Corporate Finance – Exam UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Jenna has been promoted and is now in charge of all external financing. In other words, she is in
charge of: - CORRECT ANSWER - Capital Structure Management
Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm
on a 75/25 basis. Which type of entity did they create if they have no personal liability for the
firm's debts? - CORRECT ANSWER - Corporation
Which one of the following statements about a limited partnership is correct? - CORRECT
ANSWER - TBD
One advantage of the corporate form of organization is the: - CORRECT ANSWER -
Ability to raise larger sums of equity capital than other organizational forms.
The Sarbanes-Oxley Act of 2002 has: - CORRECT ANSWER - essentially made officers
of publicly traded firms personally responsible for the firm's financial statements.
Which one of the following situations is most apt to create an agency conflict? - CORRECT
ANSWER - Basing management bonuses on the length of employment.
An agency issue is most apt to develop when: - CORRECT ANSWER - the control of a
firm is separated from the firm's ownership.
A firm has common stock of $99, paid-in surplus of $360, total liabilities of $455, current assets
of $480, and net fixed assets of $690. What is the amount of the shareholders' equity? -
CORRECT ANSWER - $715
, Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell
her business. The company built a building at a cost of $1,270,000 that is currently appraised at
$1,470,000. The equipment originally cost $750,000 and is currently valued at $497,000. The
inventory is valued on the balance sheet at $440,000 but has a market value of only one-half of
that amount. The owner expects to collect 98 percent of the $240,200 in accounts receivable. The
firm has $10,800 in cash and owes a total of $1,470,000. The legal problems are personal and
unrelated to the actual business. What is the market value of this firm? - CORRECT
ANSWER - $963,196
Ivan's, Inc., paid $470 in dividends and $580 in interest this past year. Common stock increased
by $190 and retained earnings decreased by $116. What is the net income for the year? -
CORRECT ANSWER - $354
You find the following financial information about a company: net working capital = $1,140;
fixed assets = $6,345; total assets = $8,670; and long-term debt = $4,671. What are the
company's total liabilities? - CORRECT ANSWER - $5,856
You find the following financial information about a company: net working capital = $963; fixed
assets = $7,041; total assets = $11,558; and long-term debt = $4,277. What is the company's total
equity? - CORRECT ANSWER - $3,727
At the beginning of the year, Shinedown, Corp., had a long-term debt balance of $45,630. During
the year, the company repaid a long-term loan in the amount of $11,055. The company paid
$3,940 in interest during the year, and opened a new long-term loan for $9,840. How much is the
ending long-term debt account on the company's balance sheet? - CORRECT ANSWER -
$44,415
A firm has sales of $1,210, net income of $225, net fixed assets of $542, and current assets of
$298. The firm has $100 in inventory. What is the common-size balance sheet value of
inventory? - CORRECT ANSWER - 11.90%
A firm has total debt of $1,410 and a debt-equity ratio of .26. What is the value of the total
assets? - CORRECT ANSWER - $6,833.08
ACTUAL Exam Questions and CORRECT
Answers
Jenna has been promoted and is now in charge of all external financing. In other words, she is in
charge of: - CORRECT ANSWER - Capital Structure Management
Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm
on a 75/25 basis. Which type of entity did they create if they have no personal liability for the
firm's debts? - CORRECT ANSWER - Corporation
Which one of the following statements about a limited partnership is correct? - CORRECT
ANSWER - TBD
One advantage of the corporate form of organization is the: - CORRECT ANSWER -
Ability to raise larger sums of equity capital than other organizational forms.
The Sarbanes-Oxley Act of 2002 has: - CORRECT ANSWER - essentially made officers
of publicly traded firms personally responsible for the firm's financial statements.
Which one of the following situations is most apt to create an agency conflict? - CORRECT
ANSWER - Basing management bonuses on the length of employment.
An agency issue is most apt to develop when: - CORRECT ANSWER - the control of a
firm is separated from the firm's ownership.
A firm has common stock of $99, paid-in surplus of $360, total liabilities of $455, current assets
of $480, and net fixed assets of $690. What is the amount of the shareholders' equity? -
CORRECT ANSWER - $715
, Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell
her business. The company built a building at a cost of $1,270,000 that is currently appraised at
$1,470,000. The equipment originally cost $750,000 and is currently valued at $497,000. The
inventory is valued on the balance sheet at $440,000 but has a market value of only one-half of
that amount. The owner expects to collect 98 percent of the $240,200 in accounts receivable. The
firm has $10,800 in cash and owes a total of $1,470,000. The legal problems are personal and
unrelated to the actual business. What is the market value of this firm? - CORRECT
ANSWER - $963,196
Ivan's, Inc., paid $470 in dividends and $580 in interest this past year. Common stock increased
by $190 and retained earnings decreased by $116. What is the net income for the year? -
CORRECT ANSWER - $354
You find the following financial information about a company: net working capital = $1,140;
fixed assets = $6,345; total assets = $8,670; and long-term debt = $4,671. What are the
company's total liabilities? - CORRECT ANSWER - $5,856
You find the following financial information about a company: net working capital = $963; fixed
assets = $7,041; total assets = $11,558; and long-term debt = $4,277. What is the company's total
equity? - CORRECT ANSWER - $3,727
At the beginning of the year, Shinedown, Corp., had a long-term debt balance of $45,630. During
the year, the company repaid a long-term loan in the amount of $11,055. The company paid
$3,940 in interest during the year, and opened a new long-term loan for $9,840. How much is the
ending long-term debt account on the company's balance sheet? - CORRECT ANSWER -
$44,415
A firm has sales of $1,210, net income of $225, net fixed assets of $542, and current assets of
$298. The firm has $100 in inventory. What is the common-size balance sheet value of
inventory? - CORRECT ANSWER - 11.90%
A firm has total debt of $1,410 and a debt-equity ratio of .26. What is the value of the total
assets? - CORRECT ANSWER - $6,833.08
