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Week 1 : Business Ethics – Homework ES

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Question 1.1. (TCO 1) Which of the following statements is true regarding the goal of financial management? (Points : 3)

        A US company considering international operations will have a different goal than a company that only conducts operations in the US.

        The firm’s structure (i.e. corporation, sole proprietorship, partnership) is not relevant to the goal of financial management.

        A way of aligning management goals to shareholder’s interest is to tie managerial compensation to the market value of the firm’s stock.

        None of the above are true.  

Question 2.2. (TCO 1) Book values are different to market values because: (Points : 3)

        Book values reflect the value of the asset based on generally-accepted accounting principles.

        Book values are used in the company’s balance sheet.

        Book values do not reflect the amount someone is willing to pay today for an asset.

        All of the above 

Question 3.3. For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows:

Cost of goods sold………………………….          $1.2 million 

Administrative expenses……………………          $250,000

Marketing and selling expenses……………          $175,000

Depreciation………………………………….          $500,000

Interest expense…………………………….          $200,000

Dividends paid……………………………….           $150,000

(TCO 1) Suppose that Sports Baseball has 30,000 shares of stock. What is the dividends per share figure?

(Points : 3)

        5.0

        8.75

        5.25

        8.50

Question 4.4. For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows:

Cost of goods sold………………………….          $1.2 million 

Administrative expenses……………………          $250,000

Marketing and selling expenses……………          $175,000

Depreciation………………………………….          $500,000

Interest expense…………………………….          $200,000

Dividends paid……………………………….           $150,000

(TCO 1) Assuming a tax rate of 30%, the percentage of dividends per net income is approximately ______ and operating cash flow is _________ than net income.  

Hint: You need to calculate the net income and divide dividends by the net income.

(Points : 3)

        30% and lower

        60% and lower

        30% and higher

        60% and higher

Question 5.5. For this question, use the information for Sports Baseballs, Inc. Sports Baseballs, Inc. is a corporation that manufacturers and sells baseballs across several states in the Southeast. It had sales of $2.7 million during the last year. Expenses were as follows:

Cost of goods sold………………………….          $1.2 million 

Administrative expenses……………………          $250,000

Marketing and selling expenses……………          $175,000

Depreciation………………………………….          $500,000

Interest expense…………………………….          $200,000

Dividends paid……………………………….           $150,000

(TCO 1) Select all items that will be included in Sports Baseballs, Inc. Income Statement. For this exercise you will be choosing more than one option for your answer:

(Points : 3)

         Accounts receivable 

         Cost of goods sold 

         Net working capital 

         Interest expense 

         Taxes 

         Current assets 

         Short-term loans 

         Cash on hand 

         Inventory 

Question 6.6. (TCO 1) Which one of the following activities best exemplify capital budgeting.  For this exercise you will be choosing more than one option for your answer: (Points : 6)

         Identify three good investment opportunities for the firm. 

         Obtain a short-term loan to purchase materials. 

         Evaluate the level of risk of a project. 

         Sale long-term bonds to raise funds. 

         Determine the return of a potential project. 

Question 7.7. (TCO 1) Match the following terms with the examples as appropriate: 

(Points : 4) 

Potential Matches:

1 : Microsoft’s monopolistic behavior.

2 : established an oversight board responsible for improving auditing standards within companies.

3 : incentive to encourage managers to increase share value.

4 : The relation between a manager and a owner of the corporation.

5 : McDonald’s work to redesign packaging items with recyclable materials.

    Answer

      : Managerial compensation

      : Social responsibility

      : Sarbanes-Oxley Act

      : Agency relationship

      : Antitrust case

Question 8.8. (TCO 1) Can you provide some examples of recent well-known unethical behavior cases? Explain the situation in one or two sentences. (Points : 5)