13\mathrm{.}7\%$

Question $8(1$ point$)$

A firm's overall cost of capital that is a blend of the costs of the different sources of capital is known as the firm's $\_\_\_\_\_\_\_\_.$

a

weighted average cost of capital

b

cost of preferred stock

c

cost of debt

d

cost of equity infusion

Question $9(1$ point$)$

The following information is provided in respect of the specific cost of capital of different sources along with the book value weights.

Source

Cost of capital

Book Values

Equity Share Capital

$18\%$

$0\mathrm{.}5$

Preference shares

$15\%$

$0\mathrm{.}2$

Long term debts

$7\%$

$0\mathrm{.}3$

How much is the Weighted Average Cost of Capital, WACC, using the BV weights.

a

$11\mathrm{.}18\%$

b

$9\mathrm{.}98\%$

c

$10\mathrm{.}31\%$

d

$9\mathrm{.}10\%$

Question $10(1$ point$)$

Jerome Industries has Inventory Operating Cycle of $48,$ Receivable Operating Cycle of $21,$ and Payables Operating cycle of $30.$ What is its Net operating cycle?

a

$69$ days

b

$57$ days

c

$39$ days

d

$72$ days