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FIN 575 Final Exam

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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.


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


7.For the most recent year, Cal’s Cats had sales of $380,000, cost of goods sold of $93,000, depreciation expense of $47,000, and additions to retained earnings of $61,420. The firm had $52,000 in interest expense, and 34% tax rate. What were the times interest earned ratio?

  • 2.2
  • 5.8
  • 4.61
  • 2.8


8.Bob’s Garages has sales of $41 million, total assets of $32 million, and total debt of $11 million. If the profit margin is 12% what is the return on equity (ROE)?

  • 14%
  • 12%
  • 51%
  • 23.40%


9. What are the components of project planning that need monitoring?

  • Resource procurement and quality
  • Project cost and risk
  • Project cost, risk, resource procurement and quality
  • Quality and control


10.During project planning, the project team creates a work breakdown structure that details work tasks that must be completed. The work breakdown structure should include a

  • schedule of when every task will start and be completed
  • schedule of project staff meetings
  • set of management tasks
  • budget analysis


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

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


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.


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

fin/575 project budget and finance FIN 575 Final Exam