# Finra series-7 practice test

## General Securities Representative ination (GS) Exam

##### Question 1

The Bubba Corporation has 900,000 of common outstanding and holds 100,000 shares as treasury
stock. At the end of the third quarter \$450,000 is distributed as a dividend on the common.
How much is the dividend per share?

• A. \$0.45
• B. \$0.50
• C. \$2.00
• D. \$2.22

A

Explanation:
\$0.45. Since treasury stock does not receive dividends, divide \$450,000 by the outstanding 100,000
shares to arrive at \$0.45 per share.
141/141

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##### Question 2

A large manufacturing company has current assets of approximately \$9,400,000 and current
Which of the following statements is true about the current ratio?

• A. it is substantially below the standard minimum
• B. it is somewhat below the standard minimum 140/141 Questions & Answers PDF P-
• C. it is about the standard minimum
• D. it is somewhat above the standard minimum

B

Explanation:
it is somewhat below the standard minimum. The standard minimum current ratio for a
manufacturing company is 2 to 1. The current ratio for this company is 1.92 (9,400,000 divided by
4,900,000).

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##### Question 3

Which of the following is normally the largest asset of a manufacturing company?

• A. sales
• B. inventory
• C. accounts receivable
• D. notes receivable

B

Explanation:
Inventory. A manufacturer will normally have more inventory than accounts receivable and notes
receivable. Sales is not an asset category.

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##### Question 4

Bubba Corporation has net income of \$4,200,000. It has 100,000 outstanding shares of 8% preferred
stock (\$100 par value) and 400,000 shares of common stock (\$10 par value).
What are the earnings per share of common stock?

• A. \$8.50
• B. \$6.00
• C. \$4.20
• D. \$10.50

A

Explanation:
\$8.50. Subtract the preferred dividend of \$800,000 (100,000 x 8% x 100) from the net income. Divide
the result of \$3,400,000 (\$4,200,000 - \$800,000) by the 400,000 common shares to obtain \$8.50.

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##### Question 5

Which of the following items is not deducted to determine a corporation’s net income?

• A. taxes
• B. dividends
• C. interest
• D. all of the above 139/141 Questions & Answers PDF P-

B

Explanation:
dividends. Net income is determined before dividends.

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##### Question 6

Book value of a corporation is also known as:

• A. net tangible asset value per share
• B. intangible value
• C. par value
• D. dilution value

A

Explanation:
net tangible asset value per share. Book value is much easier to say.

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##### Question 7

Which of the following is considered an intangible asset?

• A. marketable securities
• C. accounts receivable
• D. furniture

B

Explanation:
trademarks. Intangible assets are those whose true value cannot be determined, but there is some
supposed market value.

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##### Question 8

A company earns \$6 per share and pays out 20% in common stock dividends.
What does the stock yield if it sells at \$30 per share?

• A. 10% 138/141 Questions & Answers PDF P-
• B. 4%
• C. 2.5%
• D. 6%

B

Explanation:
4%. The dividend is \$1.20 per share (\$6 x 20%). Divide this by the stock price to obtain the yield.

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##### Question 9

Which of the following best describes depreciation?

• A. tax credit available to investors in heavy equipment
• B. deductions from gross income to offset lower value of equipment
• C. return of principal from real estate investors
• D. capitalized an amortized maintenance costs

B

Explanation:
deductions from gross income to offset lower value of equipment. Depreciation is the deduction of
costs for capital assets as their value declines.

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##### Question 10

A leveraged company is best described as one that has a small portion of its capitalization
represented by:

• A. common stock
• B. preferred stock
• C. debentures
• D. convertible bonds