STR 581 Final Exam Part 2 with STR 581 Week 4 Capstone Final Examination Part 2

STR 581 Capstone Final 

Examination Part 2 

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Q1. Internal reports that review the actual impact of decisions are prepared by: 

 

 

 

 

the controller 

department heads 

factory workers 

management accountants 

Q2. Horizontal analysis is also known as: 

 

 

 

 

 

 

 

 

trend analysis 

vertical analysis 

linear analysis 

common size analysis 

Q3. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? 

most common form of organization 

reduced legal liability for investors 

lower taxes 

harder to transfer ownership 


Q4. Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for 

$28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year? (Round 

to the nearest percent.) 

32% 

16% 

12% 

40% 

Q5. External financing needed: Jockey Company has total assets worth $4,417,665. At year-end it will have net income of 

$2,771,342 and pay out 60 percent as dividends. If the firm wants no external financing, what is the growth rate it can 

support? 

30.3% 

27.3% 

32.9% 

25.1% 


Q6. An unrealistic budget is more likely to result when it: 

 

 

 

 

has been developed by all levels of management. 

has been developed in a top down fashion. 

has been developed in a bottom up fashion. 

is developed with performance appraisal usages in mind. 

Q7. Which of the following financial statements is concerned with the company at a point 

in time? 

 

 

 

 

balance sheet 

retained earnings statement 

statement of cash flows 

income statement 


Q8. Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 

in each of the following three years. If their required rate of return if 14 percent, what is the present 

value of their dividends over the next four years? 

$12.50 

$11.63 

$9.72 

$13.50 

 

 

 

 

Q9. An activity that has a direct cause-effect relationship with the resources consumed is a(n): 

product activity 

cost driver 

cost pool 

overhead rate 


Q10. The major element in budgetary control is: 

• the approval of the budget by the stockholders 

• the valuation of inventories 

• the preparation of long-term plans 

• the comparison of actual results with planned objectives. 

Q11. Tule Time Comics is considering a new show that will generate annual cash flows of $100,000 into the infinite future. 

If the initial outlay for such a production is $1,500,000 and the appropriate discount rate is 6 percent for the cash flows, 

then what is the profitability index for the project? 

0.11 

1.11 

0.90 

1.90 


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Q12. How firms estimate their cost of capital: The WACC for a firm is 13.00 percent. You know that the 

firm’s cost of debt capital is 10 percent and the cost of equity capital is 20% What proportion of the firm 

is financed with debt? 

70% 

50% 

33% 

30% 

Q13. The most important information needed to determine if companies can pay their current 

obligations is the: 

 

 

 

 

relationship between current assets and current liabilities 

relationship between short-term and long-term liabilities 

projected net income for next year 

net income for this year 


Q14. Process costing is used when: 

 

 

 

 

 

 

 

 

dissimilar products are involved 

production is aimed at fulfilling a specific customer order. 

the production process is continuous. 

costs are to be assigned to specific jobs. 

Q15. A cost which remains constant per unit at various levels of activity is a: 

fixed cost 

mixed cost 

manufacturing cost 

variable cost 

Q16.The group of users of accounting information charged with achieving the goals of the 

business is its: 

 

 

 

 

investors 

auditors 

creditors 

managers 


Q17. Teakap, Inc. has current assets of $1,456,312 and total assets of $4,812,369 for the year ending 

September 30, 2006. It also has current liabilities of $1,041,012, common equity of $1,500,000 and 

retained earnings of $1,468,347. How much long-term debt does the firm have? 

$803,010 

$2,303,010 

$1,844,022 

$2,123,612 

 

 

 

 

Q18. The cash conversion cycle? 

begins when the firm invests cash to purchase the raw materials that would be used to produce the 

goods that the firm manufactures. 

estimates how long it takes on average for the firm to collect its outstanding accounts receivables 

balance. 

begins when the firm uses its cash to purchase raw materials and ends when the firm collects cash 

payments on its credit sales. 

shows how long the firm keeps its inventory before selling it. 


Q19. Ajax Corp. is expecting the following cash flows - $79,000, $112,000, $164,000, $84,000, and 

$242,000 – over the next five years. If the company’s opportunity cost is 15 percent, what is the 

present value of these cash flows? (Round to the nearest dollar.) 

