My first Magazine PSY 355 STUDY Exciting Results - psy355study.com STR 581 HELP Exciting Results - str581help.com | Page 37
opinion. • Ronan, the CFO of Puvane Inc., is granted an unsecured loan by the
company to pay his son’s medical bills. •
Tina, an accountant, fails to detect a
fraud in the financial statements of the company she audits. • Wong is a member of the
audit committee of a public corporation. However, he is an external member and was not
employed by the corporation. 13 Tanial Inc. has $950,000 in assets and $400,000 in debt.
If it earns net income of $350,000, calculate the return on assets A. 63.6% B.
36.8% C. 271.4% D. 87.5% The financial manager of a company needs to
measure how efficiently the company’s total assets are being used to generate sales. From
the information given below, calculate the relevant ratio he needs for this purpose. Cash
$220,000 Accounts receivable
1,800,000 Inventory 950,000 Plant and
equipment 1,330,000 Sales
10,000,000 A.
Assets turnover ratio of 0.3 B.
Debt to assets ratio of 3.4 C.
Assets turnover ratio of 2.3 D.
Debt to
assets ratio of 0.4 15 Jose, a financial expert of Cerione Ltd., analyzes the data given
below. What conclusion is he likely to arrive at? Sales $161,000 Cost of goods sold
110,000 Gross margin
$ 51,000 Total selling and administrative expenses
39,500 Net operating income
$ 11,500 Interest expenses 2,170 Net income
before taxes $ 9,330 Income tax (30%) 2,799 Net income $ 6,531 A. The company
does not have adequate resources to pay the interest due to creditors. B. The
company’s gross margin is 20 percent. C.
The company has sufficient resources to
pay the interest due to creditors. D.
The company’s earnings before interest is the
same as its earnings after taxes. 16 The capital structure for Purnen Corporation is given
below. Calculate the weighted average cost of capital (WACC). Debt: 10%, 1,500 bonds,
20 years to maturity, selling for 105% of par. The bonds have a $1,000 par value each
and make annual payments. Common stock: 3,000,000 shares outstanding at a par value
of $1, selling for $35 a share. The expected dividend is $2.8, and the growth rate is 10%.
Preferred stock: 5,000 shares of 6% preferred stock outstanding, selling for $103 a share
and having a par value of $100. The flotation cost is $3, and the dividend is $9. The
corporate tax rate is 35%. A.
8.4% B.
16.5% C. 9.96% D.
13.65% 17
Raul needs to choose one alternative from the four alternatives given below. Applying the
concept of time value of money, which of the following alternatives should he select? A.
Receiving $130 at the end of two years at an interest rate of 8% compounded
annually B. Receiving $100 at the end of two years at an interest rate of 9%
compounded annually C. Receiving $150 at the end of three years at an interest rate of
7% compounded annually D.
Receiving $90 at the end of one year at an interest rate
of 5% compounded annually 18 Josh and Mike are discussing the pros and cons of the
Sarbanes-Oxley Act. While Josh argues that the act has a high compliance cost, Mike is
of the opinion that companies can easily avoid these costs by choosing to go dark and