Question 1

Which of the following usually increases as sales revenue increases?

Accepted Answer

A)  Long-term liabilities 
B)  Depreciation 
C)  Accrued salaries 
D)  Capital assets 
E)  Accounts receivable 
A)  Long-term liabilities 
B)  Depreciation 
C)  Accrued salaries 
D)  Capital assets 
E)  Accounts receivable E

Question 2

Company XYZ makes insect repellent and pays $3000 for rent, $32,000 for raw materials, $70,000 for salaries, $12,000 for depreciation and $15,000 for spray bottles. Variable costs are

Accepted Answer

A)  $15,000 
B)  $47,000 
C)  $70,000 
D)  $85,000 
E)  $117,000 
A)  $15,000 
B)  $47,000 
C)  $70,000 
D)  $85,000 
E)  $117,000 B

Question 3

The Company receives 20% of its monthly sales immediately in cash, 70% in the following month and the balance in the month after that. If it had sales of $1.2 million in April, $1 million in May, $1.4 million in June and $1.3 million in July, how much cash is received from its customers in July?

Accepted Answer

A)  $1.1 million 
B)  $1.24 million 
C)  $1.34 million 
D)  $960,000 
E)  $1.94 million 
A)  $1.1 million 
B)  $1.24 million 
C)  $1.34 million 
D)  $960,000 
E)  $1.94 million C

Question 4

Fran Tex, a family-owned corporation, with 120,000 shares outstanding and projected net income after taxes of $3,024,000 has been approached by Mercury Textile to merge. Mercury Textile has 3 1/2 million shares outstanding and a projected net income after tax of $14,700,000. It wants to give Fran Tex shareholders 5.8 Mercury shares for each Fran Tex share. Assume Mercury Textile shares will be newly issued. What will be the EPS of the combined companies?

Accepted Answer

A)  $0.74 
B)  $1.06 
C)  $4.20 
D)  $4.22 
E)  $25.20 
A)  $0.74 
B)  $1.06 
C)  $4.20 
D)  $4.22 
E)  $25.20

Question 5

The TruGlass Bottle Company manufactures glass bottles for the beverage industry. Which of the following statements is correct about its breakeven point?

Accepted Answer

A)  The breakeven point refers to the amount of breakage and spoilage in the factory. 
B)  The breakeven point refers to quantity of sales that generates neither a profit or a loss. 
C)  The breakeven point refers to the last straw for the company's bankers. 
D)  The breakeven point refers to the profit or loss generated by an amount of sales. 
E)  The breakeven point refers to the sales needed to match the variable cost per unit plus the fixed costs. 
A)  The breakeven point refers to the amount of breakage and spoilage in the factory. 
B)  The breakeven point refers to quantity of sales that generates neither a profit or a loss. 
C)  The breakeven point refers to the last straw for the company's bankers. 
D)  The breakeven point refers to the profit or loss generated by an amount of sales. 
E)  The breakeven point refers to the sales needed to match the variable cost per unit plus the fixed costs.

Question 6

A Cash budget is a document that is prepared

Accepted Answer

A)  According to the accrual method of accounting 
B)  On the basis of the accounting matching principal 
C)  Based on book values of assets 
D)  To meet external auditing requirements 
E)  To reflect the timing of Cash flows 
A)  According to the accrual method of accounting 
B)  On the basis of the accounting matching principal 
C)  Based on book values of assets 
D)  To meet external auditing requirements 
E)  To reflect the timing of Cash flows

Question 7

A financing gap refers to

Accepted Answer

A)  The undisclosed project for which a portion of retained earnings is reserved 
B)  Estimates included in pro forma statements which have no basis in hard data 
C)  Financing requirements not identified in the pro forma statements 
D)  A value added to liabilities to balance the pro forma balance sheet 
E)  A reserve for bad debt 
A)  The undisclosed project for which a portion of retained earnings is reserved 
B)  Estimates included in pro forma statements which have no basis in hard data 
C)  Financing requirements not identified in the pro forma statements 
D)  A value added to liabilities to balance the pro forma balance sheet 
E)  A reserve for bad debt

Question 8

The opening Cash balance in July for Markel Ltd. is expected to be $50,000. Sales revenue for July, August and September is projected at $400,000, $450,000 and $420,000 of which 80% are on credit. 60% of credit sales are collected in the month following the sale and the rest in the month after that. Collections from the previous quarter, will add $280,000 to July and $60,000 to August. Rent, salaries and taxes are $260,000 per month. Accounts payable are equal to 30% of sales and are paid in the month following. Payables from the previous quarter equal $120,000. What is the projected closing Cash balance for Markel at the end of the quarter?

