Questions And Answers On Buying And Finance: Questions On Finance

Which of the following best describes why cash flows are utilized rather than accounting profits when evaluating capital projects? Cash flows reflect the timing of benefits and costs more accurately than accounting profits.

Which of the following goals is in the best long-term interest of stockholders? Maximizing of the market value of the existing shareholders' common stock

Long-term financial plans typically encompass: about 5 years.

Given an accounts receivable turnover of 8 and annual credit sales of $362,000, the average collection period (360-day year) is 45days

Buying and selling in more than one market to make a riskless profit is called: arbitrage.

Metals Corp. has $2,575,000 of debt, $550,000 of preferred stock, and $18,125,000 of common equity. Metals Corp.'s after-tax cost of debt is 5.25%, preferred stock has a cost of 6.35%, and newly issued common stock has a cost of 14.05%. What is Metals Corp.'s weighted average cost of capital? 12.75%

Which of the following financial ratios is the best measure of the operating effectiveness of a firm's management? Return on investment

The Securities Investor Protection Corporation protects individuals from: brokerage firm failures
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the Federal Reserve

We compute the profitability index of a capital-budgeting proposal by Initial outlay = $1,748.80 dividing the present value of the annual after-tax cash flows by the cost of the project.

A company collects 60% of its sales during the month of the sale, 30% one month after the sale, and 10% two months after the sale. The company expects sales of $10,000 in August, $20,000 in September, $30,000 in October, and $40,000 in November. How much money is expected to be collected in October? $25,000

If managers are making decisions to maximize shareholder wealth, then they are primarily concerned with making decisions that should: increase the market value of the firm's common stock.

Apple Two Enterprises expects to generate sales of $5,950,000 for fiscal 2014; sales were $3,450,000 in fiscal 2013. Assume the following figures for the fiscal year ending 2013: cash $70,000; accounts receivable $250,000; inventory $400,000; net fixed assets $520,000; accounts payable $235,000; and accruals $155,000. Use the percent-of-sales method to forecast cash for the fiscal year ending 2014.

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