Practice Test 1 AF 325 Corporate Finance Theory

Notes

Practice Test 1 AF 325 Corporate Finance Theory 1. Zumbahlen Inc. has the following balance sheet. How much total operating capital does the firm have? Cash $ 20.00 Accounts payable $ 30.00 Short-term investments 50.00 Accruals 50.00 Accounts receivable 20.00 Notes payable 30.00 Inventory 60.00 Current liabilities $110.00 Current assets $150.00 Long-term debt 70.00 Gross fixed assets $140.00 Common stock 30.00 Accumulated deprec. 40.00 Retained earnings 40.00 Net fixed assets $100.00 Total common equity $ 70.00 Total assets $250.00 Total liab. & equity $250.00 A. $114.00 B. $120.00 C. $126.00 D. $132.30 E. $138.92 2. One drawback of switching from a partnership to the corporate form of organization is the following: A. It subjects the firm to additional regulations. B. It cannot affect the amount of the firm's operating income that goes to taxes. C. It makes it more difficult for the firm to raise additional capital. D. It makes the firm’s investors subject to greater potential personal liabilities. E. It makes it more difficult for the firm’s investors to transfer their ownership interests. 3. A firm has 10,000 shares of stock outstanding, sales of $6,000, net income of $1600...