FINC400 I004 quiz 3

FINC400 I004 Sum 13

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Question 1 of 25

A lower price for the firm’s product will reduce the firm’s breakeven point.

  

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										[removed] A. True[removed] B. False

 

4.0 Points

uestion 2 of 25

(point) Profit is generally adequate to finance significant growth.

  [removed] A. True[removed] B. False  

4.0 Points

Question 5 of 25

The degree of combined leverage is the sum of the degree of operating leverage and the degree of financial leverage.

  [removed] A. True[removed] B. False  

4.0 Points

Question 6 of 25

If fixed costs rise while other variables stay constant

  

 

 

 

 

	[removed] A.the breakeven point rises.
[removed] B.degree of operating leverage increases.
[removed] C.total profit declines.
[removed] D.all of these

 

4.0 Points

Question 7 of 25

Operating leverage emphasizes the impact of using fixed assets in the business.

  [removed] A. True[removed] B. False 

4.0 Points

Question 8 of 25

(point) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced

  

 

 

 

 

[removed] A.is higher.

[removed] B.is lower.

[removed] C.is the same.

[removed] D.can be either higher or lower.

 

Question 9 of 254.0 Points The contribution margin is equal to price per unit minus total costs per unit.   [removed] A. True[removed] B. False

 

4.0 Points

Question 10 of 25

(point) Which of the following is most likely to increase the final number for notes payable in the pro forma balance sheet?

  

 

 

 

 

[removed] A.decrease in inventory.

[removed] B.increase in retained earnings.

[removed] C.decrease in accounts payable.

[removed] D.decrease in accounts receivable.

  

4.0 Points

estion 11 of 25

An increase in sales and profits generates the necessary cash required for economic growth.

  [removed] A. True[removed] B. False 

4.0 Points

Question 12 of 25

The percent-of-sales forecast is likely to be most accurate when used with cyclical companies.

  [removed] A. True[removed] B. False 

4.0 Points

Question 13 of 25

Pro forma financial statements are

  

 

 

 

 

[removed] A.the most comprehensive means of financial forecasting.

[removed] B.often required by prospective creditors.

[removed] C.projections of financial statements for a future period.

[removed] D.all of these.

  

4.0 Points

Question 14 of 25

(point) When the cost of raw materials is increasing, FIFO accounting

  

 

 

 

.

 

[removed] A.yields higher ending inventory values than LIFO.
[removed] B.produces higher unit sales than using LIFO.
[removed] C.yields higher cost of goods sold than LIFO.
	[removed] D.All of these

  

4.0 Points

Question 15 of 25

(point) If sales volume exceeds the break-even point, the firm will experience

  

 

 

 

 

[removed] A.an operating loss.

[removed] B.an operating profit.

[removed] C.an increase in plant and equipment.

[removed] D.an increase in stock price.

  

4.0 Points

Question 16 of 25

The value of ending inventory should be equal to beginning inventory plus total production costs minus cost of goods sold.

  [removed] A. True[removed] B. False 

4.0 Points

Question 17 of 25

(point) Leverage works best when volume is increasing.

  [removed] A. True[removed] B. False 

4.0 Points

Question 18 of 25

(point) The percent-of-sales method would be more accurate under a steady sales assumption than cyclical sales.

  [removed] A. True[removed] B. False 

4.0 Points

Question 19 of 25

If the price per unit decreases because of competition but the cost structure remains the same

  

[removed] A.the breakeven point rises. 

 

 

[removed] D.All of these 

[removed] B.the degree of combined leverage declines.

[removed] C.the degree of financial leverage declines.

  

4.0 Points

Question 20 of 25

 

Sales (100,000 units)	$   1,000,000
Variable costs	300,000
Contribution margin	700,000
Fixed manufacturing costs	200,000
Operating income	500,000
Interest	75,000
Earnings before taxes	425,000
Taxes (30%)	127,500
Net Income	$      297,500

Refer to the figure above. The Degree of Operating Leverage is

  

 

 

 

 

[removed] A.1.40x

[removed] B.1.56x

[removed] C.3.33x

[removed] D.2.22x

 

4.0 Points

Question 21 of 25

(point) The percent-of-sales method for financial forecasting assumes that balance sheet accounts maintain a constant relationship to sales.

  [removed] A. True[removed] B. False 

4.0 Points

Question 22 of 25

(point) As the contribution margin rises, the breakeven point goes down.

  [removed] A. True[removed] B. False 

4.0 Points

Question 23 of 25

(point) In the percent-of-sales method, an increase in dividends

  

 

 

 

 

[removed] A.will increase required new funds.

[removed] B.will decrease required new funds.

[removed] C.has no effect on required new funds.

[removed] D.more information is needed.

 

4.0 Points

uestion 24 of 25

Which of the following is not true about leverage?

  

 

 

 

 

[removed] A.operating leverage influences the top half of the income statement, determining EBIT.

[removed] B.financial leverage deals with the bottom half of the income statement, determining EPS

[removed] C.combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.

[removed] D.none of these

 

4.0 Points

Question 25 of 25

The finance department should work independently without the input of other departments because there may be significant biases when creating proformas.

  [removed] A. True[removed] B. False