STR
581 Week 4 Capstone 2
1.
Internal reports that review the actual impact of decisions are prepared by:
- the
controller
- department
heads
- factory
workers
- management
accountants
2.
Horizontal analysis is also known as:
- trend
analysis
- vertical
analysis
- linear
analysis
- common
size analysis
3.
Which of the following is an advantage of corporations relative to partnerships
and sole proprietorships?
- most
common form of organization
- reduced
legal liability for investors
- lower
taxes
- harder
to transfer ownership
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581 Week 4 Capstone 2
4.
Serox stock was selling for $20 two years ago. The stock sold for $25 one year
ago, and it is currently selling for $28.
Serox pays a $1.10 dividend per year.
What was the rate of return for owning Serox in the most recent year?
(Round to the nearest percent.)
- 32%
- 16%
- 12%
- 40%
5.
External financing needed: Jockey Company has total assets worth $4,417,665. At
year-end it will have net income of $2,771,342 and pay out 60 percent as
dividends. If the firm wants no external financing, what is the growth rate it
can support?
- 30.3%
- 27.3%
- 32.9%
- 25.1%
6.
An unrealistic budget is more likely to result when it:
- has
been developed by all levels of management.
- has
been developed in a top down fashion.
- has
been developed in a bottom up fashion.
- is
developed with performance appraisal usages in mind.
7.
Which of the following financial statements is concerned with the company at a
point in time?
- balance
sheet
- retained
earnings statement
- statement
of cash flows
- income
statement
8.
Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25
in each of the following three years. If
their required rate of return if 14 percent, what is the present value of their
dividends over the next four years?
- $12.50
- $11.63
- $9.72
- $13.50
9.
An activity that has a direct cause-effect relationship with the resources
consumed is a(n):
- product
activity
- cost
driver
- cost
pool
- overhead
rate
10.
The major element in budgetary control is:
- the
approval of the budget by the stockholders
- the
valuation of inventories
- the
preparation of long-term plans
- the
comparison of actual results with planned objectives.
11.
Tule Time Comics is considering a new show that will generate annual cash flows
of $100,000 into the infinite future. If the initial outlay for such a
production is $1,500,000 and the appropriate discount rate is 6 percent for the
cash flows, then what is the profitability index for the project?
- 0.11
- 1.11
- 0.90
- 1.90
12.
How firms estimate their cost of capital: The WACC for a firm is 13.00 percent.
You know that the firm’s cost of debt capital is 10 percent and the cost of
equity capital is 20% What proportion of the firm is financed with debt?
- 70%
- 50%
- 33%
- 30%
13.
The most important information needed to determine if companies can pay their
current obligations is the:
- relationship
between current assets and current liabilities
- relationship
between short-term and long-term liabilities
- projected
net income for next year
- net
income for this year
14.
Process costing is used when:
- dissimilar
products are involved
- production
is aimed at fulfilling a specific customer order.
- the
production process is continuous.
- costs
are to be assigned to specific jobs.
15.
A cost which remains constant per unit at various levels of activity is a:
- fixed
cost
- mixed
cost
- manufacturing
cost
- variable
cost
16.The
group of users of accounting information charged with achieving the goals of
the business is its:
- investors
- auditors
- creditors
- managers
17.
Teakap, Inc. has current assets of $1,456,312 and total assets of $4,812,369
for the year ending September 30, 2006.
It also has current liabilities of $1,041,012, common equity of
$1,500,000 and retained earnings of $1,468,347. How much long-term debt does
the firm have?
- $803,010
- $2,303,010
- $1,844,022
- $2,123,612
18.
The cash conversion cycle?
- begins
when the firm invests cash to purchase the raw materials that would be
used to produce the goods that the firm manufactures.
- estimates
how long it takes on average for the firm to collect its outstanding
accounts receivables balance.
- begins
when the firm uses its cash to purchase raw materials and ends when the
firm collects cash payments on its credit sales.
- shows
how long the firm keeps its inventory before selling it.
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581 Week 4 Capstone 2
19.
Ajax Corp. is expecting the following cash flows - $79,000, $112,000, $164,000,
$84,000, and $242,000 – over the next five years. If the company’s opportunity cost is 15
percent, what is the present value of these cash flows? (Round to the nearest
dollar.)
- $480,906
- $429,560
- $414,322
- $477,235
20.
