necessary to acquire raw materials


The time necessary to acquire raw materials, turn them into finished goods, sell them, and receive payment for them is referred to as the ______ cycle.

  • operating
  • manufacturing
  • cash
  • sales


Credit analysis relating to a borrower generally involves examining which one of the following?

  • The “two C’s”
  • The “four C’s”
  • The “three C’s”
  • The “five C’s”


The net cash flow from a firm in February, March, and April is $4.6 million, -$1.7 million, and $1.9million, respectively. What’s the cumulative cash flow for April?

  • $5.1 million
  • $3.9 million
  • $6.9 million
  • $4.8 million


Super Duper Auto Stores, Inc., needs to raise $144 million to finance its expansion. Its investment bank recommends a debt issue with an offer price of $1,000 a bond and an underwriter’s fee of 4 percent of the gross proceeds. How many bonds will the company need to sell to receive the $144 million it needs?

  • 145,000
  • 125,000
  • 150,000
  • 130,000


What’s declared about a divided on a stock’s declaration date?

  • Payment data and an ex-dividend date
  • Ex-dividend data and a record date
  • A closing date and an ex-dividend date
  • A record date and a payment date


What’s the appropriate tax rate to be used in WACC?

  • The weighted average of the marginal tax rates that would have been paid on the taxable income shielded by the interest deduction
  • The highest applicable tax rate charged on the firm’s income
  • The simple average of the tax rates that would have been paid on the taxable income shielded by the interest deduction
  • The weighted average of the firm’s discounted current marginal tax rates


The common shares of Jones & Smith, Inc. sell for $22 per share. The firm is expected to set its next annual dividend at $0.68 per share, and all future dividends are expected to grow by 5 percent per year indefinitely. If Jones & Smith, Inc., experiences a flotation cost of 15 percent on new equity issues, what will be the flotation-adjusted cost of equity?

  • 6.63 percent
  • 8.64 percent
  • 5.87 percent
  • 7.92 percent


A firm has the following sale figures:

Year 2011: $4.6 million;

Year 2012: $5.1 million

Year 2013: $4.2 million

Year 2014: $3.8 million

Year 2015: $4.3 million

Using the average approach, determine the forecast for the next year’s sales.

  • $5.4 million
  • $3.2 million
  • $5.1 million
  • $4.4 million


Super Fun Toys, Inc., has the following balance sheet:

AssetsLiabilities andEquity
Current Assets$3,500,00Current liabilities$2,400,00
Fixed Assets5,100,000Long-term debt2,100,000
Total assets$8,600,00 Total liabilities &$8,600,00

Suppose Super Fun Toys, Inc., has sales of $8.9 million for the year just ended, the profit margin of the firm is 16 percent with a retention rate of 28 percent, and the firm expects sales of $10.8 million next year. If fixed assets will have to grow by $800,000 to support the sales growth, with current assets and current liabilities expected to grow with sales, what amount of additional funds will Super Fun Toys need from external sources to fund the expected growth?

  • $482,562
  • $824,511
  • $622,314
  • $550,991


Which one of the following is not a capital-budgeting technique?

  • Modified internal rate of return (MIRR)
  • Net present value (NPV)
  • Modified payback (MPB)
  • Payback (PB)


The preliminary version of the prospectus for a public offering is known as

  • an indenture instrument.
  • the red herring prospectus.
  • a shelf registration.
  • the statement of information.


What total in fees would a firm have to pay on a loan offered by its bank with a loan commitment of $6.4 million with an up-front fee of 80 basis points and a back-end fee of 20 basis points? (The take down on the loan is 60 percent.)

  • $51,320
  • $56,320
  • $61,230
  • $5,360


The portion of the necessary increase in assets to support an increase in sales that will need to be funded from external capital is called

  • capital deficit.
  • additional funds needed.
  • excess funding requirement.
  • funds from operations.


Supersonic Spaceship Manufacturing, Inc., has 8 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 7,000 bonds. If the common shares are selling for $23 per share, the preferred shares are selling for $18.60 per share, and the bonds are selling for 99 percent of par, what weight should you use for debt when calculating Supersonic’s WACC?

  • 3.56 percent
  • 1.88 percent
  • 2.44 percent
  • 3.12 percent


Your firm is considering a project with the following timeline and cash flows:

Year 0: -$1,800

Year 1: $880

Year 2: $948

Year 3: $1,231

Year 4: $845

Year 5: $1,586

If the appropriate cost of capital is 7 percent, what’s the PI statistic for the project, and should the firm accept or reject the project?

  • 0.54; Accept
  • 2.46; Accept
  • 0.54; Reject
  • 2.46; Reject


A firm has the following sales figures:

Year 2011: $2.1 million

Year 2012: $2.3 million

Year 2013: $2.5 million

Year 2014: $2.2 million

Year 2015: $3.1 million

Using the naïve approach, determine the forecast for next year’s sales.

  • $2.5 million
  • $3.2 million
  • $3.1 million
  • $3.4 million


Venture Forth Enterprises estimates that it takes five days on average for customers’ payments to arrive, two days for bookkeepers to process and deposit the payments, and three more days for the checks to clear after being deposited. What is Venture Forth’s collection float?

  • 5 days
  • 7 days
  • 8 days
  • 10 days


Assume that Consolidated Widgets, Inc., has annual sales of $5.9 million, cost of goods sold of $3.9 million, average inventories of $2.2 million, and average accounts receivable of $1.1 million. If all of Consolidated Widgets’ sales are on credit, what would be the firm’s operating cycle?

  • 292.14 days
  • 311.42 days
  • 261.83 days
  • 273.95 days


A graph of a project’s NPV as a function of possible capital costs is called the ______ profile.

  • IRR
  • standard deviation
  • beta
  • NPV


With the help of its investment bank, Terrestrial Travel Tours recently issued $314 million of new debt. The offer price on the debt was $1,000 per bond, and the underwriter’s spread was 6 percent of the gross proceeds. What’s the amount of capital funding Terrestrial Travel Tours raised through this bond issue?

  • $314,896,000
  • $312,420,000
  • $287,469,000
  • $295,160,000

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