FIN 100 Milestone 1 Sophia,100% CORRECT

The purpose of a pro forma balance sheet is to __________. • prepare for a financial audit • compare previous accounting periods • analyze the effects of a sales forecast • analyze historical data 2 Which of the following is true of ethics and its application to the business environment? • The ethical norms and values of a business can have a powerful influence on its employees. • Employers prefer to hire individuals whose ethics conflict with that of the business organization. • Conflicts rarely occur between an individual's ethics and a business organization's ethics. • Personal values have no place in business, where decisions should be made according to organizational values and norms. 3 If Company A has a TIE ratio of 3 and Company B has a TIE ratio of 1.2, then Company A is more likely to __________ than Company B. • need to use cash on hand to meet its interest obligations • default on its short-term debt • be able to repay its long-term debt • be able to honor its debt payments 4 Which of the following would explain a company’s day sales outstanding ratio falling from 37.3 to 25? • The company's cost of goods sold has decreased while total sales has increased. • The company's accounts receivable has decreased while total sales has increased. • The company's cost of goods sold has decreased while total sales has remained constant. • The company's accounts receivable has remained constant while total sales has decreased. 5 In the United States, the role of corporate governance is to maximize __________. • shareholder value and stakeholder value • market value and stakeholder value • market value and shareholder value • fundamental value and shareholder value 6 Consider the following information: Total current assets $42,123 Deferred income taxes $2,638 Inventories $4,873 Prepaid expenses $1,554 Other assets $6,263 Total current liabilities $38,902 What is the current ratio? • 1.21 • 0.97 • 1.15 • 1.08 7 What is a question that should be asked about accounts payable when forecasting? • How much product on hand is too much? • What is the cash conversion cycle? • How will our cash inflows be affected? • How quickly can we replenish goods? 8 Using the DuPont equation, how can a company determine if it has an acceptable ROE? • If it is between 2-3%. • If it is over 30%. • If it is over 50%. • If it is at least 15%. 9 After a significant economic recession, prices and investing activity in the stock market began trending consistently upward six years ago. In the last three months, this trend has reversed and prices have fallen steadily. How are the past three months of the stock market classified? • Primary bull market • Secular bear market • Primary bear market • Secular bull market 10 If equity is $2 million and total revenue is $1.3 million, then ROE is __________. • incalculable without EBIT data • incalculable without net profit data • 65% • 35% 11 Capacity planning answers the question "__________" • What will our revenue be? • How will we decide which direction to go? • How can we be most efficient? • How will we finance it? 12 What principle of corporate governance requires public clarification of the roles and responsibilities of board and management in order to provide stakeholders with a level of accountability? • Shareholder rights • Integrity and ethical behavior • Disclosure and transparency • Interests of other stakeholders 13 For which company can trend analysis be most useful? • A retail company that recently changed its accounting practices and its business model • A software company whose business model and accounting practices have remained stable over time • A mining company that recently changed its business model, but not its accounting practices • A banking company that recently changed its accounting practices, but not its business model 14 Thomas is concerned about his company's ability to pay off its short-term debts. If he wants to know more about his company's liquidity, what should he do? • Calculate his total liabilities • Calculate his debt to equity ratio • Calculate his total assets • Calculate his net working capital 15 Under what circumstance would agency conflict be most likely to increase? • When oversight by the board is adequate. • When owners are separated from the business. • When the incentives of a manager align with those of owners. • When owners are very close to the business. 16 Finance is most concerned with __________. • determining the current value of assets and investments • determining how much assets and investments were worth in the past • determing the ratio of assets to investments • determining how much assets and investments will be worth over time 17 Under GAAP, how would dividends paid to company stockholders be accounted for on the statement of cash flows? • As an increase in cash flow from operations • As a decrease in cash flow from investment • As an increase in cash flow from financing • As a decrease in cash flow from financing 18 Internet platforms have allowed for the greatest increase of what recent trend in finance? • Impact investing • Peer-to-peer lending • Microfinancing • Algorithmic trading 19 Preparing a cash flow forecast helps a company to examine and manage its __________. • bottom line • float times • profitability • accounting practices 20 If a sales increase is forecasted, how will it affect expenses on the pro forma income statement if market conditions are expected to remain stable? • There will be no effect on expenses. • Expenses will increase. • Expenses will decrease. • It depends on the type of product being sold. 21 Ratios that measure a company's ability to pay off short-term debt are _________. • asset management ratios • leverage ratios • market ratios • liquidity ratios 22 Xander is looking for ways to reduce his non-operating expenses to improve his company's overall financial performance, so he consults his most recent income statement. Which of the following should he focus on? • Income taxes • Depreciation • Amortization • Wages 23 Consider the P/E ratios of the following companies: • Company A: 5.34 • Company B: 3.33 • Company C: 7.90 • Company D: 6.75 Which company has the lowest relative value among investors? • Company D • Company A • Company B • Company C 24 Lucas is worried about his company's short-term viability. What type of financial statement should he look at? • Balance sheet • Cash flow statement • Statement of changes in equity • Income statement 25 Select the option that reflects how revenue is typically organized on an income statement. • 1. Cost of goods sold 2. Sales 3. Other revenue • 1. Cost of goods sold 2. Other revenue 3. Sales • 1. Sales 2. Cost of goods sold 3. Other revenue • 1. Sales 2. Other revenue 3. Cost of goods sold 26 Tom and Wendy are launching a life coaching business. They plan to have an equal say in any managerial business decisions and they plan to share any profits or losses. They are concerned about their exposure to liability, so they have purchased some professional insurance policies. However, they are pleased with how simple it has been to organize their business. Which form of business structure have Tom and Wendy likely adopted? • Partnership • S corporation • Sole proprietorship • Corporation 27 Which organization most fully protects owners from personal liabilities and is taxed separately? • Partnership • LLC • S Corp • C Corp