ACC 599/ACC599 MIDTERM EXAM (A++++++ Guarantee)

Question 1
Dawn Alive reported the following for 2012.
Ending market price $40.75
Earnings per share: 
Basic 2.50
Diluted 2.08
Dividends per share 1.10
The price/earnings ratio and dividend payout were:
Answer
19.59 and 52.88%
16.30 and 52.88%
16.30 and 44.00%
19.59 and 44.00%
37.04 and 52.88%
Question 2
The ratio percentage of earnings retained is the same as that termed:
Answer
dividend yield.
dividend payout.
this year's retained earnings to net income.
return on common equity.
book value.
Question 3
What is the effect of the exercise of stock options?
Answer
They generate cash to the issuing firm and therefore increase profit per share.
They are an expense at the time of exercise. This lowers net income.
They increase debt and lower borrowing capacity but have no effect on profit.
They increase the number of shares outstanding.
They have no immediate effect on profitability
Question 4
Interest expense creates magnification of earnings through financial leverage because:
Answer
the interest rate is variable.
interest accompanies debt financing.
the use of interest causes higher earnings.
interest costs are cheaper than the required rate of return to equity owners.
while earnings available to pay interest rise, earnings to residual owners rise faster.
Question 5
Book value per share may not approximate market value per share because:
Answer
the book value is after tax.
book values are based on replacement costs rather than market values.
book value is related to book figures and market value is related to the future potential as seen by investors.
investors do not understand book value.
book value is not related to dividends.
Question 6
The price/earnings ratio:
Answer
measures the past earning ability of the firm.
is a gauge of future earning power as seen by investors.
relates price to dividends.
relates price to total net income.
Question 7
Which of the following ratios appears most frequently in annual reports?
Answer
Earnings per Share
Return on Equity
Profit Margin
Effective Tax Rate
Debt/Equity
Question 8
Which of the following ratios is rated to be a primary measure of liquidity and the highest significance rating of the liquidity ratios according to commercial loan departments?
Answer
Debt/Equity
Current Ratio
Degree of Financial Leverage
Inventory Turnover in Days
Accounts Receivable Turnover in Days
Question 9
Which of the following ratios is given the highest significance rating by controllers?
Answer
Current Ratio
Earning Per Share
Return on Equity - After Tax
Return on Assets - After Tax
Price/Earnings Ratio
Question 10
There are many definitions or descriptions given to financial failure. Which of the following does not appear to be a reasonable definition or description:
Answer
refinancing of bonds payable.
liquidation.
deferment of payments to short-term creditors.
deferment of payments of interest on bonds.
deferment of payments of principal on bonds
Question 11
Which of the following ratios is a primary measure of liquidity according to the corporate controller survey?
Answer
Earnings per Share
Debt/Equity Ratio
Return on Equity after Tax
Current Ratio
None of the answers are correct
Question 12
Which of the following ratios is given the highest significance rating by Certified Public Accountants?
Answer
Quick Ratio
Debt/Equity
Net Profit Margin
Current Ratio
Times Interest Earned
Question 13
The identification and elimination of activities that fail to add value refers to
Answer
external failures.
activity reduction.
internal failures.
activity elimination.
Question 14
____ can help a company become more competitive by providing more accurate cost data.
Answer
Unit-based costing
Volume-based costing
Kaizen costing
Production costing
Activity-based costing
Question 15
A(n) ____ ratio measures the proportion of an activity consumed by a product.
Answer
production
consumption
efficiency
quality
usage
Question 16
Costs incurred when products and services fail to conform to requirements or satisfy customer needs after being delivered to customers are
Answer
prevention costs.
appraisal costs.
internal failure costs.
external failure costs.
a different category of quality-related costs.
Question 17
____ is present whenever products have different consumption ratios for different overhead activities.
Answer
Environmental costs
Activity sharing
Product diversity
Activity inputs
Control costs
Question 18
Increasing the efficiency of necessary activities by using economies of scale is known as
Answer
activity inputs.
activity sharing.
control activities.
cycle time.
Question 19
Costs incurred when products and services prior to being delivered do not conform to specifications or customer needs are
Answer
prevention costs.
appraisal costs.
a different category of quality-related costs.
external failure costs.
internal failure costs.
Question 20
The earning of interest on interest is
Answer
present value.
future value.
discount rate.
compounding of interest.
interest earned.
Question 21
Which of the following provides an absolute dollar measure?
Answer
internal rate of return
net present value
payback period
accounting rate of return
Question 22
The interest rate that sets the present value of a project's cash inflows equal to the present value of the project's cost is called the ____.
Answer
present value
discount rate
company cost of capital
payback period
internal rate of return
Question 23
The reason that a discount factor in Year 3 is less than a discount factor in Year 2 is that
Answer
cash flows are uneven.
compounding does not occur.
cash flows are even.
present value is positive.
a dollar received in 3 years is worth less than a dollar received in 2 years.
Question 24
Which of the following is a drawback of the payback period?
Answer
It ignores a project's total profitability.
It uses a set discount rate.
It considers total profitability, requiring the forecasting of all future cash flows.
It uses before-tax cash flows rather than after-tax cash flows.
It uses operating income rather than cash flows.
Question 25
A formula for the accounting rate of return is
Answer
average income/initial investment.
initial investment/annual cash flow.
annual cash flow/initial investment.
initial investment/average income.
(average income + initial investment)/initial investment