Review Test Submission: Practice Quiz 1 - Module 1: Quizzes and Tests

6/28/2020 Review Test Submission: Practice Quiz 1 - Module 1 – ...
Ajil Mohan 136

MyCourses
H Quizzes and Tests Review Test Submission: Practice Quiz 1 - Module 1

M
Review Test Submission: Practice Quiz 1 - Module 1
User Ajil Mohan

Course Managerial Acctg and Finance - ACCT-5507-WWA
Test Practice Quiz 1 - Module 1
Started 6/28/20 10:15 PM
Submitted 6/28/20 10:16 PM
Status Completed
Attempt Score 5 out of 20 points
Time Elapsed 1 minute out of 40 minutes
Instructions Click on "Begin" to open and take the quiz.
Results Displayed All Answers, Submitted Answers, Correct Answers
Question 1 0 out of 1 points
A corporation:
I. Is subject to double taxation.

II. Can be sued.
III. Can have an unlimited life.
IV. Can be a general partner in a partnership.
Selected Answer: I, II, and III only
Answers: I and III only
II and III only
II, III, and IV only
I, II, and III only
I, II, III, and IV
The purchase and sale of securities after the original issuance occurs in the:
Selected Answer: Primary market.
Answers: Primary market.
Secondary market.
Dealer market.
https://learn.humber.ca/webapps/assessment/review/review.jsp?attempt_id=_17997699_1&course_id=_151952_1&content_id=_8516626_1&return_c… 1/7
Auction market.
Liquidation market.
Which one of the following statements concerning a partnership is true?

Selected
Answer: Limited partners in a limited partnership should be actively involved in
management decisions.
Answers:
Under a general partnership, only the key partner is personally liable for the
business debts.
Limited partners in a limited partnership should be actively involved in

management decisions.
Income from a limited partnership is taxed as corporate income.
A primary advantage of a partnership is the ease of transferring ownership.
A partnership terminates at the death of any partner.
The area of corporate finance concerned purchasing and selling stocks and bonds is called:
Selected Answer: International finance.
Answers: Investments.
Municipal finance.
International finance.
Institutional finance.
Strategic finance.
Which one of the following statements concerning a proprietorship is true?

Selected A proprietorship can be a business jointly owned by two family members.
Answer:
Answers: A proprietorship can be a business jointly owned by two family members.
Income from a proprietorship is taxed as a separate entity.
A proprietor is personally responsible for 100% of the firm's liabilities.
A partial transfer of ownership is easier with a proprietorship than with a

corporation.
Income from a proprietorship is taxed at a lower rate than other personal

income.
NASDAQ is:
Selected Both an OTC and an auction market.
Answer:
Answers:
The largest financial market in the U.S. in terms of the total value of listed
stocks.
Both an OTC and an auction market.
An electronic market trading solely in corporate and government bonds.
An electronic market which has no physical location.
A market with far fewer listings than the NYSE.
A market where trading takes place directly between buyers and sellers is called a(n):
Selected Answer: Dealer market.
Answers: primary market.
OTC market.
Dealer market.
Auction market.
Liquidation market.
The mix of debt and equity by which a corporation is financed refers to the firm's:
Selected Answer: Capital budgeting.
Answers: Cash management.
Capital structure.
Capital budgeting.
Working capital management.
Leverage management.
Which of the following is a disadvantage of the corporate form of ownership?

Selected Answer: Ability to raise capital
Answers: Limited liability
Ease of transfer of ownership
Taxation
Ability to raise capital
The life of the corporation
Which one of the following actions is the best example of an agency problem?
Selected Basing management bonuses on the attainment of specific financial goals
Answer:
Answers:
Paying management bonuses based on the number of store locations opened
during the year
Paying management bonuses based on the current market value of the firm's
stock
Accepting a project that enhances both management salaries and the market
value of the firm's stock
Requiring stockholders approval of all management compensation decisions
Basing management bonuses on the attainment of specific financial goals
The agency problem is best defined as a conflict of interest between a firm's:

Selected Answer: Stockholders and the firm's managers.
Answers: Various employees.
Various managers.
Managers and the firm's employees.
Stockholders and the firm's managers.
Stockholders and the firm's debtors.
Double taxation refers to which of the following scenarios?

Selected The corporation pays taxes on revenues and earnings.
Answer:
Answers: Both bondholders and shareholders must pay taxes.
The corporation pays taxes on earnings, and creditors pay taxes on interest
received.
The corporation pays taxes on its earnings, and shareholders pay taxes on
dividends.
The corporation pays taxes on revenues and expenses.
The corporation pays taxes on revenues and earnings.
Working capital management:

Selected Includes the daily oversight of a firm's cash requirements.
Answer:
Answers: Includes the daily oversight of a firm's cash requirements.
Involves the determination of how much long-term debt should be issued.
Is the oversight of a firm's long-term assets.
Deals with the refinancing of the firm's debt if interest rates decline.
Deals with the allocation of equipment to various jobs on a daily basis.
Which of the following help convince managers to work in the best interest of the stockholders?
I. Compensation based on the value of the stock.

II. Stock option plans.
III. Threat of a company takeover.
IV. Threat of a proxy fight.
Selected Answer: I, II, and III only
Answers: I and II only
III and IV only
I, II, and III only
I, III, and IV only
I, II, III, and IV
When owners are managers (such as in a sole proprietorship), a firm will have agency costs.
Selected Answer: False
Answers: True
False
Which of the following is considered a benefit of the corporate form of organization?
I. Ease of the transfer of ownership.

II. Limited life.
III. Double taxation.
Selected Answer: II only
Answers: I only
II only
I and II only
I and III only
I, II, and III
In a limited partnership:
Selected
Answer: A limited partner is liable only for the amount he/she contributed to the
partnership.
Answers: Only the limited partners are involved in the daily management of the firm.
Both general and limited partners are involved in the daily management of the
firm.
A limited partner is liable only for the amount he/she contributed to the
partnership.
A general partner is liable only for the amount he/she contributed to the
partnership.
The income earned is taxed like a corporation.
A conflict of interest between the stockholders and management of a firm is called:

Selected Answer: Corporate activism.
Answers: Stockholders' liability.
Corporate breakdown.
The agency problem.
Corporate activism.
Legal liability.
Which of the following represent cash outflows from a firm?
I. Issuance of securities.
II. Payment of dividends.
III. New loan proceeds.
IV. Payment of government taxes.
Selected Answer: I, II, and IV only
Answers: I and III only
II and IV only
I and IV only
I, II, and IV only
The treasurer and the controller of a corporation generally report to the:

Selected Answer: Vice president of finance.
Answers: Board of directors.
Chairman of the board.
Chief executive officer.
President.
Vice president of finance.
Sunday, June 28, 2020 10:16:20 PM EDT
← OK
Siddharth Laxman Anjarlekar 165

MyCourses

M
User Siddharth Laxman Anjarlekar

Started 6/28/20 9:38 PM
Status Completed
Time Elapsed 32 minutes out of 40 minutes
Results All Answers, Submitted Answers, Correct Answers, Feedback, Incorrectly Answered
Displayed Questions
The ___________ tax rate is the rate that applies if one more dollar of income is earned and the
___________ tax rate is the total tax bill divided by taxable income.
Selected Answer: Marginal; average
Answers: Marginal; flat
Marginal; average
Flat; marginal
Flat; average
Average; marginal
Response correct
Feedback:
TB 02-32 The ___________ tax rate is the rate that applies ...
Chapter - Chapter 02 #32
Difficulty: Basic
Gradable: automatic
Learning Objective: 02-03 How to determine a firm's cash flow from its
financial statements.
Type: Definitions
Given the following statement of comprehensive income data, calculate net income: sales =
$135, cost of goods sold = $40, miscellaneous expenses = $35, depreciation = $20, interest
https://learn.humber.ca/webapps/assessment/review/review.jsp?attempt_id=_17997360_1&course_id=_151952_1&content_id=_8516627_1&return_… 1/13
expense = $20, tax rate = 34%.

Selected Answer: $13.20
Answers: $13.20
$19.80
$20.00
$23.10
$42.90
Response correct
Feedback:
TB 02-172 Given the following statement of comprehensive inc...
Difficulty: Intermediate
Gradable: automatic
Learning Objective: 02-04 The difference between average and marginal
tax rates.
Type: Problems
What is net new borrowing for 2009?

Selected Answer: $70
Answers: -$70
-$35
$35
$70
$105
Response correct
Feedback:
TB 02-261 What is net new borrowing for 2009?
Difficulty: Challenge
Gradable: automatic
tax rates.
Type: Problems
What is the change in net working capital for 2009?

Selected Answer: -$122
Answers: -$643
-$122
$122
$643
$765
Response correct
Feedback:
TB 02-222 What is the change in net working capital for 2009...
Gradable: automatic
tax rates.
Type: Problems
Which one of the following will increase the operating cash flow of a firm, all else constant?
Selected Answer: an increase in depreciation expense
Answers: an increase in depreciation expense
an increase in the taxes paid
a decrease in sales
a decrease in the interest expense
a decrease in variable costs
Response incorrect
Feedback:
TB 02-159 Which one of the following will increase the opera...
Gradable: automatic
Learning Objective: 02-02 The difference between accounting income and
cash flow.
Type: Concepts
What is net capital spending for 2009?

