Titan Photo Quiz: Operating Capital, Free Cash Flow, and Market Value Added, Exams of Finance

Download Titan Photo Quiz: Operating Capital, Free Cash Flow, and Market Value Added and more Exams Finance in PDF only on Docsity! Quiz for Lecture 3 Your Name __________________ Your CWID __________________ 1. Accounting profits are not appropriate measurements for management efficiency, because a. they do not reflect the cost of equity. b. they do not differentiate operating income/expense from non-operating income/expense. c. Both a and b. d. Neither a nor b. 2. Which of the following would cause an increase in operating capital? a. Net fixed assets increase. b. Accounts payable increases. c. Short-term investments increase. d. Notes payable decreases. 3. Free cash flow is the amount of cash flow available for distribution to all investors after all necessary investments in operating capital have been made. a. True. b. False. Titan Photo has the following information for the previous year: Net income = $400; Net operating profit after taxes (NOPAT) = $600; Total assets = $2,000; and Total net operating capital = $1900. The information for the current year is: Net income = $900; Net operating profit after taxes (NOPAT) = $800; Total assets = $2,300; and Total net operating capital = $2200. 4. What is the free cash flow of Titan Photo for the current year? a. $400 b. $500 c. $600 d. $700 5. If Titan Photo’s cost of capital is 30%, are its current-year operating activities adding value to the firm? a. Yes. b. No.