Accepted Answer

A)  ($261,000) 
B)  $29,000 
C)  $79,000 
D)  $199,000 
E)  $599,000 
A)  ($261,000) 
B)  $29,000 
C)  $79,000 
D)  $199,000 
E)  $599,000

Question 9

The best way to apply the concept of operating leverage is to realize that

Accepted Answer

A)  High fixed costs compared to variable costs will always produce a higher EBIT 
B)  Higher variable costs compared to fixed costs will always produce higher EBIT 
C)  High fixed costs compared to variable costs will provide greater losses as sales decline than the reverse 
D)  High variable costs compared to fixed costs will provide greater income as sales increase rather than the reverse 
E)  High variable costs relative to fixed costs will provide greater losses as sales decline rather than the reverse 
A)  High fixed costs compared to variable costs will always produce a higher EBIT 
B)  Higher variable costs compared to fixed costs will always produce higher EBIT 
C)  High fixed costs compared to variable costs will provide greater losses as sales decline than the reverse 
D)  High variable costs compared to fixed costs will provide greater income as sales increase rather than the reverse 
E)  High variable costs relative to fixed costs will provide greater losses as sales decline rather than the reverse

Question 10

The opening balance of accounts receivable in October is $255,000. Sales for the month are forecast to be $600,000 of which 55% are on credit. If customers pay in full in one month, what cash will be received from customers in October?

Accepted Answer

A)  $270,000 
B)  $525,000 
C)  $585,000 
D)  $384,750 
E)  $465,000 
A)  $270,000 
B)  $525,000 
C)  $585,000 
D)  $384,750 
E)  $465,000

Question 11

YPad is priced at $500 per unit and has the following cost structure: factory variable manufacturing costs per unit $100; factory fixed costs total $1,000,000; sales commissions are 10% of selling price; delivery expenses to retail stores are 5% of selling price; management salaries total $3,000,000; head office rent $200,000 per year; interest on bank loan is $50,000 per month. What is the breakeven point in units for the YPad?

Accepted Answer

A)  2,769,231 units. 
B)  6,461,538 
C)  6,538,462 
D)  7,076,923 
E)  7,384,615 
A)  2,769,231 units. 
B)  6,461,538 
C)  6,538,462 
D)  7,076,923 
E)  7,384,615

Question 12

Dressler Antiques Ltd. reported retained earnings of ($125,000) on the balance sheet for the year just ended. The company is projecting a net income after tax of $1,620,000 for the coming year. Dressler has 500,000 preferred shares outstanding and 3 million common shares outstanding Both pay a dividend of $.35 per share. What is the projected balance of the Company's retained earnings at the end of the coming year?

Accepted Answer

A)  $270,000 
B)  $345,000 
C)  $395,000 
D)  $1,320,000 
E)  $1,495,000 
A)  $270,000 
B)  $345,000 
C)  $395,000 
D)  $1,320,000 
E)  $1,495,000

Question 13

In which of the following aspects of business planning do Pro Forma Financial Statements play a key role?

Accepted Answer

A)  Communicating the business plan to stakeholders 
B)  Collecting data required to formulate the businesses of options 
C)  Evaluating and selecting the most suitable business option 
D)  Setting the teams and objectives of the business 
E)  Identifying the business options available to the business 
A)  Communicating the business plan to stakeholders 
B)  Collecting data required to formulate the businesses of options 
C)  Evaluating and selecting the most suitable business option 
D)  Setting the teams and objectives of the business 
E)  Identifying the business options available to the business