Answers: -$250
-$57
$0
$57
$477
Response correct
Feedback:
TB 02-258 What is net capital spending for 2009?
Gradable: automatic
tax rates.
Type: Problems
Anax Corporation purchased a long-term asset for $100,000. The asset has a 30% CCA rate. At
the end of year 5, Anax sold the asset for 25% of its original value. Given this information,
determine the value of the terminal loss or recapture at the end of year 5.
Selected Answer: Recapture; $3,391
Answers: Recapture; $3,391
Recapture $4,391
Recapture $1,501
Terminal Loss $1,501
Response correct
Feedback:
TB 02-326 Anax Corporation purchased a long-term asset for $...
Gradable: automatic
Learning Objective: 02-05 The basics of Capital Cost Allowance (CCA) and
Undepreciated Capital Cost (UCC).
Type: Problems
Book value:
Selected is based on historical cost.
Answer:
Answers: is equivalent to market value for firms with fixed assets.
is based on historical cost.
generally tends to exceed market value when fixed assets are included.
is more of a financial than an accounting valuation.
is adjusted to market value whenever the market value exceeds the stated
book value.
Response correct
Feedback:
TB 02-132 Book value:
Difficulty: Basic
Gradable: automatic
Learning Objective: 02-01 The difference between accounting value (or "book"
value) and market value.
Type: Concepts
What is the amount of net new borrowing for 2009?

Answers: -$225
-$25
$0
$25
$225
Response incorrect
Feedback:
TB 02-252 What is the amount of net new borrowing for 2009?
Gradable: automatic
tax rates.
Type: Problems
A(n) _________ asset is one which can be quickly converted into cash without significant loss in
value.
Selected Answer: Liquid.
Answers: Current.
Fixed.
Intangible.
Liquid.
Long-term.
Response correct
Feedback:
TB 02-17 A(n) _________ asset is one which can be quickly c...
Difficulty: Basic
Gradable: automatic
tax rates.
Type: Definitions
Given the following information from More Money, Inc.'s 2009 financial statements, calculate
cash flow from assets: operating cash flow = $284,500, net fixed assets declined by $8,000,
depreciation expense = $13,000, and net working capital increased by $1,500.
Selected Answer: $278,000
Answers: $262,000
$278,000
$281,000
$288,000
$301,000
Response correct
Feedback:
TB 02-179 Given the following information from More Money, I...
Gradable: automatic
tax rates.
Type: Problems
Thompson's Jet Skis has operating cash flow of $218. Depreciation is $45 and interest paid is
$35. A net total of $69 was paid on long-term debt. The firm spent $180 on fixed assets and
increased net working capital by $38. What is the amount of the cash flow to stockholders?
Answers: -$104
-$28
$28
$114
$142
Response correct
Feedback:
TB 02-246 Thompson's Jet Skis has operating cash flow of $21...
Gradable: automatic
cash flow.
Type: Problems
Cash flow to creditors must increase when:

Selected
Answer: the cash flow to stockholders is constant and the cash flow from assets
increases.
Answers:
a firm increases its long-term debt by more than its interest expense in any
given year.
the cash flow to stockholders is constant and the cash flow from assets
increases.
the operating cash flow increases and the cash flow to stockholders
decreases.
the interest rate on the firm's debt decreases.
a firm borrows more than it repays in any one given year.
Response correct
Feedback:
TB 02-164 Cash flow to creditors must increase when:

Gradable: automatic
cash flow.
Type: Concepts
Which one of the following statements concerning liquidity is correct?

Selected
Answer: Statement of financial position accounts are listed in order of decreasing
liquidity.
Answers: If you can sell an asset today, it is a liquid asset.
If you can sell an asset next year at a price equal to its actual value, the asset is
highly liquid.
Trademarks and patents are highly liquid.
The less liquidity a firm has, the lower the probability the firm will encounter
financial difficulties.
Statement of financial position accounts are listed in order of decreasing

liquidity.
Response correct
Feedback:
TB 02-129 Which one of the following statements concerning l...
Difficulty: Basic
Gradable: automatic
tax rates.
Type: Concepts
The earnings per share will:

Selected Answer: increase if the number of shares outstanding is decreased.
Answers: increase if the tax rate increases.
remain constant if the number of shares outstanding is increased.
increase anytime the revenue of a firm increases.
increase only if the net income of a firm increases.
increase if the number of shares outstanding is decreased.
Response correct
Feedback:
TB 02-157 The earnings per share will:
Gradable: automatic
cash flow.
Type: Concepts
Cymex Corporation purchased a long-term asset for $80,000. The asset has a 20% CCA rate. At
the end of year 5, Cymex sold the asset for 25,000. Given this information, determine the value of
the terminal loss or recapture at the end of year 5.
Selected Answer: Recapture $4,491
Answers: Recapture; $8,601
Recapture $4,491
Recapture $1,501
Response incorrect
Feedback:
TB 02-327 Cymex Corporation purchased a long-term asset for ...
Gradable: automatic
Learning Objective: 02-05 The basics of Capital Cost Allowance (CCA) and
Undepreciated Capital Cost (UCC).
Type: Problems
https://learn.humber.ca/webapps/assessment/review/review.jsp?attempt_id=_17997360_1&course_id=_151952_1&content_id=_8516627_1&return… 10/13
What is the net new equity for 2009?

Answers: -$40
-$20
$20
$40
$60
Response correct
Feedback:
TB 02-226 What is the net new equity for 2009?
Gradable: automatic
tax rates.
Type: Problems
A firm has current assets of $400, shareholders' equity of $700, current liabilities of $300, and net
fixed assets of $600. What is the amount of long-term debt?
Answers: $0
$100
$200
$300
$400
Response incorrect
Feedback:
TB 02-211 A firm has current assets of $400, shareholders' e...
Difficulty: Basic
Gradable: automatic
tax rates.
Type: Problems
The financial statement summarizing the value of a firm's equity on a particular date is the
statement of comprehensive income.
Selected Answer: False
Answers: True
False
Response correct
Feedback:
TB 02-02 The financial statement summarizing the value of a...
Difficulty: Basic
Gradable: automatic
tax rates.
Type: Concepts
Which of the following accurately describes the relation between book and market value?
Selected
Answer: Book value is an accounting summary of value and is inferior to market value as a
source of current information regarding the true value of the firm.
Answers:
Financial managers should rely on book values, and not market values, when
making decisions for the firm, because the firm's tax liability is based on book
values.
Financial managers should rely on market values, and not book values, when
making decisions for the firm, because the firm's tax liability is based on market
values.
Book value is an accounting summary of value and is inferior to market value as a

source of current information regarding the true value of the firm.
The market value of current assets is often difficult to determine, and thus of little
value to the decision making process of financial managers.
Market value always exceeds book value.
Response correct
Feedback:
TB 02-68 Which of the following accurately describes the re...
Gradable: automatic
Learning Objective: 02-01 The difference between accounting value (or "book"
value) and market value.
Type: Concepts
← OK
Ajil Mohan 136

MyCourses

M
User Ajil Mohan

Started 6/28/20 10:17 PM
Status Completed
Time Elapsed 17 minutes out of 40 minutes
Displayed Questions
The net working capital turnover ratio is measured as:

Selected Answer: Sales divided by net working capital.
Answers: Sales divided by net working capital.
Sales minus net working capital.
Sales times net working capital.
Net working capital divided by sales.
Net working capital plus sales.
Response correct
Feedback:
TB 03-31 The net working capital turnover ratio is measured...
Difficulty: Basic
Gradable: automatic
Learning Objective: 03-02 How to standardize financial statements for
comparison purposes.
Type: Definitions
Rojers Communications Inc. sells for $34.50 and there are 605 million shares outstanding at the
end of 2009. Based on the 2009 annual report, EBIT is $2,024 million, net income is $1,002
million, and depreciation is $1,760 million. What is the Enterprise Multiple?
Selected Answer: 5.52
Answers: 5.52
10.31
20.83
4.52
5.00
Response correct
Feedback:
TB 03-303 Rojers Communications Inc. sells for $34.50 and th...
Gradable: automatic
Learning Objective: 03-03 How to compute and; more importantly; interpret
some common ratios.
Type: Problems
Using the Du Pont Identity Method, calculate the equity multiplier given the following information.
Profit margin 17%; total asset turnover 0.88; return on equity 17.95%.
Answers: 1.6
1.4
1.2
1.0
0.8
Response Feedback: correct
TB 03-338 Using the Du Pont Identity Method, calculate the e...

Gradable: automatic
Learning Objective: 03-04 The determinants of a firm's profitability.
Type: Problems
A Quebec City firm has a debt-equity ratio of .65. From this, you can determine that the firm has
_____ in assets for every $1 in equity.
Selected Answer: $.65
Answers: $.54
$.65
$1.54
$1.65
$2.54
Response incorrect
Feedback:
TB 03-255 A Quebec City firm has a debt-equity ratio of .65....
Difficulty: Basic
Gradable: automatic
Type: Problems
Using the Du Pont Identity Method, calculate return on equity given the following information.
Profit margin 16%; total asset turnover 0.85; equity multiplier 1.5.
Selected Answer: 20.40%
Answers: 20.40%
21.40%
22.40%
D.23.40%
24.40%
TB 03-336 Using the Du Pont Identity Method, calculate retur...

Gradable: automatic
Type: Problems
A firm has a profit margin of 9% on sales of $400,000. There are 10,000 shares of common stock
outstanding. What is the earnings per share?
Answers: $1.80
$3.60
$4.00
$36.00
$40.00
Response incorrect
Feedback:
TB 03-234 A firm has a profit margin of 9% on sales of $400,...
Gradable: automatic
some common ratios.
Type: Problems
If a firm is having difficulty controlling its operating expenses, the trouble will be most directly
reflected in the firm's ________________ ratios.
Selected Answer: profitability
Answers: liquidity
profitability
market value
asset management
long-term solvency
Response correct
Feedback:
TB 03-98 If a firm is having difficulty controlling its ope...
Difficulty: Basic
Gradable: automatic
Type: Concepts
If you were to prepare a statement of cash flows, what is the negative flow from cash due to
operating activities? (Consider only outflows)
Answers: -$105
-$175
-$215
-$351
-$457
TB 03-215 If you were to prepare a statement of cash flows, ...

