FIN 575 Final Exam Questions With Answers

“FIN 575 Final
Exam Questions With
Answers”
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1. During the project initiation, a project charter is created. The project
charter should include which of the following?
• Project managers expenses
• Analysis of budget
• Selection of the senior project manager
• Projects high-level deliverables
2. A project's budget should be based on a company’s
• strategy and financial goals
• profitability
• financial goals and equity
• debt load and equity

3. Earned value management is a technique used to integrate projects
• resources
• scope, schedule, and resources
• schedule, costs, and benefits
• costs and profits
4. Bill’s Billiards has total assets of $8 million and a total asset turnover of 2.9
times. If the return on assets is 11%, what is Bill's profit margin?
• 11%
• 4.10%
• 2.50%
• 3.79%

5. What are the acceptance criteria for NPV?
• If the NPV is less that $0, accept the project.
• If the NPV is greater than $0, accept the project.
• If the IRR is equal to 0%, reject the project.
• If the NPV is equal to the discounted payback, accept the project.
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6. The risk response plan answers what question?
• What can be done if risk occurs? What is the backup plan?
• What are project costs?
• There is no need to plan for risk seldom occurs in a project.
• How risk is to be managed

11. The R. M. Senchack Corporation earned an operating profit margin of 6% based
on sales of $11 million and total assets of $6 million last year. What was
Senchack’s total asset turnover ratio?
• 1
• 0.54
• 5.4
• 1.8
12. Why is the communication plan a crucial factor in project success?
• Ensures the timely generation, collection, storage, and disposition of project
information
• Facilitates upper management communication with the workers
• Reduces rumors in the organization
• Communicates the economic value of the project to management

13. A company’s assets are financed with
•debt
•equity
•equity or debt
•equity and debt
14. Part of financial planning for projects involves the understanding of the
inflows and outflows of cash that will be created by the project. What tool can be
used to track these cash flows?
•A NPV flow sheet
•Profitability work sheet.
•Project cash flow worksheet
•Cash flow table

15. Stokes, Inc. has net working capital of $7,900, current liabilities of $5,220, and
inventory of $2,000. What is the quick ratio?
•1.89
•1.13
•1.21
•2.1
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16. What ratio measures a firm’s degree of indebtedness?
•Debt ratio
•Quick ratio
•Fixed coverage ratio
•Times interest earned ratio

17. Which one of these terms is a type of debt financing?
•Stock repurchases plans
•Collateral
•Trade credit
•Bearer bonds
18. The sum of the percentage of equity and debt multiplied by their respective
cost is called
•weighted average cost of capital
•capital asset pricing model
•market value added
•economic value added.

19. Profitability ratios all have what same figure in the numerator?
•Book value per
•Net income
•Price per share
•Total assets
20. Terry’s Trash removal has a total debt ratio of 0.45. What is the firm’s debt-to-
equity ratio?
•1.27
•0.41
•0.82
•1.82
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21. An investment in a project should be undertaken only if the expected return
is greater than the
•NPV
•WACC
•payback method
•economic value added
22. Brenda Smith, Inc. had a gross profit margin (gross profits ÷ sales) of 25% and
sales of $9.75 million last year. Seventy-five percent of the firm’s sales are on
credit and the remainder are cash sales. Smith’s current assets equal $1,550,000,
its current liabilities equal $300,000, and it has $150,000 in cash plus marketable
securities. If Smith’s accounts receivable are $562,500, what is its average
collection period?
•25 days
•32 days
•28 days
•14 days

23. You are considering a project with an initial cash outlay of $160,000 and
expected free cash flows of $40,000 at the end of each year for 6 years. The
required rate of return for this project is 10%. What is the project’s payback
period?
•4 years
•4.5 years
•6 years
•5 years
24. Project managers manage project cost by
•monitoring inventory costs
•monitoring opportunity costs
•ensuring the work is progressing as planned
•ensuring retail costs are controlled

25. What is the primary weakness commonly associated with the use of the payback
method to evaluate a proposed investment?
•This approach fails to take into account the time factor in the time value of money.
•The payback method uses the discounted cash flow process.
•The payback method is able to recognize cash flows that occur after the payback
period.
•The payback method is not appropriate for evaluating small projects.
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26. Fijisawa, Inc. is considering a major expansion of its product line and has estimated
the following free cash flows associated with such an expansion. The initial outlay
associated with the expansion would be $1,950,000, and the project would generate free
cash flows of $450,000 per year for 6 years. The appropriate required rate of return is 9%.
Calculate the net present value and the internal rate of return.
•NPV=$66,098, IRR=10.5
•NPV=$72,097, IRR=9.5
•NPV=$68,663, IRR=10.2
•NPV=$69,368, IRR=10

27. Cost normally falls into the domain of managerial accounting and has 4
essential proposes. Select the answer that is an essential function of cost.
•Used to calculate earned value cost
•Used to calculate executive stock options
•Used to calculate inventory costs
•Used for planning future activities or budgets
28. Select the answer that is an example of a cost classification?
•Credit cost
•Fixed cost
•Retail cost
•Inventory cost

29. What are the four secondary processes in project control?
•Schedule control, change control, risk control, and quality assurance control
•Value control, Inventory control, schedule control and quality control
•Organizational control, cost control, inventory control, and risk control
•Stakeholder control, organization control, risk control, and change control
30. Stokes, Inc. has net working capital of $7,900, current liabilities of $5,220, and
inventory of $2,000. What is the current ratio?
•2.1
•0.77
•1.89
•1.51

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