1|Page: 2024/2025 Grade A+
Corporate Finance Questions and Correct
Answers & Latest Updated
The higher the degree of financial leverage employed by a firm, the
o :## Higher the probability that the firm will encounter financial distress.
When net working capital is negative
o :##
The PE ratio falls within which of the following classifications of financial ratios?
o :## Market value measures
In corporate finance the term dilution is used for
o :## Determine the loss in existing shareholder value.
A firm has total debt of $4,850 and a debt-equity ratio of 0.57. What is the value of the total
assets?
o :## Total equity = $4,850/0.57 = $8,508.77Total assets = $4,850 + $8,508.77 = $13,358.77
A firm generated net income of $911. The depreciation expense was $47 and dividends
were paid in the amount of $25. Accounts payables increased by $15, accounts receivables
increased by $28, inventory decreased by $14, and net fixed assets decreased by $8. There
was no interest expense. What was the net cash flow from operating activity?
o :## Net cash from operating activities = $911 + 47 + 15 - 28 + 14 =$959
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,2|Page: 2024/2025 Grade A+
Outdoor Living needs $14.6 million to finance updates and additions to its production
equipment. The underwriters estimate that the firm could sell additional shares of stock at
$23.50 a share with an underwriting spread of 7.75 percent. This would be a firm
commitment underwriting. The estimated issue costs are $368,000. How many shares of
stock will Outdoor Living need to sell to finance this project? (Round up to the next whole
share.)
o :## 690,446 shares
Total value of issue = ($14,600,000 + 368,000) / (1 - .0775) = $16,225,474.25
Number of shares needed = $16,225,474.25 / $23.50 = 690,445.71, or 690,446 shares
In 2015, a firm has sales revenue of $2,525, a cost of goods sold of $1,010, other expenses
of$552,depreciation of $25, interest of $10, and taxes of $220. What's the firm's profit
margin?
o :## 28.04 percent
Which one of the following functions should be the responsibility of the controller rather
than the treasurer?
o :## Income Tax Returns
Suppose that a corporation has a taxable income of $325,000. Using the following table,
what's the firm's average tax rate?
o :## 33.846 percent
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How is return on equity measured?
o :## Net Income divided by Total Equity
If a firm has $8,750 in earnings before interest and taxes, $725 in depreciation expense, and
$3,062 in taxes, what's the firm's operating cash flow?
o :## $6,413
Alberto currently owns 2500 shares of southern tools. he has just been notified that the firm
is issuing additional shares and he is being given a chance to purchase some of these shares
prior to the shares being offered to the general public. what is this type of an offer called?
o :## Rights Offer
Bonner Automotive has shareholders' equity of $218,700. The firm owes a total of $141,000
of which 40 percent is payable within the next year. The firm has net fixed assets of
$209,800. What is the amount of the net working capital?
o :## Net working capital = current assets - current liabilities
141,000(0.6) + 218,700 - 209,800 = 93,500
A firm has sales of $3340, net income of $274, net fixed assets of $2600, and current assets
of $920. The firm has $430 in inventory. What is the common-size statement value of
inventory?
o :## 12.22%
Master01: DO NOT COPY AND PASTE!! August 25, 2024 Latest Update