Gradable: automatic
Learning Objective: 03-01 The sources and uses of a firm's cash flows.
Type: Problems

The following statement of financial position and statement of comprehensive income should be
used.
What is Woodburn's debt-equity ratio for 2009?

Selected Answer: .55
Answers: .39
.47
.52
.55
.68
Response incorrect
Feedback:
TB 03-287 What is Woodburn's debt-equity ratio for 2009?
Difficulty: Basic
Gradable: automatic
Type: Problems
Jeminson's Hardware has accounts payable of $682, inventory of $3,608, cash of $340, fixed
assets of $4,211, accounts receivable of $418, and long-term debt of $3,750. What is the value of
the net working capital to total assets ratio?
Selected Answer: .43
Answers: .29
.37
.43
.47
.56
Response correct
Feedback:
TB 03-309 Jeminson's Hardware has accounts payable of $682, ...
Gradable: automatic
Type: Problems
Ratios that measure the firm's financial leverage are known as:
Selected Answer: Long-term solvency ratios.
Answers: Asset management ratios.
Long-term solvency ratios.
Short-term solvency ratios.
Profitability ratios.
Market value ratios.
Response correct
Feedback:
TB 03-18 Ratios that measure the firm's financial leverage ...
Difficulty: Basic
Gradable: automatic
Type: Definitions
Which one of the following statements is correct?

Selected
Answer: Financial statements are frequently the basis used for performance
evaluations.
Answers: Book values should always be given precedence over market values.
Financial statements are frequently the basis used for performance

evaluations.
Historical information has no value when predicting the future.
Potential lenders place little value on financial statement information.
Reviewing financial information over time has very limited value.
TB 03-176 Which one of the following statements is correct?

Difficulty: Basic
Gradable: automatic
Type: Concepts
Calculate cash given the following information. Total current assets $57,000; supplies $4,000;
average collection period 60.83 days; days' sales in inventory 97.33 days; sales 90,000; cost of
goods sold 75,000.
Answers: $24,000
$22,000
$20,000
$18,000
$16,000
Response correct
Feedback:
TB 03-330 Calculate cash given the following information. To...
Gradable: automatic
some common ratios.
Type: Problems
What is the days' sales in receivables for 2009?

Selected Answer: 43
Answers: 34
43
48
53
59
Response correct
Feedback:
TB 03-239 What is the days' sales in receivables for 2009?
Gradable: automatic
Type: Problems
The ___________ breaks down return on equity into three component parts: operating efficiency
of the firm, its asset use efficiency, and financial leverage.
Selected Answer: Du Pont identity
Answers: Du Pont identity
Return on assets
Statement of cash flows
Asset turnover ratio
Equity multiplier
Response correct
Feedback:
TB 03-40 The ___________ breaks down return on equity into ...
Difficulty: Basic
Gradable: automatic
some common ratios.
Type: Definitions
← OK
Ajil Mohan 138

MyCourses

M
User Ajil Mohan

Started 6/28/20 10:36 PM
Status Completed
Displayed Questions
Syed's Industries has accounts receivable of $700, inventory of $1,200, sales of $4,200, and cost
of goods sold of $3,400. How long does it take Syed's to both sell its inventory and then collect
the payment on the sale?
Selected Answer: 190 days
Answers: 128 days
146 days
163 days
190 days
211 days
Response correct
Feedback:
TB 03-298 Syed's Industries has accounts receivable of $700,...
Gradable: automatic
Type: Problems
A decrease in which one of the following is a source of cash?

Selected Answer: Notes payable
Answers: Common stock
Notes payable
Inventory
Retained earnings
Long-term debt
Response Feedback: incorrect
TB 03-131 A decrease in which one of the following is a sour...

Difficulty: Basic
Gradable: automatic
Type: Concepts
The financial ratio days' sales in receivables is measured as:

Selected Answer: Accounts receivable times 365 days.
Answers: Receivables turnover plus 365 days.
Accounts receivable times 365 days.
Accounts receivable plus sales, divided by 365 days.
365 days divided by receivables turnover.
365 days divided by accounts receivable.
Response incorrect
Feedback:
TB 03-30 The financial ratio days' sales in receivables is ...
Difficulty: Basic
Gradable: automatic
Type: Definitions
What is the net working capital turnover rate for 2009?

Answers: 1.16
1.25
2.28
2.34
2.87
Response incorrect
Feedback:
TB 03-241 What is the net working capital turnover rate for ...
Gradable: automatic
Type: Problems
An equity multiplier of 1.64 means that for every $1 the firm raises in new equity, the firm can:
Selected Answer: Acquire an additional $1.64 in new assets.
Answers: Acquire an additional $1.64 in new assets.
Acquire an additional $1.64 in new debt.
Earn $1.64 in additional profits.
Earn $1.64 in additional profits per share.
Pay $1.64 in additional dividends per share.
Response correct
Feedback:
TB 03-116 An equity multiplier of 1.64 means that for every ...
Difficulty: Basic
Gradable: automatic
Type: Concepts
Financial ratios that measure the firm's ability to pay its bills over the short run without undue
stress are known as:
Selected Answer: Market value ratios.
Response incorrect
Feedback:
TB 03-12 Financial ratios that measure the firm's ability t...
Difficulty: Basic
Gradable: automatic
Type: Definitions
Last year, which is used as the base year, a firm had cash of $46, accounts receivable of $132,
inventory of $319, and net fixed assets of $640. This year, the firm has cash of $52, accounts
receivable of $147, inventory of $312, and net fixed assets of $576. What is the common-base
year value of accounts receivable?
Answers: .88
.90
1.11
1.13
1.18
TB 03-307 Last year, which is used as the base year, a firm ...
Gradable: automatic
Type: Problems
If a firm is having difficulty controlling its operating expenses, the trouble will be most directly
reflected in the firm's ________________ ratios.
Selected Answer: profitability
Answers: liquidity
profitability
market value
asset management
long-term solvency
Response correct
Feedback:
TB 03-98 If a firm is having difficulty controlling its ope...
Difficulty: Basic
Gradable: automatic
Type: Concepts
The financial ratio measured as the firm's long-term debt divided by its total capitalization is:
Selected Answer: The interval measure.
Answers: The interval measure.
The equity multiplier.
The total debt ratio.
The long-term debt ratio.
The debt-equity ratio.
Response incorrect
Feedback:
TB 03-23 The financial ratio measured as the firm's long-te...
Difficulty: Basic
Gradable: automatic
Type: Definitions
Jorge Corp. of North Bay has 100,000 shares outstanding. EBIT is $1 million and interest paid is
$200,001. If the corporate tax rate is 34%, what is Jorge's earnings per share?
Answers: $2.72
$3.40
$5.28
$6.60
$10.00
Response incorrect
Feedback:
TB 03-194 Jorge Corp. of North Bay has 100,000 shares outsta...
Gradable: automatic
some common ratios.
Type: Problems
A _____________ standardizes items on the statement of comprehensive income and statement

of financial position as a percentage of total sales and total assets, respectively.
Selected Answer: tax reconciliation statement
Answers: tax reconciliation statement
statement of standardization
statement of changes in financial position
common-base year statement
common-size statement
TB 03-09 A _____________ standardizes items on the statemen...

Difficulty: Basic
Gradable: automatic
Type: Definitions
The quick ratio is measured as:

Selected Answer: Current assets minus inventory minus current liabilities.
Answers: Current assets divided by current liabilities.
Cash on hand plus current liabilities, divided by current assets.
Current liabilities divided by current assets, plus inventory.
Current assets minus inventory, divided by current liabilities.
Current assets minus inventory minus current liabilities.
Response incorrect
Feedback:
TB 03-14 The quick ratio is measured as:
Difficulty: Basic
Gradable: automatic
Type: Definitions
Which of the following is NOT a correct statement about the price/earnings ratio?
Selected
Answer: A P/E ratio of 15 means the firm's shares are selling for 15 times current earnings.
Answers:
A high P/E ratio is often taken to mean the firm has significant prospects for future
growth.
A P/E ratio of 15 means investors are willing to pay $15 for each $1 of current
earnings.
Care must be taken in interpreting very high P/E ratios since they can result from
a firm having very low earnings.
A P/E ratio of 15 means the firm's shares are selling for 15 times current earnings.
A firm with high earnings per share will also have a very high P/E ratio.
Response incorrect
Feedback:
TB 03-95 Which of the following is NOT a correct statement ...
Difficulty: Basic
Gradable: automatic
some common ratios.
Type: Concepts
Which one of the following statements is correct concerning ratio analysis?

Selected A single ratio is often computed differently by different individuals.
Answer:
Answers: A single ratio is often computed differently by different individuals.
Ratios do NOT address the problem of size differences among firms.
There is only a very limited number of ratios which can be used for analytical
purposes.
Each ratio has a specific formula that is used consistently by all analysts.
Ratios can NOT be used for comparison purposes over periods of time.
Response correct
Feedback:
TB 03-150 Which one of the following statements is correct c...
Difficulty: Basic
Gradable: automatic
Type: Concepts
Net income divided by total revenue is referred to as:

Selected Answer: The equity multiplier.
Answers: The equity multiplier.
Earnings per share.
The retention ratio.
The operating cash flow.
The profit margin.
Response incorrect
Feedback:
TB 03-55 Net income divided by total revenue is referred to...
Difficulty: Basic
Gradable: automatic
some common ratios.
Type: Definitions
Using the Du Pont Identity Method, calculate the equity multiplier given the following information.
Answers: 1.2
1.3
1.4
1.5
1.6
TB 03-339 Using the Du Pont Identity Method, calculate the e...

Gradable: automatic
Type: Problems
Financial statement analysis provides useful information to which of the following parties?
I. Creditors
II. Investors
III. Internal division managers
IV. Senior corporate officers
Selected Answer: II and IV only
Answers: I and II only
II and IV only
III and IV only
I, II, III, and IV
TB 03-130 Financial statement analysis provides useful infor...