Question 14

The disadvantage associated with simulations, is that

Accepted Answer

A)  The ease of generating different pro forma statements can preclude a critical look at underlying assumptions 
B)  A single assumption often drives in the range of results produced for all the variables 
C)  Because of data reduction, an insufficient range of alternatives is produced 
D)  Information overload occurs as too many meaningless alternatives are generated for each set of inputs 
E)  The analysis cannot handle the variety of imports from different stakeholders 
A)  The ease of generating different pro forma statements can preclude a critical look at underlying assumptions 
B)  A single assumption often drives in the range of results produced for all the variables 
C)  Because of data reduction, an insufficient range of alternatives is produced 
D)  Information overload occurs as too many meaningless alternatives are generated for each set of inputs 
E)  The analysis cannot handle the variety of imports from different stakeholders

Question 15

Abbey Lane Breweries had sales revenue of $64,000, Cost of Goods Sold of $25,600, Commission Sales Expenses of $16,000, Customer Delivery Expenses of $3,200, Other Miscellaneous Expenses of $7,200. If Sales are targeted to go up by 7% using the Percent-of-Sales Method, what will EBT for the coming year be?

Accepted Answer

A)  $41,088 
B)  $19,200 
C)  $12,000 
D)  $38,400 
E)  $13,344 
A)  $41,088 
B)  $19,200 
C)  $12,000 
D)  $38,400 
E)  $13,344

Question 16

CapiCal Enterprises Hydro contract specifies that over each three-month billing period, the Company will pay a flat fee for electrical consumption until a specified level is reached. Then CapiCal will be invoiced for each additional kilowatt hour of electricity consumed. This type of expense is called a

Accepted Answer

A)  Direct cost 
B)  Indirect cost 
C)  Variable cost 
D)  Mixed cost 
E)  Allocated cost 
A)  Direct cost 
B)  Indirect cost 
C)  Variable cost 
D)  Mixed cost 
E)  Allocated cost

Question 17

Canadian Auto Industries Ltd. (CAI) is considering entering the electric car business because it has access to the latest government research data on a new kind of electric battery. Which of the following situations would most like convince CAI to stop developing a new electric car.

Accepted Answer

A)  The pro forma financial statements indicate CAI must borrow$100,000,000 start the new electric car business. 
B)  The pro forma financial statements indicate CAI will generate negative cash flows for the first three years of the new electric car business. 
C)  The pro forma financial statements indicate CAI must make a new investment of $100,000,000 to generate new profits of $3,000,000. 
D)  The pro forma financial statements indicate CAI's financial position at the end of five years will show a doubling of assets. 
E)  The pro forma financial statements indicate CAI will show a 50% increase in the amount of debt outstanding. 
A)  The pro forma financial statements indicate CAI must borrow$100,000,000 start the new electric car business. 
B)  The pro forma financial statements indicate CAI will generate negative cash flows for the first three years of the new electric car business. 
C)  The pro forma financial statements indicate CAI must make a new investment of $100,000,000 to generate new profits of $3,000,000. 
D)  The pro forma financial statements indicate CAI's financial position at the end of five years will show a doubling of assets. 
E)  The pro forma financial statements indicate CAI will show a 50% increase in the amount of debt outstanding.

Question 18

If sales increased by 12%, and EBIT increased by 5%, which of the following is a possible reason?

Accepted Answer

A)  Operating expenses increased 
B)  Liabilities increased 
C)  Shares were diluted 
D)  Income tax rates increased 
E)  Volumes sold decreased 
A)  Operating expenses increased 
B)  Liabilities increased 
C)  Shares were diluted 
D)  Income tax rates increased 
E)  Volumes sold decreased

Question 19

Pizza is generally considered a recession proof commodity offering. Which of the following will have the greatest impact on a pizza chain's sales?

Accepted Answer

A)  Bargaining power of customers 
B)  Competitive pressure 
C)  General economic conditions 
D)  Availability of resources 
E)  Competitive product innovation 
A)  Bargaining power of customers 
B)  Competitive pressure 
C)  General economic conditions 
D)  Availability of resources 
E)  Competitive product innovation

Question 20

Argo Heating Ltd. manufactures air conditioners. For 100,000 air conditioners, direct material, direct labour, and direct overhead was $2,000,000, $6,000,000, and $ 4,000,000 respectively. The air conditioners sell for $280 each. Factory rent was $400,000 and advertising was another $500,000. Management salaries totalled $2,000,000. Which of the following is the breakeven point for Argo Heating?