$480,906 

$429,560 

$414,322 

$477,235 

Q20. Jack Robbins is saving for a new car. He needs to have $21,000 for the car in three years. How 

much will he have to invest today in an account paying 8 percent annually to achieve his target? 

(Round to nearest dollar) 

$26,454 

$19,444 

$22,680 

$16,670 


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Q21. Which of the following presents a summary of changes in a firm’s balance sheet from the 

beginning of an accounting period to the end of that accounting period? 

 

 

 

 

the statement of net worth 

the statement of cash flows 

the statement of working capital 

the statement of retained earnings 

Q22. M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is expected to 

exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your 

analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent 

for the debt. You currently own 10 percent of the stock. 

If Dynamo wishes to change its capital structure from 75 percent equity to 60 percent equity and use 

the debt proceeds to pay a special dividend to shareholders, how much debt should they use? 

$225 

$600 

$375 

$321 


Q23. Horizontal analysis is a technique for evaluating a series of financial statement data over a 

period of time: 

 

 

 

 

that has been arranged from the highest number to the lowest number. 

to determine the amount and/or percentage increase or decrease that has taken place. 

to determine which items are in error. 

that has been arranged from the lowest number to the highest number. 

Q24. Jayadev Athreya has started his first job. He will invest $5,000 at the end of each year for the 

next 45 years in a fund that will earn a return of 10 percent. How much will Jayadev have at the end 

of 45 years? 

$2,667,904 

$5,233,442 

$1,745,600 

$3,594,524 


Q25. Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and amortization expenses 

amounted to $84 million. The firm has 135 million shares outstanding and a share price of $12.80. A competing firm that 

is very similar to Turnbull has an enterprise value/EBITDA multiple of 5.40. 

What is the enterprise value of Turnbull Corp.? Round to the nearest million dollars. 

 

 

 

 

 

 

 

 

$1,344 million 

$453.6 million 



Q26. Firms that achieve higher growth rates without seeking external financing: 

Have a low plowback ratio 

are highly leveraged 

have less equity and/or are able to generate high net income leading to a high ROE. 

None of these 


Q27. In a process cost system, product costs are summarized: 

on job cost sheets. 

when the products are sold. 

after each unit is produced. 

on production cost reports. 

 

 

 

 

Q28. The convention of consistency refers to consistent use of accounting principles: 

within industries 

among accounting periods 

throughout the accounting period 

among firms 


Q29. If a company’s weighted average cost of capital is less than the required return on 

equity, then the firm: 

 

 

 

 

is financed with more than 50% debt 

is perceived to be safe 

partnership 

has debt in its capital structure 

Q30. Your firm has an equity multiplier of 2.47. What is the debt-to-equity ratio? 

0 

1.74 

0.60 

1.47 


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Q31. The accumulation of accounting data on the basis of the individual manager who has the 

authority to make day-to-day decisions about activities in an area is called: 

 

 

 

 

master budgeting 

static reporting 

responsibility accounting 

flexible accounting 

Q32. Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors 

buying the bond today can expect to earn a yield to maturity of 6.875 percent. What should the 

company’s bonds be priced at today? Assume annual coupon payments. (Round to the nearest 

dollar.) 

$1014 

$972 

$923 

$1,066 


Q33. Variance reports are: 

 

 

 

 

internal reports for management 

SEC financial reports 

external financial reports 

all of these 

 

 

 

 

Q34. The break-even point is where: 

contribution margin equals total fixed costs. 

total sales equal total variable costs. 

total sales equal total fixed costs. 

total variable costs equal total fixed costs. 


Q35. When a company assigns the costs of direct materials, direct labor, and both variable and fixed 

manufacturing overhead to products, that company is using: 

 

 

 

 

operations costing 

product costing 

absorption costing 

variable costing 

 

 

 

 

Q36. Which of the following is considered a hybrid organizational form? 

sole proprietorship 

partnership 

limited liability partnership 

corporation 


Q38. The process of evaluating financial data that change under alternative courses of action is 

called: 

 

 

 

 

incremental analysis 

contribution margin analysis 

cost-benefit analysis 

double entry analysis 

Q39. What decision criteria should managers use in selecting projects when there is not enough 

capital to invest in all available positive NPV projects? 

 

 

 

 

the modified internal rate of return 

the profitability index 

the discounted payback 

the internal rate of return 


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