Gradable: automatic
Type: Concepts
Which one of the following transactions is a use of cash?

Selected Answer: Obtaining a bank loan
Answers: Payment to a supplier for a credit purchase
Sale of inventory on credit
Cash sale to a customer
Collection of an account due from a customer
Obtaining a bank loan
TB 03-132 Which one of the following transactions is a use o...

Difficulty: Basic
Gradable: automatic
Type: Concepts
Ratios that measure the firm's financial leverage are known as:
Selected Answer: Long-term solvency ratios.
Response correct
Feedback:
TB 03-18 Ratios that measure the firm's financial leverage ...
Difficulty: Basic
Gradable: automatic
Type: Definitions
The following statement of financial position and statement of comprehensive income should be
used.
What is Woodburn's return on assets for 2009?

Selected Answer: 20.70 percent
Answers: 18.50 percent
18.67 percent
19.89 percent
20.18 percent
20.70 percent
Response incorrect
Feedback:
TB 03-288 What is Woodburn's return on assets for 2009?
Difficulty: Basic
Gradable: automatic
some common ratios.
Type: Problems
← OK
Ajil Mohan 138

MyCourses

M
User Ajil Mohan

Started 6/28/20 10:38 PM
Status Completed
Instructions Click on the heading of this page to open and take the quiz.
Displayed Questions
What is the future value of $25,000 received today if it is invested at 6.5% compounded annually
for six years?
Selected Answer: $27,476.42
Answers: $17,133.35
$27,476.42
$36,478.56
$39,521.75
$41,374.89
Response incorrect
Feedback:
TB 05-86 What is the future value of $25,000 received today...
Difficulty: Basic
Gradable: automatic
Learning Objective: 05-01 How to determine the future value of an
investment made today.
Type: Problems
Five years ago, Precision Tool set aside $50,000 in case of a financial emergency. Today, that
account has increased in value to $64,397. What rate of interest is the firm earning on this
money?
Answers: 5.19%
5.47%
6.18%
6.32%
6.45%
Response $64,397 = $50,000 × (1 + r) 5; r = 5.19%

Feedback: Using a Calculator
TB 05-204 Five years ago, Precision Tool set aside $50,000 i...
Difficulty: Basic
Gradable: automatic
Learning Objective: 05-03 How to find the return on an investment.
Type: Problems
You deposit $500,000 in a higher risk investment. Three years later, you receive $711,900 and
withdraw your funds. Given this information calculate the interest earned at the end of year 3.
Answers: $77,096
$78,806
$79,096
$80,806
$81,096
Response
Feedback:
TB 05-229 You deposit $500,000 in a higher risk investment. ...

Gradable: automatic
Type: Problems
Thirty years ago, an average house cost $120,000 in Vancouver. Now the average house price is
$950,000. Determine the annual rate of growth in Vancouver's housing prices.
Answers: 8.31%
7.14%
6.25%
5.58%
4.63%
Response
Feedback:
TB 05-222 Thirty years ago, an average house cost $120,000 i...

Gradable: automatic
Type: Problems
You received a $1 savings account earning 5% on your 1 st birthday. How much will you have in
the account on your 40 th birthday if you don't withdraw any money before then?
Answers: $5.89
$6.34
$6.70
$7.00
$7.04
Response incorrect
Feedback:
TB 05-85 You received a $1 savings account earning 5% on yo...
Difficulty: Basic
Gradable: automatic
Type: Problems
Fresh out of college, you are negotiating with your prospective new employer. They offer you a
signing bonus of $2,000,000 today or a lump sum payment of $2,500,000 three years from now.
If you can earn 7% on your invested funds, which of the following is true?
Selected Answer: Take the lump sum because it has the higher present value.
Answers: Take the signing bonus because it has the lower present value.
Take the signing bonus because it has the higher future value.
Take the lump sum because it has the higher present value.
Take the lump sum because it has the lower future value.
Based on these numbers, you are indifferent between the two.
Response correct
Feedback:
TB 05-48 Fresh out of college, you are negotiating with you...
Difficulty: Basic
Gradable: automatic
Learning Objective: 05-02 How to determine the present value of cash to be
received at a future date.
Type: Concepts
The future value of a single sum will increase more rapidly when:
I. The interest rate increases.

II. The interest rate decreases.
III. The frequency of compounding increases.
IV. The frequency of compounding decreases.
Selected Answer: II and III only
Answers: I only
III only
I and III only
II and III only
I and IV only
TB 05-62 The future value of a single sum will increase mor...

Gradable: automatic
Type: Concepts
You have $500 in an account which pays 5% compound interest. How much additional interest
would you earn over four years if you moved the money to an account earning 6%?
Answers: $21.89
$23.49
$24.93
$25.88
$29.94
TB 05-92 You have $500 in an account which pays 5% compound...

Gradable: automatic
Type: Problems
Stephen has $2,400 to invest. Which one of the following investment options will produce the
largest future value for him?
Selected Answer: 7%, compounded annually for 10 years
Answers: 7% simple interest for 10 years
7%, compounded annually for 10 years
7%, compounded monthly for 12 years
7%, compounded annually for 12 years
7, simple interest for 12 years
Response incorrect
Feedback:
TB 05-84 Stephen has $2,400 to invest. Which one of the fol...
Difficulty: Basic
Gradable: automatic
Type: Concepts
Thirty years ago, your father invested $6,000. Today that investment is worth $67,270.98. What is
the average rate of return your father earned on this investment?
Answers: 8.39%
8.44%
10.23%
10.34%
11.67%
TB 05-170 Thirty years ago, your father invested $6,000. Tod...

Difficulty: Basic
Gradable: automatic
Type: Problems
An account was opened with $1,000 ten years ago. Today, the account balance is $1,500. If the
account paid interest compounded annually, how much interest on interest was earned?
Answers: $86.20
$93.10
$102.39
$130.28
$500.00
TB 05-94 An account was opened with $1,000 ten years ago. T...
Gradable: automatic
Type: Problems
Katie is going to receive $1,000 three years from now. Wilt is going to receive $1,000 five years
from now. Which one of the following statements is correct if both Katie and Wilt apply a 5%
discount rate to these amounts?
Selected The present value of Katie and Wilt's money is equal.
Answer:
Answers: The present value of Katie and Wilt's money is equal.
The value of Wilt's money will be greater than the value of Katie's money six
years from now.
In today's dollars, Wilt's money is worth more than Katie's.
In five years, the value of Katie's money will be equal to the value of Wilt's
money.
Katie's money is worth more than Wilt's money today.
Response incorrect
Feedback:
TB 05-69 Katie is going to receive $1,000 three years from ...
Difficulty: Basic
Gradable: automatic
Type: Concepts
Your grandmother invested one lump sum 17 years ago at 4.25% interest. Today, she gave you
the proceeds of that investment which totaled $5,539.92. How much did your grandmother
originally invest?
Answers: $2,700.00
$2,730.30
$2,750.00
$2,768.40
$2,774.90
Response incorrect
Feedback:
TB 05-142 Your grandmother invested one lump sum 17 years ag...
Difficulty: Basic
Gradable: automatic
Type: Problems
You deposit $1,000 in a retirement account today at 8.5% interest. How much more money will
you have if you leave the money invested for 40 years rather than 35 years?
Answers: $7,714.91
$7,799.08
$7,839.73
$7,846.52
$8,753.38
Response Future value = $1,000 × (1 + .085) 40 = $26,133.02; Future value = $1,000 × (1 +

Feedback:
.085) 35 = $17,379.64; Difference = $26,133.02 - $17,379.64 = $8,753.38
Using a Calculator
TB 05-215 You deposit $1,000 in a retirement account today a...

Difficulty: Basic
Gradable: automatic
Type: Problems
An account paying annual compound interest was opened with $1,000 ten years ago. Today, the
account balance is $1,500. If the same interest rate is offered on an account paying simple
interest, how much income would be earned over the same time period?
Answers: $86.20
$92.47
$413.80
$436.29
$500.00
TB 05-89 An account paying annual compound interest was ope...

Difficulty: Basic
Gradable: automatic
Type: Problems
← OK
Siddharth Laxman Anjarlekar 165

MyCourses

M
User Siddharth Laxman Anjarlekar

Started 6/28/20 10:37 PM
Status Completed
Displayed Questions
The discounted payback period of a project will decrease whenever the:

Selected Answer: time period of the project is increased.
Answers: discount rate applied to the project is increased.
initial cash outlay of the project is increased.
time period of the project is increased.
amount of each project cash flow is increased.
costs of the fixed assets utilized in the project increase.
Response incorrect
Feedback:
TB 09-191 The discounted payback period of a project will de...
Difficulty: Basic
Gradable: automatic
Learning Objective: 09-03 The discounted payback rule and some of its
shortcomings.
Type: Concepts
Susan Sunshine has been investing $160,000 a year for the past 9 years into Sunshine in a Can,
Inc. Today, as the sole shareholder, she sold Sunshine in a Can, Inc. for $2.6 million. What is her
rate of return on this investment?
14.24 percent
14.29 percent
14.37 percent
14.42 percent
Response
Feedback:
This cannot be solved directly, so it's easiest to just use the calculator method to
get an answer. You can then use the calculator answer as the rate in the formula
just to verify that your answer is correct.
TB 06-309 Susan Sunshine has been investing $160,000 a year ...

