Basic Finance for Managers

BUSN 5200 Quiz for week 3 Note: In the questions below, the correct answer is identified with an asterisk 1. ( See Exhibit 2-2 on page 58 in your BUSN 5200 Custom text Version 2) Assume Main Street Store’s Net Sales in 2010 were $1,000,000 and it’s Net Income in 2010 was $17,000. Thus, between 2010 and 2011 Main Street Store’s net sales increased 20%. During the same period what percentage did net income increase? a. 5.6% From Exhibit 2-2 on page 58: b. 17.0% 2010 net income: $17,000 2011 net income: $18,000 c. 5.9% * Change: $ 1,000 Percent change = $1,000 / $17,000 = .0588, or 5.9% d. 94.4% 2. ( See Exhibit 2-2 on page 58 in your BUSN 5200 Custom text Version 2) In 2011 Main Street Store’s largest expense was: a. Net Sales (not an expense) b. Cost of Goods Sold * $850,000 (see Exhibit 2-2 on page 58) c. Interest Expense $9,000 d. Income Tax $12,000 3. ( See Exhibit 2-1 on page 56 in your BUSN 5200 Custom text Version 2) As of August 31, 2011, what percentage of Main Street Store’s assets were financed with debt (that is, liabilities)? a. 20.9% From Exhibit 2-1 on page 56: b. 36.6% * Total liabilities: $117,000 Total assets : $320,000 c. 15.6% Percent of assets financed from debt (liabilities) = $117,000 / $320,000 = ..366, or 36.6% d. 100% 4. ( See Exhibit 2-1 on page 56 in your BUSN 5200 Custom text Version 2) What was Main Street Store’s Net Worth at the end of August, 2011? a. $320,000 From Exhibit 2-1 on page 56: b. $117,000 Total owners’ equity, Aug 31 2011 = $203,000 c. $34,000 d. $203,000 * 5. ( See Exhibit 2-4 on page 62 in your BUSN 5200 Custom text Version 2) Which of the following categories produced most of Main Street Store’s cash in 2011? a. Cash Flows from Operations $(161,000) b. Cash Flows from Investing Activities $(40,000) c. Cash Flows from Financing Activities * $235,000 See Exhibit 2-4 on page 62 6. ( See Exhibit 2-4 on page 62 in your BUSN 5200 Custom text Version 2) What did Main Street Store spend most of its cash on in 2011? a. Buying equipment $(40,000) b. Paying off debt no pay down of debt in 2011 c. Increasing inventory * $(170,000) See Exhibit 2-4 on page 62 d. Paying dividends * $(5,000) 7. ( See Exhibit 2-4 on page 62 in your BUSN 5200 Custom text Version 2) What happened to Main Street Store’s Cash Account in 2011? a. It increased * From Exhibit 2-4 on page 62: Increase in cash during 2011 = $34,000 b. It decreased c. It stayed the same d. You can’t tell without further information

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