BFIN 300 MIDTERM EXAM QUESTIONS WITH 100% CORRECT ANSWERS NEW UPDATE

BFIN 300 MIDTERM EXAM QUESTIONS WITH 100% CORRECT ANSWERS NEW UPDATE What is a financial security? - Answer-A claim against assets of cash flows of a company Who is the primary regulator of the US securities markets? - Answer-Securities and Exchange Commission The Securities and Exchange Commission does all of the following except: - Answer-Regulates all national banks in the US Which of the following is a security traded in the US money market? - Answer-Treasury Bills What is the best definition of a derivative in the context of securities markets? - Answer-A security where the value is based on the value of another security A Johnson & Johnson bond pays an 8% coupon rate on a bond provided that its earnings exceed an ROE of 8%. What type of security is this? - Answer-Income bond. Which security has the greatest preference in liquidation? - Answer-Senior debt. Which security has a "residual claim" on a company's cash flows? - Answer-Equity Which two cash flows are received by a typical bond? - Answer-Interest and principal at maturity. Which best explains a fixed coupon bond? - Answer-Fixed coupon paid until maturity, and lump sum returned at maturity The process of planning and managing a firm's long-term investments is called - Answer-Capital Budgeting Which of the following is an example of an indirect agency cost? - Answer-A lost opportunity Which of the following forms of business organization is subject to double taxation? - Answer-Corporation Control of a firm ultimately rests with - Answer-The Stockholders Which of the following should a financial manager take into account when considering an opportunity? - Answer-How much cash they expect to receive, When will they receive the funds and How likely they are to receive the funds ABC Corporation has current assets of $5,200, fixed assets of $26,000, current liabilities of $4,900, and long-term debt of $15,000. What is the ABC Corporation's total equity? What is the NWC of ABC Corporation? - Answer-Total Equity $11,300, NWC $300 Company X has fixed assets of $6million on its balance sheet that were originally purchased for $10million; it can be sold for $7million today. The company's balance sheet also shows current liabilities of $2.6million and NWC of $900,000. In addition, if all the current assets were liquidated today, the company would receive $2.8million cash. What is the book value of Company X's total assets? What is the market value of Company X's total assets? - Answer-BV $9.5million, MV $9.8million Company has sales of $21,000, costs of $11,200, depreciation expense of $2,300, and interest expense of $1,300. If the tax rate is 40 percent, what is the operating cash flow, or OCF? - Answer-OCF $7320 = EBIT $7500+Depreciation $2300-Taxes $2480 XYZ Corporation's balance sheet of 2019 showed net fixed assets of $1.56million, and the 2020 balance sheet showed net fixed assets of $1.78 million. The company's 2020 income statement showed a depreciation expense of $140,000. What was the company's net capital spending for 2020? - Answer-$360,000 Which one of the following is the financial statement which shows the accounting value of a firm's equity as of a particular date? - Answer-Balance sheet Which is a financial leverage ratio? - Answer-Debt to equity Which is a key turnover ratio? - Answer-Inventory turnover ratio, Asset turnover ratio, Receivables turnover ratio and Fixed asset turnover ratio Which of the following ratios are market-based ratios? - Answer-P/E ratio and P/BV ratio Which of the followings are the correct set of components of ROE? - Answer-Profit margin, asset turnover, equity multiplier