FIN 801 - TMU CERTIFICATION SCRIPT 2026
QUESTIONS WITH SOLUTIONS GRADED A+
◍ James' Garage has cash of $150, accounts receivable of $100, accounts
payable of $225, and inventory of $200. What is the value of the quick
ratio?.
Answer: Quick Ratio = (Current Assets - Inventory)/ Current LiabilitiesCash
+ Accounts Receivable/Accounts Payable150 + 100/225 = 1.11
◍ Harper's Homes, Inc. incurred depreciation expenses of $21,900 last year.
The sales were $811,400 and the addition to retained earnings was $15,680.
The firm paid interest of $9,700 and dividends of $2,100. The tax rate was
34 percent. What was the amount of the costs incurred by the firm?
A. $764,020
B. $752,861
C. $779,800
D. $741,511
E. $755,891.
Answer: B.$752,861Earnings before interest and taxes = [($15,680 +
$2,100)/(1 - 0.34)] + $9,700 = $36,639Costs = $811,400 - $21,900 -
$36,639 = $752,861
◍ Secondary Securities are issued by.
Answer: Financial Intermediaries to savers: deposits, insurance policies,
pension claims, mutual fund shares
◍ What are risks common to all financial institutions?.
Answer: Credit risk or default risk of assets, interest rate risk from maturity
mismatch between assets and liabilities, liability withdrawal or liquidity
risk, underwriting risk, and operating risk.
◍ How does syndicated lending works (Model).
, Answer: Borrower receives loan Banks share fundingBorrower pays interest
and principal Payments are distributed to all contributing banks
◍ noncash items.
Answer: expenses charged against revenues that do not directly affect cash
flow, such as depreciation (which is most important)
◍ What do Financial Intermediaries do?.
Answer: Financial Intermediaries does the monitoring to reduce agency
costs with a delegated monitor of economies to scale.
◍ Which one of the following statements is correct?Potential lenders are not
interested in financial statement information.Book values are more
important than market values in corporate finance.Historical information is
useful when projecting a firm's future performance.Reviewing financial
information over time has very limited value.Performance evaluations rarely
involve financial ratios..
Answer: Historical information is useful when projecting a firm's future
performance.
◍ Partnership Advantages.
Answer: Two or more ownersMore capital availableRelatively easy to
startIncome taxed once as personal income
◍ How can individual savers use financial institutions to reduce the transaction
costs ofinvesting in financial assets?.
Answer: By pooling the assets of many small investors, FIs can gain
economies of scale in transactioncosts. This benefit occurs whether the FI is
lending to a corporate or retail customer, orpurchasing assets in the money
and capital markets. In either case, operating activities that aredesigned to
deal in large volumes typically are more efficient than those activities
designed forsmall volumes. By grouping their assets in FIs that purchase
assets in bulk—such as in mutualfunds and pension funds—household
savers can reduce the transaction costs of their assetpurchases
◍ Syndicate members.
, Answer: Contribute other parts of the loan
◍ Andrew's Bookstore has sales of $813,000 with costs of $679,000. Interest
expense is $46,000 and depreciation is $62,000. The tax rate is 25 percent.
What is the net income?.
Answer: Net income = ($813,000 - 679,000 - 46,000 - 62,000) (1 - .25) =
$19,500
◍ Partnership Disadvantages.
Answer: Unlimited liabilityGeneral partnershipLimited
partnershipPartnership dissolves when one partner dies or wishes to
sellDifficult to transfer ownership
◍ agency problem.
Answer: the possibility of conflict of interest between the stockholders and
management of a firm
◍ present value.
Answer: •The current value of future cash flows discounted at the
appropriate discount rate•Value at t=0 on a time line
◍ Which of the following ratios are measures of a firm's liquidity?
I. Long term debt ratio.I
I. Current ratio.II
I. Fixed asset trunover.I
V. Quick ratio..
Answer: II and IV only.
◍ Syndicated Lending.
Answer: Borrowers (corporations, government, projects) often have to
borrow a really big loan. These are too large or risky for only one bank, so a
Lead Bank is formed called the syndicate lender. The syndicate lender
arranges everything from the loan: organizes the loan, negotiates the term,
etc.
◍ Which one of the following is included in net working capital?
