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1. Rusty RoboTech, a robotics technology company, has provided the following financial information for the year 20X3:
* Sales Revenue: $500,000
* Net Income: $50,000
* Dividend Payout: 40% of Net Income
* Total Assets at the beginning of 20X3: $300,000
* Total Liabilities at the beginning of 20X3: $150,000
* Equity at the beginning of 20X3: $150,000
* Historical Cash-to-Sales Ratio: 5%
* Accounts Receivable-to-Sales Ratio: 15%
* Inventory-to-Sales Ratio: 25%
* Cost of Goods Sold-to-Sales Ratio: 43%
For the year 20X4, Rusty RoboTech projects a 20% increase in sales revenue. Other ratios and the dividend policy are expected to remain the same.
What is the projected inventory value for Rusty RoboTech at the beginning of 20X4?
A) $130,000
B) $120,000
C) $150,000
D) $140,000
2. Why might a firm's net income not equal its cash flows from operations for a period?
A) Net income may reflect noncash charges and revenue recognition that differ from a firm's actual cash flows.
B) Net income projects future earnings, while cash flows from operations deal with past cash transactions.
C) Net income represents profits from investing activities only, while cash flows from operations reflect all earnings.
D) Cash flows from operations are calculated for tax purposes only and may not align with actual income earned.
3. What distinguishes a subordinated debenture from a senior debenture?
A) A subordinated debenture has a lower claim on assets in the event of liquidation.
B) A subordinated debenture is issued in a foreign currency.
C) A subordinated debenture is secured with collateral.
D) A subordinated debenture has a higher claim on assets in the event of liquidation.
4. What is the goal of just-in-time (JIT) inventory management?
A) To minimize holding costs by reducing inventory levels
B) To increase the quantity of on-hand inventory
C) To maximize the storage space utilized
D) To extend the cash conversion cycle
5. Alliah Company produces vaccines at its pharmaceutical facility near a river. It is considering expanding its operations by building a second facility next to the first. The company holds a public hearing to discuss an extra investment it will make to minimize pollution and keep the river clean and thriving for the native wildlife.
How does this effort support the overall goal of the firm?
A) Alliah Company is focusing on consumers first and foremost to create the greatest value for the company. Reducing this pollution will directly improve the quality of products the company creates.
B) Alliah Company is seeking to focus initially on maximizing value to the shareholders-or owners-of the firm, and the extra costs to prevent pollution will increase the immediate earnings available for owners.
C) Alliah Company is ensuring this action will reduce immediate costs to maximize employee engagement and earnings-because the ultimate goal of a company is employee-oriented.
D) Alliah Company is considering the long-term impact on shareholder value and the company ' s social responsibility to all stakeholders-including the environment and local community.
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: A | Question # 3 Answer: A | Question # 4 Answer: A | Question # 5 Answer: D |
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