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Quiz 3 Bayern

In Course: CASE STUDIES IN CORPORATE FINANCE ( FIN 550 Spring 2012)


Instructor: Dr. Louise August
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Thank you. Your exam has been submitted. Your grade will become available after the due date, Apr 29,
2012 at 11:59 PM.
Your score on this exam is 10 out of 10 .

Answer Key

Question 1 (Worth 1 points)
If easing a firm's credit policy lengthens the collection period and results in a worsening of the aging
schedule, then why do firms take such actions?
It normally stimulates sales.
To meet competitive pressures.
To increase the firm's deferral period for payables.
All of the answers above.
Both answers a and b above.
Points earned on this question: 1

Question 2 (Worth 1 points)
The optimal dividend policy for a firm strikes a balance between payment of current dividends and
retention of earnings for future growth, and results in the maximization of stock price.
True
False
Points earned on this question: 1

Question 3 (Worth 1 points)
A firm sells its product for $50 per item. It costs $15 of materials and components to make each unit.
Fixed costs are $157,500. At what volume of business will the firm break even?
4,500 units and $225,000 of sales
6,300 units and $315,000 of sales
4,500 units and $525,000 of sales
3,150 units and $225,000 of sales
Points earned on this question: 1

Question 4 (Worth 1 points)
At its upcoming board meeting, Bayerns board of directors must make a decision:
Concerning a new financial budget for the coming year.
On the amount of the quarterly dividend to be declared.
As to compensation to be paid to the marketing manager.
All of the above.
Points earned on this question: 1

Question 5 (Worth 1 points)
Based on Uncle Augusts compensation proposal, what rate of increase does this represent to Max?
19 %
39 %
49 %
59 %
Points earned on this question: 1

Question 6 (Worth 1 points)
Why does this profitable company need increasing amounts of bank financing?
Bayern is expected to suffer net losses over the next few years.
Bayern anticipates hiring new highly-skilled brewery personnel.
Bayern is acting as the primary creditor to its eastern distributors.
Bayern forecasts increased depreciation and amortization expenses.
Bayern does not require increasing amounts of bank financing.
Points earned on this question: 1

Question 7 (Worth 1 points)
How does Bayern plan to increase its sales in the east?
By providing easier trade credit to its distributors.
By increasing the inventory being warehoused.
By aggressively increasing its distributor base.
a and b are correct.
All of the above.
Points earned on this question: 1

Question 8 (Worth 1 points)
How does Bayern plan to finance its future capital investment and expansion efforts?
By eliminating cash dividend payments.
By raising equity from non-family members.
By increasing its short-term bank debt.
By issuing secured long-term convertible bonds.
Points earned on this question: 1

Question 9 (Worth 1 points)
What will be the likely outcome of approving the proposed eastern expansion apart from any
modifications to Max Leiters plan?
Shareholders will take on significant risk to achieve additional growth.
The firms bankers will institute less restrictive covenants on future loans.
Bayerns ability to repay debt and its liquidity position should improve.
Max Leiter will be motivated to better represent the interests of the shareholders.
All of the above.
Points earned on this question: 1

Question 10 (Worth 1 points)
Which of the following could render Leiters breakeven analysis obsolete?
A change in the fixed cost structure of the company.
A change in the sales price of the companys products.
A change in variable costs per unit of production.
b and c are correct.
All of the above.
Points earned on this question: 1

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