CPA Finance - FIN FREE EXAM DUMPS QUESTIONS & ANSWERS

The following statements about the drawbacks of the accounting rate of return (ARR) were made at a recent meeting:
1) ARR is based on accounting profits and not cash flows, and can change because profits are subject to different possible treatments.
2) ARR only considers cash flows within a given time period and ignores cash flows after that time period.
3) With the ARR method $1 receivable today is worth the same as a $1 in five years.
Therefore it ignores the time value of money.
Which combination of the above statements is true?

Johar Co has earnings per share of $0*80 and a constant annual dividend payout ratio of 25%.
Its equity shares have a beta of 1.2. The risk-free rate of return is 5% and the market rate of return is 8%.
What is the expected cost and predicted value of an equity share in Johar Co?

A business keeps an item in stock for which demand is 30,000 units per year. The cost of placing an order for the item is $40 and the cost of holding one unit of the item is $0*60 per year. The business uses the economic order quantity (EOQ) approach to derive the optimal order quantity for the item. Demand for the item is even throughout the year.
What is the combined annual cost of stock holding and stock ordering for the item?

Mirach Co has an item of inventory for which the economic order size is 200 units. The annual cost of holding each item of inventory is $4 per year and the cost of placing each order is $50.
What is the annual demand for the item?

An analysis of the financial statements of a business reveals the following financial ratios:
1.A higher than average inventory holding period
2.A higher than average payment period for trade payables
3.A lower than average current ratio
4.A lower than average sales to working capital ratio
Which TWO of the above is consistent with a business being over-capitalized?

Dorsal Co intends to make a bonus issue of ordinary shares during the forthcoming year.
Which one of the following will be affected as a result of the issue?

Aludra Co has $450 million loan notes in issue that pay an annual fixed rate of interest of 6.3%. The directors of the company have recently decided to change this fixed rate for a floating rate of interest. A bank has offered a swap agreement whereby the bank pays a fixed rate of interest of 5.8% and receives LIBOR in return.
Assuming LIBOR is 5.4% for the first year of the swap agreement, what will be the percentage borrowing cost for Aludra Co?

Consider the following two statements concerning convertible loan notes:
1.A business will aim to issue convertible loan notes with the lowest possible conversion premium.
2.Convertible loan notes normally have a higher coupon rate of interest than non-convertible loan notes.
Which ONE of the following combinations (true/false) is correct?