Accepted Answer

A)  10,357 units 
B)  18,125 units 
C)  24,167 units 
D)  42,857 units 
E)  75,000 units 
A)  10,357 units 
B)  18,125 units 
C)  24,167 units 
D)  42,857 units 
E)  75,000 units

Which of the following usually increases as sales revenue increases?

Company XYZ makes insect repellent and pays $3000 for rent, $32,000 for raw materials, $70,000 for salaries, $12,000 for depreciation and $15,000 for spray bottles. Variable costs are

The Company receives 20% of its monthly sales immediately in cash, 70% in the following month and the balance in the month after that. If it had sales of $1.2 million in April, $1 million in May, $1.4 million in June and $1.3 million in July, how much cash is received from its customers in July?

The TruGlass Bottle Company manufactures glass bottles for the beverage industry. Which of the following statements is correct about its breakeven point?

A Cash budget is a document that is prepared

A financing gap refers to

The best way to apply the concept of operating leverage is to realize that

The opening balance of accounts receivable in October is $255,000. Sales for the month are forecast to be $600,000 of which 55% are on credit. If customers pay in full in one month, what cash will be received from customers in October?

In which of the following aspects of business planning do Pro Forma Financial Statements play a key role?

The disadvantage associated with simulations, is that

Canadian Auto Industries Ltd. (CAI) is considering entering the electric car business because it has access to the latest government research data on a new kind of electric battery. Which of the following situations would most like convince CAI to stop developing a new electric car.

If sales increased by 12%, and EBIT increased by 5%, which of the following is a possible reason?

Pizza is generally considered a recession proof commodity offering. Which of the following will have the greatest impact on a pizza chain's sales?

Introduction to Financial Management

Accounting - the Language of Business

Analyzing and Interpreting Financial Statements

The Time Value of Money

Making Capital Investment Decisions

Making Capital Investment Decisions: Further Issues

Financing a Business 1: Sources of Funds

Financing a Business 2: Raising Long-Term Funds

The Cost of Capital and the Capital Structure Decision

Developing a Dividend Policy

Managing Working Capital

Measuring and Managing for Shareholder Value

Mergers, Acquisitions, and the Valuation of Shares

Filters

Exam 3: Financial Planning and Pro Forma Financial Statements

Which of the following usually increases as sales revenue increases?

Company XYZ makes insect repellent and pays $3000 for rent, $32,000 for raw materials, $70,000 for salaries, $12,000 for depreciation and $15,000 for spray bottles. Variable costs are

The Company receives 20% of its monthly sales immediately in cash, 70% in the following month and the balance in the month after that. If it had sales of $1.2 million in April, $1 million in May, $1.4 million in June and $1.3 million in July, how much cash is received from its customers in July?

The TruGlass Bottle Company manufactures glass bottles for the beverage industry. Which of the following statements is correct about its breakeven point?

A Cash budget is a document that is prepared

A financing gap refers to

The best way to apply the concept of operating leverage is to realize that

The opening balance of accounts receivable in October is $255,000. Sales for the month are forecast to be $600,000 of which 55% are on credit. If customers pay in full in one month, what cash will be received from customers in October?

In which of the following aspects of business planning do Pro Forma Financial Statements play a key role?

The disadvantage associated with simulations, is that

Canadian Auto Industries Ltd. (CAI) is considering entering the electric car business because it has access to the latest government research data on a new kind of electric battery. Which of the following situations would most like convince CAI to stop developing a new electric car.

If sales increased by 12%, and EBIT increased by 5%, which of the following is a possible reason?

Pizza is generally considered a recession proof commodity offering. Which of the following will have the greatest impact on a pizza chain's sales?

Introduction to Financial Management

Accounting - the Language of Business

Analyzing and Interpreting Financial Statements

The Time Value of Money

Making Capital Investment Decisions

Making Capital Investment Decisions: Further Issues

Financing a Business 1: Sources of Funds

Financing a Business 2: Raising Long-Term Funds

The Cost of Capital and the Capital Structure Decision

Developing a Dividend Policy

Managing Working Capital

Measuring and Managing for Shareholder Value

Mergers, Acquisitions, and the Valuation of Shares

Filters