Gradable: automatic
Learning Objective: 06-02 How loan payments are calculated and how to find the
interest rate on a loan.
Type: Problems
You just won the lottery! As your prize you will receive $1,200 a month for 100 months. If you can
earn 8 percent on your money, what is this prize worth to you today?
Answers: $87,003.69
$87,380.23
$87,962.77
$88,104.26
$90,723.76
Response incorrect
Feedback:
TB 06-184 You just won the lottery! As your prize you will r...
Difficulty: Basic
Gradable: automatic
Learning Objective: 06-01 How to determine the future and present value of
investments with multiple cash flows.
Type: Problems
Which of the following is considered to be a redeeming feature of average accounting return

analysis?
Selected Answer: Estimation of the appropriate cutoff rate is straightforward and easy.
Answers: It incorporates time value of money.
Estimation of the appropriate cutoff rate is straightforward and easy.
Calculation relies on net income and not cash flows or asset values.
Calculation relies on book values and not market values or cash flows.
It is relatively easy to calculate.
Response incorrect
Feedback:
TB 09-52 Which of the following is considered to be a redee...
Difficulty: Basic
Gradable: automatic
Learning Objective: 09-04 Accounting rates of return and some of the
problems with them.
Type: Concepts
Elderkin & Martin is considering an investment which will cost $259,000. The investment
produces no cash flows for the first year. In the second year, the cash inflow is $58,000. This
inflow will increase to $150,000 and then $200,000 for the following two years before ceasing
permanently. The firm requires a 14 percent rate of return and has a required discounted
payback period of three years. The firm should _____ the project because the discounted
payback period is _____ years. Accept or reject this project? Why?
Selected Answer: accept; 2.26
Answers: accept; 2.26
accept; 2.49
accept; 3.96
reject; 3.26
reject; 3.96
Response
Feedback:
Discounted payback
years Elderkin & Martin should reject the project since the payback period of 3.96
years exceeds the required 3 years.
TB 09-321 Elderkin & Martin is considering an investment...

Gradable: automatic
Learning Objective: 09-03 The discounted payback rule and some of its
shortcomings.
Type: Problems
You are analyzing a project and have prepared the following data:
Based on the profitability index of _____ for this project, you should _____ the project.
Selected Answer: 1.08; reject
Answers: .87; accept
.87; reject
1.02; accept
1.02; reject
1.08; reject
Response incorrect
Feedback:
TB 09-301 Based on the profitability index of _____ for this...
Difficulty: Basic
Gradable: automatic
Learning Objective: 09-07 The profitability index and its relation to net
present value.
Type: Problems
You hold a winning ticket from your provincial lottery. It entitles the bearer to receive payments of
$50,000 at the end of each of the next 20 years. Given what you know about the time value of
money, you should be able to sell this ticket for no less than $1 million in the open market.
Selected Answer: True
Answers: True
False
Response incorrect
Feedback:
TB 06-01 You hold a winning ticket from your provincial lot...
Difficulty: Basic
Gradable: automatic
Type: Concepts
A donation of $70,000 to a charity provides an annual scholarship to recipients. If the investment

earns 3.8% compounded semi-annually, determine the value of the annual scholarship.
Answers: $6,685
$5,685
$4,685
$3,685
$2,685
Response
Feedback:
TB 06-333 A donation of $70,000 to a charity provides an ann...

Gradable: automatic
Type: Problems
Freda Mai has a $65,000 insurance annuity. The company has offered monthly payments for
twenty years as a payout option for this annuity. The insurance company will use a 3% rate of
return. How much more per month would Freda Mai receive if the insurance company would pay
her a 5% rate of return on her annuity?
Answers: $13.13
$29.37
$68.48
$71.18
$73.01
Response incorrect
Feedback:
TB 06-173 Freda Mai has a $65,000 insurance annuity. The com...
Gradable: automatic
Learning Objective: 06-02 How loan payments are calculated and how to find
the interest rate on a loan.
Type: Problems
Which of the following can cause a project to have multiple IRRs?

Selected With mutually exclusive investments.
Answer:
Answers: The project has a large initial outlay.
A ten-year project has a negative cash flow in the last year of the project's life.
A project has negative cash flows in the first three years, but positive cash
flows thereafter.
Whenever project cash flows are conventional.
With mutually exclusive investments.
Response incorrect
Feedback:
TB 09-59 Which of the following can cause a project to have...
Difficulty: Basic
Gradable: automatic
Learning Objective: 09-05 The internal rate of return criterion and its
strengths and weaknesses.
Type: Concepts

You are considering the following two mutually exclusive projects. The required rate of return is
11.25 percent for project A and 10.75 percent for project B. Which project should you accept and
why?
Selected project B; because it is the largest sized project

Answer:
Answers:
project A; because its NPV is about $335 more than the NPV of project B
project A; because it has the higher required rate of return
project B; because it has the largest total cash inflow
project B; because it returns all its cash flows within two years
project B; because it is the largest sized project
Response incorrect
Feedback:
TB 09-225 You are considering the following two mutually exc...
Gradable: automatic
Learning Objective: 09-01 How to compute the net present value and why it is
the best decision criterion.
Type: Problems
What is the internal rate of return on an investment with the following cash flows?
6.75 percent
6.87 percent
7.50 percent
7.67 percent
Response incorrect
Feedback:
TB 09-281 What is the internal rate of return on an investme...
Gradable: automatic
Type: Problems
What is the internal rate of return for a project with the following cash flows?
12.1 percent
12.3 percent
12.5 percent
12.7 percent
Response correct
Feedback:
TB 09-284 What is the internal rate of return for a project ...
Gradable: automatic
Type: Problems
By definition, the net present value is equal to zero when the discount rate is equal to the:
Selected Answer: Rate used in the discounted payback formula.
Answers: Average account rate of return.
Rate used in the discounted payback formula.
Profitability index rate.
Internal rate of return.
Crossover rate.
Response incorrect
Feedback:
TB 09-27 By definition, the net present value is equal to z...
Difficulty: Basic
Gradable: automatic
Type: Definitions
The present value factor for annuities is calculated as:

Selected Answer: Present value factor + (1/r)
Answers: (1 + present value factor)/r
(1 - present value factor)/r
Present value factor + (1/r)
(Present value factor/r) + (1/r)
Response incorrect
Feedback:
TB 06-13 The present value factor for annuities is calculat...
Difficulty: Basic
Gradable: automatic
Type: Definitions
What is the effective annual rate of 9.75 percent compounded continuously?

10.11 percent
10.24 percent
10.28 percent
10.30 percent
Response incorrect
Feedback:
TB 06-238 What is the effective annual rate of 9.75 percent ...
Difficulty: Basic
Gradable: automatic
Type: Problems
A perpetuity differs from an annuity because:

Selected Answer: Perpetuity payments never cease.
Answers: Perpetuity payments vary with the rate of inflation.
Perpetuity payments vary with the market rate of interest.
Perpetuity payments are variable while annuity payments are constant.
Perpetuity payments never cease.
Annuity payments never cease.
Response correct
Feedback:
TB 06-71 A perpetuity differs from an annuity because:
Difficulty: Basic
Gradable: automatic
Type: Concepts
You just received an insurance settlement offer related to an accident you had four years ago.
The offer gives you a choice of one of the following three offers:
Option A: $6,500 on the first day of each year for 40 years
Option B: $610 on the first day of each month for 25 years
Option C: $75,000 as a lump sum payment today
You can earn 8.75 percent on your investments. You do not care if you personally receive the
funds or if they are paid to your heirs should you die within the settlement period. Which one of
the following statements is correct given this information?
Selected
Answer: Option C is the best choice since you can earn 8.75 percent on the entire lump
sum starting immediately.
Answers:
Option C is the best choice since you can earn 8.75 percent on the entire lump
sum starting immediately.
Option B is the best choice since it offers the largest number of payments.
Option A is the best choice since it has the largest present value.
Option B is the best choice since it has the largest present value.
You are indifferent to the three options as they are all equal in value to you.
Response
Feedback:
Option A has a present value of $77,966.27.

Option B has a present value of $74,737.30.
Option C has a present value of $75,000.
Option A is the best choice since it has the largest present value.
TB 06-306 You just received an insurance settlement offer re...

Gradable: automatic
Type: Problems
What is the future value of $2,400 a year for three years at an 8 percent rate of interest?
Answers: $6,185.03
$6,847.26
$7,134.16
$7,791.36
$8,414.67
Response correct
Feedback:
TB 06-193 What is the future value of $2,400 a year for thre...
Difficulty: Basic
Gradable: automatic
Type: Problems
Which one of the following statements concerning an ordinary annuity is true?
Selected
Answer: If two annuities are equal in every way except that one is an ordinary annuity and
one is an annuity due, then the ordinary annuity will have a larger present value than
the annuity due.
Answers:
An ordinary annuity consists of equal payments that occur at the beginning of each
period over a set period of time.
If two annuities are equal in every way except that one is an ordinary annuity and
one is an annuity due, then the ordinary annuity will have a larger future value than
the annuity due.
The future value of an ordinary annuity can be computed by dividing the future value
of an annuity due by (1 + r).
If two annuities are equal in every way except that one is an ordinary annuity and
one is an annuity due, then the ordinary annuity will have a larger present value than
the annuity due.
Most financial calculators can compute ordinary annuity problems but not annuity
due problems.
Response incorrect
Feedback:
TB 06-63 Which one of the following statements concerning a...
Gradable: automatic
Type: Concepts
← OK
COMMERCE 2202
Practice Questions
1. ____________ refers to the difference between a firm's current assets and its current liabilities.
A) Operating cash flow
B) Capital spending
C) Net working capital
D) Cash flow from assets
E) Cash flow to creditors
Ans: C Level: Basic Subject: Net Working Capital Type: Definitions
2. A(n) _________ asset is one which can be quickly converted into cash without significant loss in
value.
A) current
B) fixed
C) intangible
D) liquid
E) long-term
Ans: D Level: Basic Subject: Liquid Assets Type: Definitions
3. Financial leverage refers to:

A) The proportion of debt used in a firm's capital structure.
B) The ratio of retained earnings to shareholders' equity.
C) The ratio of paid-in surplus to shareholders' equity.
D) The ratio of cost-of-goods-sold to total sales.
E) The amount of receivables present in the firm's asset structure.
Ans: A Level: Basic Subject: Financial Leverage Type: Definitions

