Finance 370 Final Exam
Instructor: Tim Gould
Ch 1, 3, 4,5,9,10,12,14,15,16,18,19,20,22,23,24
There are 50 questions worth 0.2 points each for a total possible of 10 points toward your class grade.
Please highlight the answer you want to give for each question in BOLD and yellow as follows:
a.All of the above.
1. Which of the following is a characteristic of an efficient market?
a.Small number of individuals.
b.Opportunities exist for investors to profit from publicly available information.
- Security prices reflect fair value of the firm.
d.Immediate response occurs for new public information.
2.Diversification increases when ________ decreases.
- a and c
e.all of the above
3.Corporations receive money from investors with:
a.initial public offerings.
b.seasoned new issues.
c.primary market transactions.
d.a and b.
- all of the above.
4.Which of the following is true regarding an initial public offering?
a.The corporation gets proceeds from the investor.
b.Investors get proceeds from other investors.
c.The security is sold for the first time to the public.
- Both a and c.
e.All of the above.
Table 1(Use this table for questions 5-8)
Smith Company Balance Sheet
Cash and marketable securities $300,000
Accounts receivable 2,215,000
Prepaid expenses 24,000
Total current assets $3,286,500
Fixed assets 2,700,000
Less: accumulated depreciation 1,087,500
Net fixed assets $1,612,500
Total assets $4,899,000
Accounts payable $240,000
Notes payable 825,000
Accrued taxes 42,500
Total current liabilities $1,107,000
Long-term debt 975,000
Owner’s equity 2,817,000
Total liabilities and owner’s equity $4,899,000
Net sales (all credit) $6,375,000
Less: Cost of goods sold 4,312,500
Selling and administrative expense 1,387,500
Depreciation expense 135,000
Interest expense 127,000
Earnings before taxes $412,500
Income taxes 225,000
Net income $187,500
Common stock dividends $97,500
Change in retained earnings $90,000