CF TE10 Test

Q. Corporate governance:

• A. complies with a set of global standards.
• B. is independent of both shareholder theory and stakeholder theory.
• C. seeks to minimize and manage conflicting interests between insiders and external shareholders.

Q. According to the pecking order theory:

• A. new debt is preferable to new equity.
• B. new debt is preferable to internally generated funds.
• C. new equity is always preferable to other sources of capital.

None

• A. 7.62%.
• B. 10.52%.
• C. 12.40%.

Q. Myundia Motors now sells 1 million units at ¥3,529 per unit. Fixed operating costs are ¥1,290 million and variable operating costs are ¥1,500 per unit. If the company pays ¥410 million in interest, the levels of sales at the operating breakeven and breakeven points are, respectively:

• A. ¥1,500,000,000 and ¥2,257,612,900.
• B. ¥2,243,671,760 and ¥2,956,776,737.
• C. ¥2,975,148,800 and ¥3,529,000,000.

None

• A. a higher degree of total leverage.
• B. a lower sensitivity of operating income to changes in units sold.
• C. the same sensitivity of operating income to changes in net income.

Q. The Fulcrum Company produces decorative swivel platforms for home televisions. If Fulcrum produces 40 million units, it estimates that it can sell them for $100 each. Variable production costs are $65 per unit and fixed production costs are $1.05 billion. Which of the following statements is most accurate? Holding all else constant, the Fulcrum Company would:

• A. generate positive operating income if unit sales were 25 million.
• B. have less operating leverage if fixed production costs were 10 percent greater than $1.05 billion.
• C. generate 20 percent more operating income if unit sales were 5 percent greater than 40 million.

None

• A. No for Suggestions 1 and 2
• B. No for Suggestion 1 and yes for Suggestion 2
• C. Yes for Suggestion 1 and no for Suggestion 2

None

• A. 1.60.
• B. 2.67.
• C. 3.20.

None

• A. 10.52%.
• B. 19.91%.
• C. 28.95%.

None

• A. 7.65%.
• B. 9.23%.
• C. 10.17%.