4. The common set of standards and procedures by which audited financial statements are prepared
is known as:
A) The matching principle.
B) The cash flow identity.
C) Generally Accepted Accounting Principles (GAAP).
D) The Freedom of Information Act (FOIA) .
E) The 1993 Omnibus Budget Reconciliation Act.
Ans: C Level: Basic Subject: GAAP Type: Definitions
5. The financial statement summarizing a firm's performance over a period of time is the:
A) Income statement.
B) Balance sheet.
C) Statement of cash flows.
D) Tax reconciliation statement.
E) Shareholders' equity sheet.
Ans: A Level: Basic Subject: Income Statement Type: Definitions
6. Earnings per share is equal to:

A) Net income divided by the total number of shares outstanding.
B) Net income divided by the par value of common stock.
C) Gross income multiplied by the par value of common stock.
D) Operating income divided by the par value of common stock.
E) Net income divided by total stockholders' equity.
Ans: A Level: Basic Subject: Earnings Per Share Type: Definitions
7. Dividends per share is equal to:

A) Dividends paid divided by the par value of common stock.
B) Dividends paid divided by the total number of shares outstanding.
C) Dividends paid divided by total stockholders' equity.
D) Dividends paid multiplied by the par value of common stock.
E) Dividends paid multiplied by the total number of shares outstanding.
Ans: B Level: Basic Subject: Dividends Per Share Type: Definitions
8. Non-cash items
A) The credit sales of a firm.
B) The accounts payable of a firm.
C) Expenses incurred for the purchase of intangible fixed assets.
D) Expenses charged against revenues that do not directly affect cash flow.
E) All accounts on the balance sheet other than cash on hand.
Ans: D Level: Intermediate Subject: Non-cash Items Type: Definitions

9. ________________ refers to the cash flow that results from the firm's ongoing, normal business
activities.
A) Operating cash flow
B) Capital spending
C) Net working capital
D) Cash flow from assets
E) Cash flow to creditors
Ans: A Level: Basic Subject: Operating Cash Flow Type: Definitions
10.The corporate officer generally responsible for tasks related to cash and credit management, financial
planning, and capital expenditures is the:
A) Corporate Treasurer.
B) Director.
C) Corporate Controller.
D) Chairman of the Board.
E) Vice President of Operations.
Ans: A Level: Basic Subject: Corporate Treasurer Type: Definitions
11. The process of planning and managing a firm's long-term investments is called:
A) Working capital management.
B) Financial depreciation.
C) Agency cost analysis.
D) Capital budgeting.
E) Capital structure.
Ans: D Level: Basic Subject: Capital Budgeting Type: Definitions
12. The mixture of debt and equity used by the firm to finance its operations is called:
A) working capital management.
B) financial depreciation.
C) agency cost analysis.
D) capital budgeting.
E) capital structure.
Ans: E Level: Basic Subject: Capital Structure Type: Definitions
13. The management of the firm's short-term assets and liabilities is called:
A) Working capital management.
B) Financial depreciation.
C) Agency cost analysis.
D) Capital budgeting.
E) Capital structure.
Ans: A Level: Basic Subject: Working Capital Type: Definitions

14. A business owned by a single individual is called a(n):
A) Corporation.
B) Sole proprietorship.
C) Partnership.
D) Closed receivership.
E) Open structure.
Ans: B Level: Basic Subject: Sole Proprietorship Type: Definitions
15. A business formed by two or more individuals or entities is called a(n):

A) Corporation.
C) Partnership.
E) Open structure.
Ans: C Level: Basic Subject: Partnership Type: Definitions
16. The division of profits and losses between the members of a partnership is formalized in the:
A) Indemnity clause.
B) Indenture contract.
C) Statement of purpose.
D) Partnership agreement.
E) Group charter.
Ans: D Level: Basic Subject: Partnership Agreement Type: Definitions
17. A business created as a distinct legal entity composed of one or more individuals or entities is
called a(n):
A) Corporation.
C) Partnership.
E) Open structure.
Ans: A Level: Basic Subject: Corporation Type: Definitions
18. The document that legally establishes domicile for a corporation is called the:
A) Indenture contract.
B) Partnership agreement.
C) Amended homestead filing.
D) Bylaws.
E) Articles of incorporation.
Ans: E Level: Basic Subject: Articles Of Incorporation Type: Definitions

19. The rules by which corporations govern themselves are called:
A) Indenture provisions.
B) Indemnity provisions.
C) Partnership agreements.
D) Bylaws.
E) Articles of incorporation.
Ans: D Level: Basic Subject: Bylaws Type: Definitions
20. The primary goal of financial management is to:

A) Maximize current sales.
B) Maximize the current value per share of the existing stock.
C) Avoid financial distress.
D) Minimize operational costs.
E) Maintain steady earnings growth.
Ans: B Level: Basic Subject: Financial Management Goal Type: Definitions
21. The possibility of conflict of interest between the stockholders and management of the firm is
called:
A) The shareholders' conundrum.
B) Corporate breakdown.
C) The agency problem.
D) Corporate activism.
E) Legal liability.
Ans: C Level: Basic Subject: Agency Problem Type: Definitions
22. Agency costs

A) The total dividends paid to shareholders over the lifetime of the firm.
B) The costs that result from default and bankruptcy of the firm.
C) Corporate income subject to double taxation.
D) The costs of the conflict of interest between stockholders and management.
E) The total interest paid to creditors over the lifetime of the firm.
Ans: D Level: Basic Subject: Agency Costs Type: Definitions
23. A stakeholder is:

A) Given to each stockholder when they first purchase their stock.
B) A proxy vote made at a shareholders' meeting.
C) A founding stockholder of the firm.
D) An original creditor of the firm.
E) A person or entity including a stockholder or creditor, who potentially has a claim on the
cash flows of the firm.
Ans: E Level: Basic Subject: Stakeholders Type: Definitions

24. The original sale of securities by governments and corporations occurs in the:
A) Primary market.
B) Secondary market.
C) Dealer market.
D) Auction market.
E) Liquidation market.
Ans: A Level: Basic Subject: Primary Market Type: Definitions
25. Using the Du Pont Identity Method, calculate the equity multiplier given the following information.
A. 1.2
B. 1.3
C. 1.4
D. 1.5
E. 1.6
26. Calculate price earnings growth ratio given the following information: net income = $1,250,000;
shares outstanding = 400,000; stock price = $35; future earnings growth rate = 8%.
A. 1.30
B. 1.35
C. 1.40
D. 1.45
E. 1.50
27.
What was inventory turnover for 2015?

A. 1.38
B. 1.42
C. 1.48
D. 3.15
E. 3.38
28. Use the following statement of financial position and statement of comprehensive income
What is the equity multiplier for Bluebird for 2015?

A. 1.53
B. 1.56
C. 1.59
D. 1.61
E. 1.64
29. Cash is $500, inventory is $4,800, accounts receivable is $3,200 and accounts payable is
$2,400. What is the quick ratio?
A. 0.77
B. 1.54
C. 1.67
D. 3.33
E. 3.54
30. Calculate the current ratio given the following information: current liabilities = $40,000;
sales = $90,000; cost of goods sold = $32,000; cash ratio = 1.10; accounts receivable turnover =
5; inventory turnover = 3.
A. 1.60
B. 1.70
C. 1.80
D. 1.90
E. 2.00
31. Herman's Bar and Grill paid $1,618 in interest and $265 in dividends last year. The times
interest earned ratio is 1.9 and the depreciation expense is $50. What is the value of the cash
coverage ratio?
A. 1.62
B. 1.87
C. 1.93
D. 1.99
E. 2.11
32
Marble Comics' times interest earned ratio is:
A. 0.34
B. 1.46
C. 1.95
D. 2.95
E. 4.80
33. Little's Inc. provides a 10% return on equity. Sales are $100,000 on total assets of $140,000
and total equity of $85,000. What is the profit margin?
A. 6.07%
B. 8.50%
C. 10.00%
D. 11.77%
E. 14.00%
Use the following to answer questions 34-40:
KLM, Inc.
2003 Income Statement
Net sales $3,685

Cost of goods sold $3,180
Depreciation $104
Earnings before interest and taxes $401
Interest paid $25
Taxable income $376
Taxes $128
Net income $248
Dividends paid $60
Addition to retained earnings $188
KLM Corporation
Balance Sheets as of December 31, 2002 and 2003
2002 2003 2002 2003

Cash $520 $601 Accounts payable $621 $704
Accounts rec. $235 $219 Notes payable $333 $272
Inventory $964 $799 Current liabilities $954 $976
Current assets $1,719 $1,619 Long-term debt $350 $60
Net fixed assets $890 $930 Common stock $800 $820
Retained earnings $505 $693
Total assets $2,609 $2,549 Total liabilities and Owner's equity $2,609 $2,549
34. What is the change in net working capital for 2003?

A) -$643
B) -$122
C) $122
D) $643
E) $765
Ans: B Level: Intermediate Subject: Change In Net Working Capital Type: Problems
35. What is the net capital spending for 2003?
A) -$144
B) -$64
C) $64
D) $144
E) $208
Ans: D Level: Intermediate Subject: Net Capital Spending Type: Problems
36. What is the cash flow from assets for 2003?

A) $111
B) $355
C) $1,307
D) $2,259
E) $2,503
Ans: B Level: Intermediate Subject: Cash Flow From Assets Type: Problems
37. What is the ending net working capital for 2003?

A) -$60
B) $40
C) $60
D) $643
E) $765
Ans: D Level: Intermediate Subject: Net Working Capital Type: Problems
38. What is the net new equity for 2003?

A) -$40
B) -$20
C) $20
D) $40
E) $60
Ans: C Level: Intermediate Subject: Net New Equity Type: Problems
39. What is the operating cash flow for 2003?

