FIN 220 - Midterm Review Part A

What is another way of saying "net worth"?

• Historical value

• Book value

• Market value

• Liquid value

Answer explanation

Found in Chapter 2.

Which of the following has the definition "the percent change in operating income divided by the percent change in units sold"?

• Degree of Financial Leverage (DFL)

• Degree of Combined Leverage (DCL)

• Degree of Operating Leverage (DOL)

• Break-Even Analysis

Answer explanation

Found in Chapter 5.

How do you compute the change in retained earnings for one reporting period?

• EAT - common dividends paid

• Earnings available to common shareholders - common dividends paid

• Earnings available to common shareholders + preferred dividends paid

• EAT + preferred dividends paid

Answer explanation

Found in Chapter 2.

• The days a discount is available

• The focal date

Answer explanation

Found in Chapter 8.

Which of the following is a benefit of a financial manager having a goal of shareholder wealth maximization?

• They are willing to take bigger risks to bring in even higher profits

• They can focus on profits that happen in the near future instead of later on

• They can focus on profits that will benefit both themselves and the company in the future

• They can choose to focus on the highest of the various types of net income calculations

Answer explanation

Found in Chapter 1.

True or false: It is better to have a lower receivables turnover than competitors in the industry

• True

• False

Answer explanation

Found in Chapter 3.

How do you determine the order that accounts go on the balance sheet?

• Dollar value

• Market value

• Purchase date

• Liquidity

Answer explanation

Found in Chapter 2

What is the pattern seen between financing alternatives with a "normal" term structure?

• Short-term rates are almost always higher than long-term rates

• Short-term rates are higher than long-term rates every 5 years

• Long-term rates are almost always higher than short-term rates

• Long-term rates are higher than short-term rates every 4 years

Answer explanation

Found in Chapter 6.

• The discount rate

• The cost of foregoing a discount

Answer explanation

Found in Chapter 8.

What is the correct calculation of Free Cash Flow?

• Cashflows from operating activities - capital expenditures - dividends paid

• Cashflows from investing activities + capital expenditures + dividends paid

• Cashflows from operating activities + capital expenditures + dividends paid

• Cashflows from investing activities - capital expenditures - dividends paid

Answer explanation

Found in Chapter 2.