Jack Robbins is saving for a new car. He needs to have $21,000 for the car in
three years. How much will he have to invest today in an account paying 8
percent annually to achieve his target? (Round to nearest dollar)
- $26,454
- $19,444
- $22,680
- $16,670
21.
Which of the following presents a summary of changes in a firm’s balance sheet
from the beginning of an accounting period to the end of that accounting
period?
- the
statement of net worth
- the
statement of cash flows
- the
statement of working capital
- the
statement of retained earnings
22.
M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is
expected to exist forever. The company is currently financed with 75 percent
equity and 25 percent debt. Your analysis tells you that the appropriate
discount rates are 10 percent for the cash flows, and 7 percent for the debt.
You currently own 10 percent of the stock.
If
Dynamo wishes to change its capital structure from 75 percent equity to 60
percent equity and use the debt proceeds to pay a special dividend to
shareholders, how much debt should they use?
- $225
- $600
- $375
- $321
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581 Week 4 Capstone 2
23.
Horizontal analysis is a technique for evaluating a series of financial
statement data over a period of time:
- that
has been arranged from the highest number to the lowest number.
- to
determine the amount and/or percentage increase or decrease that has taken
place.
- to
determine which items are in error.
- that
has been arranged from the lowest number to the highest number.
24.
Jayadev Athreya has started his first job. He will invest $5,000 at the end of
each year for the next 45 years in a fund that will earn a return of 10
percent. How much will Jayadev have at
the end of 45 years?
- $2,667,904
- $5,233,442
- $1,745,600
- $3,594,524
25.
Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses
amounted to $84 million. The firm has
135 million shares outstanding and a share price of $12.80. A competing firm
that is very similar to Turnbull has an enterprise value/EBITDA multiple of
5.40.
What
is the enterprise value of Turnbull Corp.? Round to the nearest million
dollars.
- $1,344
million
- $453.6
million
- $1,315
million
- $1,787
million
26.
Firms that achieve higher growth rates without seeking external financing:
- Have
a low plowback ratio
- are
highly leveraged
- have
less equity and/or are able to generate high net income leading to a high
ROE.
- None
of these
27.
In a process cost system, product costs are summarized:
- on
job cost sheets.
- when
the products are sold.
- after
each unit is produced.
- on
production cost reports.
28.
The convention of consistency refers to consistent use of accounting
principles:
- within
industries
- among
accounting periods
- throughout
the accounting period
- among
firms
29.
If a company’s weighted average cost of capital is less than the required return on equity, then the firm:
- is
financed with more than 50% debt
- is
perceived to be safe
- partnership
- has
debt in its capital structure
30.
Your firm has an equity multiplier of 2.47.
What is the debt-to-equity ratio?
- 0
- 1.74
- 0.60
- 1.47
31.
The accumulation of accounting data on the basis of the individual manager who
has the authority to make day-to-day decisions about activities in an area is
called:
- master
budgeting
- static
reporting
- responsibility
accounting
- flexible
accounting
32.
Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon
rate. Investors buying the bond today can expect to earn a yield to maturity of
6.875 percent. What should the company’s bonds be priced at today? Assume
annual coupon payments. (Round to the nearest dollar.)
- $1014
- $972
- $923
- $1,066
33.
Variance reports are:
- internal
reports for management
- SEC
financial reports
- external
financial reports
- all
of these
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34.
The break-even point is where:
- contribution
margin equals total fixed costs.
- total
sales equal total variable costs.
- total
sales equal total fixed costs.
- total
variable costs equal total fixed costs.
35.
When a company assigns the costs of direct materials, direct labor, and both
variable and fixed manufacturing overhead to products, that company is using:
- operations
costing
- product
costing
- absorption
costing
- variable
costing
36.
Which of the following is considered a hybrid organizational form?
- sole
proprietorship
- partnership
- limited
liability partnership
- corporation
37.
Gateway, Corp. has an inventory turnover
of 5.6. What is the firm’s days’s sales
in inventory?
- 57.9
- 61.7
- 65.2
- 64.3
38.
The process of evaluating financial data that change under alternative courses
of action is called:
- incremental
analysis
- contribution
margin analysis
- cost-benefit
analysis
- double
entry analysis
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581 Week 2 Capstone 1
39.
What decision criteria should managers use in selecting projects when there is
not enough capital to invest in all available positive NPV projects?
- the
modified internal rate of return
- the
profitability index
- the
discounted payback
- the
internal rate of return
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581 Week 4 Capstone 2. The author is working in the field of
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