A) $169
B) $272
C) $377
D) $425
E) $480
Ans: C Level: Intermediate Subject: Operating Cash Flow Type: Problems

40. What is the cash flow to stockholders for 2003?
A) $40
B) $60
C) $80
D) $148
E) $268
Ans: A Level: Intermediate Subject: Cash Flow To Stockholders Type: Problems
41. Two of the primary advantages of a sole proprietorship are the:

A) Ease of company formation and limited liability.
B) Ease of company formation and less regulation.
C) Ease of ownership transfer and less regulation.
D) Ease of ownership transfer and ease of company formation.
E) Ability to raise capital and less regulation.
Ans: B Level: Intermediate Subject: Proprietorship Type: Concepts
42. In a limited partnership:

A) Only the limited partners are involved in the daily management of the firm.
B) Both general and limited partners are involved in the daily management of the firm.
C) A limited partner is liable only for the amount he/she contributed to the partnership.
D) A general partner is liable only for the amount he/she contributed to the partnership.
E) The income earned is taxed like a corporation.
Ans: C Level: Intermediate Subject: Partnership Type: Concepts
43. In a general partnership:

A) Each partner is personally responsible for all of the firm's debt.
B) Each partner is responsible only for his/her portion of the firm's debt based on ownership
percentage.
C) Each partner is liable only for the portion of the total debt he/she agreed in writing to pay.
D) Only the general partner is liable for the firm's debt.
E) None of the partners are personally liable for the firm's debt.
Ans: A Level: Intermediate Subject: Partnership Type: Concepts
44. Which of the following are disadvantages of the partnership form of ownership?
A) Personal liability and double taxation
B) Personal liability and limited firm life
C) Double taxation and limited firm life
D) Ease of formation and unlimited firm life
E) Ease of formation and ease of ownership transfer
Ans: B Level: Intermediate Subject: Partnership Type: Concepts

45. Which of the following are advantages of the corporate form of ownership?
A) Limited personal liability and limited firm life
B) Ability to raise capital and limited firm life
C) Limited personal liability and ability to raise capital
D) Ease of ownership transfer and simplicity of company formation
E) Simplicity of company formation and the ability to raise capital
Ans: C Level: Intermediate Subject: Corporation Type: Concepts
46. Which one of the following actions best meets the goal of financial management?
A) Deciding a firm should be 100% equity financed
B) Delaying cash payments in order to increase the total cash on hand
C) Easing the accounts receivable policies in order to increase current sales
D) Accepting a project that enhances the current market value of the firm's stock
E) Issuing additional shares of stock to increase the total cash on hand
Ans: D Level: Intermediate Subject: Goal of Financial Management Type: Concepts
47. Which one of the following actions is the best example of an agency problem?
A) Paying management bonuses based on the number of store locations opened during the year
B) Paying management bonuses based on the current market value of the firm's stock
C) Accepting a project that enhances both management salaries and the market value of the
firm's stock
D) Requiring stockholders approval of all management compensation decisions
E) Basing management bonuses on the attainment of specific financial goals
Ans: A Level: Challenge Subject: Agency Problem Type: Concepts
48. Which one of the following means of management compensation is designed to help eliminate the
agency problem?
A) Providing cost of living adjustments
B) Increasing health care benefits
C) Offering stock options
D) Providing annual raises
E) Providing a corporate jet
Ans: C Level: Intermediate Subject: Agency Problem Type: Concepts
49. The primary purpose of an auction market is to:

A) Offer new shares of stock to the general public.
B) Handle private placements of shares of stock.
C) Provide a market place for dealers.
D) Provide electronic trading for dealers.
E) Match buyers with sellers.
Ans: E Level: Intermediate Subject: Auction Market Type: Concepts

50. The primary purpose of capital budgeting is to:
A) Determine the amount of cash and inventory to keep on hand.
B) Estimate the initial cost of a project.
C) Distinguish projects that have at least a five-year life from those that don't.
D) Determine the risk level of a project.
E) Identify projects that produce cash flows that exceed the cost of the project.
Ans: E Level: Basic Subject: Capital Budgeting Type: Concepts
51. An individual who places an order to buy 1000 shares of IBM stock:
A) Is involved in a private placement of securities.
B) Is most likely involved in an IPO.
C) Is most likely participating in the secondary market.
D) Must have hired a dealer to perform this transaction.
E) Has to be listed as a private dealer.
Ans: C Level: Intermediate Subject: Secondary Market Type: Concepts
52. Stockholders elect:

A) The Chief Executive Officer.
B) The Corporate Directors.
C) The Chairman of the Board.
D) The President.
E) All senior managers.
Ans: B Level: Basic Subject: Organizational Chart Type: Concepts
53. The current ratio is measured as:

A) Current assets minus current liabilities.
B) Current assets divided by current liabilities.
C) Current liabilities minus inventory, divided by current assets.
D) Cash on hand divided by current liabilities.
E) Current liabilities divided by current assets.
Ans: B Level: Basic Subject: Current Ratio Type: Definitions
54. The quick ratio is measured as:

A) Current assets divided by current liabilities.
B) Cash on hand plus current liabilities, divided by current assets.
C) Current liabilities divided by current assets, plus inventory.
D) Current assets minus inventory, divided by current liabilities.
E) Current assets minus inventory minus current liabilities.
Ans: D Level: Basic Subject: Quick Ratio Type: Definitions

55. The cash ratio is measured as:
A) Current assets divided by current liabilities.
B) Current assets minus cash on hand, divided by current liabilities.
C) Current liabilities plus current assets, divided by cash on hand.
D) Cash on hand plus inventory, divided by current liabilities.
E) Cash on hand divided by current liabilities.
Ans: E Level: Basic Subject: Cash Ratio Type: Definitions
56. The financial ratio measured as current assets divided by average daily operating costs is the:
A) Cash ratio.
B) NWC to total assets ratio.
C) Acid-test ratio.
D) Interval measure.
E) Operating measure.
Ans: D Level: Basic Subject: Interval Measure Type: Definitions
57. The interval measure is an example of a ____________ ratio.

A) short-term solvency
B) financial leverage
C) asset management
D) profitability
E) market value
Ans: A Level: Basic Subject: Interval Measure Type: Definitions
58. Ratios that measure the firm's financial leverage are known as:
A) Asset management ratios.
B) Long-term solvency ratios.
C) Short-term solvency ratios.
D) Profitability ratios.
E) Market value ratios.
Ans: B Level: Basic Subject: Long-Term Solvency Ratios Type: Definitions
59. The financial ratio measured as total assets minus total equity, divided by total assets, is the:
A) Total debt ratio.
B) Equity multiplier.
C) Debt-equity ratio.
D) Current ratio.
E) Times interest earned ratio.
Ans: A Level: Basic Subject: Total Debt Ratio Type: Definitions

60. The debt-equity ratio is measured as:
A) Total equity minus total debt.
B) Total equity divided by total debt.
C) Total debt divided by total equity.
D) Total debt plus total equity.
E) Total debt minus total assets, divided by total equity.
Ans: C Level: Basic Subject: Debt-Equity Ratio Type: Definitions
61. The equity multiplier ratio is measured as:

A) Total equity divided by total assets.
B) Total equity plus total debt.
C) Total assets minus total equity, divided by total assets.
D) Total assets plus total equity, divided by total debt.
E) Total assets divided by total equity.
Ans: E Level: Basic Subject: Equity Multiplier Type: Definitions

62. The total long-term debt and equity of the firm is frequently called:
A) Total assets.
B) Total capitalization.
C) Total financing.
D) Debt-equity consolidation.
E) Debt-equity reconciliation.
Ans: B Level: Basic Subject: Total Capitalization Type: Definitions
63. If a firm acquires more long-term debt while also issuing additional shares of stock, then the:
A) Debt-equity ratio will increase.
B) Debt-equity ratio will decrease.
C) Debt equity ratio will remain constant.
D) Change in the debt-equity ratio cannot be determined from the information provided.
E) Net Income will increase.
Ans: D Level: Intermediate Subject: Debt-Equity Ratio Type: Concepts
64. If the level of inventory rises, all else constant, then:

A) The days sales in inventory will also rise.
B) The NWC ratio will also rise.
C) Inventory turnover will also rise.
D) Fixed asset turnover will decline.
E) Current ratio will decline.
Ans: A Level: Intermediate Subject: Days Sales In Inventory Type: Concepts

65. An increase in the receivables turnover means that:
A) The majority of customers are paying slower.
B) The prices of items purchased are rising.
C) The days sales in receivables is rising.
D) Profit margins are rising.
E) Customers are paying their bills faster.
Ans: E Level: Intermediate Subject: Receivables Turnover Type: Concepts
66. A fixed asset turnover ratio of .72 means that:

A) For every $1 in total assets, a firm can generate $0.72 in net income.
B) For every $1 in net fixed assets, a firm can generate $0.72 in net income.
C) For every $1 in total assets, a firm can generate $0.72 in sales.
D) For every $1 in net fixed assets, a firm can generate $0.72 in sales.
E) For every $1 in net fixed assets, a firm can obtain $0.72 in debt.
Ans: D Level: Intermediate Subject: Fixed Asset Turnover Type: Concepts
67. Last year a firm had a total debt ratio of .31. This year the total debt ratio is .33. Which one of the
following statements can be made with certainty based on this information?
A) The firm is bankrupt.
B) The firm increased its equity financing.
C) The firm had to have sold some long-term assets.
D) The firm had to have borrowed more money.
E) The firm changed its capital structure.
Ans: E Level: Challenge Subject: Total Debt Ratio Type: Concepts
68. Which one of the following measures indicates how long a firm can continue operating without
any additional cash inflows?
A) Current ratio
B) Cash ratio
C) Quick ratio
D) Interval measure
E) Total debt ratio
Ans: D Level: Intermediate Subject: Interval Measure Type: Concepts
69. Which one of the following measures the efficiency with which a firm uses it resources to
generate sales?
A) Price earnings ratio
B) Return on equity
C) Total asset turnover
D) Current ratio
E) Return on assets
Ans: C Level: Intermediate Subject: Total Asset Turnover Type: Concepts