A. Equipment
QUESTIONS WITH SOLUTIONS GRADED A+
◍ James' Garage has cash of $150, accounts receivable of $100, accounts
payable of $225, and inventory of $200. What is the value of the quick
ratio?.
Answer: Quick Ratio = (Current Assets - Inventory)/ Current LiabilitiesCash
+ Accounts Receivable/Accounts Payable150 + 100/225 = 1.11
◍ Harper's Homes, Inc. incurred depreciation expenses of $21,900 last year.
The sales were $811,400 and the addition to retained earnings was $15,680.
The firm paid interest of $9,700 and dividends of $2,100. The tax rate was
34 percent. What was the amount of the costs incurred by the firm?
A. $764,020
B. $752,861
C. $779,800
D. $741,511
E. $755,891.
Answer: B.$752,861Earnings before interest and taxes = [($15,680 +
$2,100)/(1 - 0.34)] + $9,700 = $36,639Costs = $811,400 - $21,900 -
$36,639 = $752,861
◍ Secondary Securities are issued by.
Answer: Financial Intermediaries to savers: deposits, insurance policies,
pension claims, mutual fund shares
◍ What are risks common to all financial institutions?.
Answer: Credit risk or default risk of assets, interest rate risk from maturity
mismatch between assets and liabilities, liability withdrawal or liquidity
risk, underwriting risk, and operating risk.
◍ How does syndicated lending works (Model).
, Answer: Borrower receives loan Banks share fundingBorrower pays interest
and principal Payments are distributed to all contributing banks
◍ noncash items.
Answer: expenses charged against revenues that do not directly affect cash
flow, such as depreciation (which is most important)
◍ What do Financial Intermediaries do?.
Answer: Financial Intermediaries does the monitoring to reduce agency
costs with a delegated monitor of economies to scale.
◍ Which one of the following statements is correct?Potential lenders are not
interested in financial statement information.Book values are more
important than market values in corporate finance.Historical information is
useful when projecting a firm's future performance.Reviewing financial
information over time has very limited value.Performance evaluations rarely
involve financial ratios..
Answer: Historical information is useful when projecting a firm's future
performance.
◍ Partnership Advantages.
Answer: Two or more ownersMore capital availableRelatively easy to
startIncome taxed once as personal income
◍ How can individual savers use financial institutions to reduce the transaction
costs ofinvesting in financial assets?.
Answer: By pooling the assets of many small investors, FIs can gain
economies of scale in transactioncosts. This benefit occurs whether the FI is
lending to a corporate or retail customer, orpurchasing assets in the money
and capital markets. In either case, operating activities that aredesigned to
deal in large volumes typically are more efficient than those activities
designed forsmall volumes. By grouping their assets in FIs that purchase
assets in bulk—such as in mutualfunds and pension funds—household
savers can reduce the transaction costs of their assetpurchases
◍ Syndicate members.
, Answer: Contribute other parts of the loan
◍ Andrew's Bookstore has sales of $813,000 with costs of $679,000. Interest
expense is $46,000 and depreciation is $62,000. The tax rate is 25 percent.
What is the net income?.
Answer: Net income = ($813,000 - 679,000 - 46,000 - 62,000) (1 - .25) =
$19,500
◍ Partnership Disadvantages.
Answer: Unlimited liabilityGeneral partnershipLimited
partnershipPartnership dissolves when one partner dies or wishes to
sellDifficult to transfer ownership
◍ agency problem.
Answer: the possibility of conflict of interest between the stockholders and
management of a firm
◍ present value.
Answer: •The current value of future cash flows discounted at the
appropriate discount rate•Value at t=0 on a time line
◍ Which of the following ratios are measures of a firm's liquidity?
I. Long term debt ratio.I
I. Current ratio.II
I. Fixed asset trunover.I
V. Quick ratio..
Answer: II and IV only.
◍ Syndicated Lending.
Answer: Borrowers (corporations, government, projects) often have to
borrow a really big loan. These are too large or risky for only one bank, so a
Lead Bank is formed called the syndicate lender. The syndicate lender
arranges everything from the loan: organizes the loan, negotiates the term,
etc.
◍ Which one of the following is included in net working capital?
A. Equipment