70.A reduction in interest expense, all else constant, will cause a(n):
A) Decrease in the times interest earned ratio.
B) Increase in the cash coverage ratio.
C) Decrease in the long-term debt ratio.
D) Decrease in the return on equity.
E) Increase in the price earnings ratio.
Ans: B Level: Challenge Subject: Profit Margin Type: Concepts

71.Financial statement analysis provides useful information to which of the following parties?
I. Creditors
II. Investors
III. Internal division managers
IV. Senior corporate officers
A) I and II only
B) II and IV only
C) III and IV only
D) II, III, and IV only
E) I, II, III, and IV
Ans: E Level: Intermediate Subject: Financial Statement Analysis Type: Concepts
72.Martin's Method Acting School has a current ratio of 2, a quick ratio of 1.8, net income of $180,000, a
profit margin of 10%, and an accounts receivable balance of $150,000. What is the firm's
average collection period?
A) 50 days
B) 43 days
C) 30 days
D) 24 days
E) 16 days
Ans: C Level: Intermediate Subject: Average Collection Period Type: Problems
73.If a firm has a total debt ratio of 1.5, what is its equity multiplier?
A) –2.00 times
B) 0.50 times
C) 0.67 times
D) 1.50 times
E) 3.00 times
Ans: A Level: Intermediate Subject: Debt Ratio & Equity Multiplier Type: Problems
74.Tron, Inc. has a times interest earned ratio of 4.0. Based on this ratio, a creditor knows that Tron's
EBIT must decline by more than __________ before Tron will be unable to cover its interest
expense.
A) 33%
B) 40%
C) 67%
D) 75%
E) 80%
Ans: D Level: Intermediate Subject: Times Interest Earned Type: Problems
75.Given a profit margin = 10%, ROE = 20%, D/E = 1.5, and assets = $200, calculate sales.
A) $10
B) $160
C) $250
D) $640
E) $1,000
Ans: B Level: Intermediate Subject: Du Pont Identity Type: Problems
76.The long-range time period, usually the next two to five years, over which the financial planning
process focuses is known as the:
A) Planning horizon.
B) Planning strategy.
C) Planning agenda.
D) Short run.
E) Current financing period.
Ans: A Level: Basic Subject: Planning Horizon Type: Definitions

77.The process by which smaller investment proposals of each of a firm's operational units are added up
and treated as one big project is known as:
A) Separation.
B) Aggregation.
C) Conglomeration.
D) Appropriation.
E) Striation.
Ans: B Level: Basic Subject: Aggregation Type: Definitions
78.Pro forma financial statements are:

A) Illegal.
B) Accounting statements filed with the Securities and Exchange Commission (SEC) .
C) Accounting statements filed with CCRA.
D) Projections in the form of accounting statements, based on a sales forecast assumption.
E) The most-recently compiled accounting statements of the firm released to the public.
Ans: D Level: Basic Subject: Pro Forma Statements Type: Definitions
79.The designated source(s) of external financing required to make the pro forma balance sheet balance is
called the:
A) Retained earnings account.
B) Common stock account.
C) Debt-equity ratio.
D) Cash flow variable.
E) Plug variable.
Ans: E Level: Basic Subject: Plug Variable Type: Definitions
80.The financial planning method in which accounts are varied depending on a firm's predicted sales level
is called the:
A) Percentage of sales approach.
B) Sales dilution approach.
C) Sales reconciliation approach.
D) Common-size approach.
E) Time-trend approach.
Ans: A Level: Basic Subject: Percentage Of Sales Type: Definitions
81.If a firm believes its costs and assets grow at the same rate as sales, the dividend payout ratio is fixed,
no new equity is possible, and the current debt-equity ratio is optimal, then which of the
following is true?
I. The sustainable growth rate gives the maximum rate at which sales can grow.
II. External financing will be zero.
III. Asset growth must completely come from increases in accounts payable and retained
earnings.
IV. If the firm pays out in dividends all of its net income, sales cannot grow.
A) I only
B) I, II, and III only
C) I and IV only
D) II, III, and IV only
E) I, II, III, and IV
Ans: C Level: Intermediate Subject: Sustainable Growth Type: Concepts
82. If a firm is to grow at its sustainable growth rate, its growth depends on which of the
following factors?
I. Profit margin
II. Financial policy
III. Dividend policy
A) I only
B) I and II only
C) I and III only
D) II and III only
E) I, II, and III
Ans: E Level: Intermediate Subject: Sustainable Growth Rate Type: Concepts
83. Which of the following firms would most likely be interested in knowing their
sustainable growth rate?
A) A firm that believes its equity multiplier is at its optimal level
B) A firm that has no capacity to raise new debt
C) A firm in a mature industry that expects limited sales growth in the future
D) A firm that pays no dividends
E) A firm that has a low level of investment in fixed assets
Ans: A Level: Intermediate Subject: Sustainable Growth Rate Type: Concepts
84. You wish to compute a firm's sustainable growth rate from its accounting statements. To
do so, you could use the values of
A) total assets, net income, and the retention ratio
B) total assets, interest paid, and equity
C) net income, equity, and the dividend payout ratio
D) interest paid, equity, and total assets
E) net income, equity, and total assets
Ans: C Level: Basic Subject: Sustainable Growth Rate Type: Concepts
85. Which of the following are constant under the percentage of sales approach?
A) Profit margin and dividend payout ratio
B) Addition to retained earnings and net income
C) Dividends paid and the profit margin
D) Costs as a percentage of sales and dividends paid
E) Costs as a percentage of sales and the addition to retained earnings
Ans: A Level: Intermediate Subject: Percentage Of Sales Approach

Type: Concepts
86. The elements of financial planning include:

I The results of the net working capital decisions.
II Consideration of the degree of financial leverage to be employed.
III Investment opportunities the firm chooses to pursue.
IV The amount of cash needed to pay dividends.
A) I and IV only.
B) I, II, and III only.
C) II, III, and IV only.
D) I, III, and IV only.
E) I, II, III, and IV.
Ans: E Level: Intermediate Subject: Elements Of Financial Planning

Type: Concepts
87. Financial planning generally considers:

A) Two to five proposals over the short-term.
B) A two to five year time frame while aggregating smaller proposals.
C) The details of each individual project over the long-term.
D) Three alternative scenarios over the short-term.
E) An aggregation of projects over the next twenty-four months.
Ans: B Level: Intermediate Subject: Planning Horizon Type: Concepts
88. Financial planning allows firms to:

I. Avoid future losses.
II. Develop contingency plans.
III. Ascertain expected financing needs.
IV. Explore and evaluate various options.
A) I and IV only.
B) III and IV only.
C) II and III only.
D) II, III, and IV only.
E) I, II, III, and IV.
Ans: D Level: Intermediate Subject: Financial Planning Type: Concepts
89. The sales forecast for most financial plans is:

A) Developed based upon the net income figure provided by management.
B) Projected based on the anticipated level of debt financing.
C) Used as the plug figure.
D) Derived from the output of the financial planning process.
E) Externally supplied.
Ans: E Level: Basic Subject: Sales Forecast Type: Concepts
90. Two of the more important economic factors that must be considered when doing a
financial plan for a firm are the:
A) GDP growth rate and the interest rate.
B) Unemployment rate and the GDP growth rate.
C) Marginal tax rate and the interest rate.
D) GDP growth rate and the marginal tax rate.
E) Inflation rate and the interest rate.
Ans: C Level: Intermediate Subject: Economic Assumptions Type: Concepts

91.The interest rate used to calculate the present value of future cash flows is called the ____________
rate.
A) free interest
B) annual interest
C) compound interest
D) simple interest
E) discount
Ans: E Level: Basic Subject: Discount Rate Type: Definitions
92.The concept that a dollar received today is worth more than a dollar received tomorrow is referred to
as the:
A) Present value.
B) Simple interest value.
C) Compound value.
D) Time value of money.
E) Future value of money.
Ans: D Level: Basic Subject: Time Value Of Money Type: Definitions
93.The factor (1 + r)t is called the:

A) Simple rate of interest.
B) Current factor.
C) Future value factor.
D) Present value factor.
E) Discount factor.
Ans: C Level: Basic Subject: Future Value Factor Type: Definitions
94.The value computed using the factor 1 / (1 + r)t is called the:

A) Present value.
B) Interest rate.
C) Number of periods.
D) Future value.
E) Compound value.
Ans: A Level: Basic Subject: Present Value Type: Definitions
95.Compound interest means that you earn:

A) Interest only on the initial amount invested.
B) Interest on the initial principal only.
C) Interest on both the principal and prior reinvested interest.
D) A decreasing amount of interest each year.
E) The same amount of interest each year.
Ans: C Level: Basic Subject: Compound Interest Type: Definitions

96.Calculating the present value of a future cash flow to determine its value today is called:
A) Discounted cash flow valuation.
B) The discount rate.
C) Future value compounding.
D) Present value compounding.
E) Timing the cash flow.
Ans: A Level: Basic Subject: Discounted Cash Flow Type: Definitions
97.The rate used to find the present value of a future payment is called the:
A) Simple rate.
B) Discount rate.
C) Compound rate.
D) Future value rate.
E) Loan rate.
Ans: B Level: Basic Subject: Discount Rate Type: Definitions
98.The discounted value of money is called the:

A) Compound value.
B) Simple value.
C) Future value.
D) Complex value.
E) Present value.
Ans: E Level: Basic Subject: Present Value Type: Definitions
99.The rate of return used when computing a present value is referred to as the ______ rate while the rate
used when computing a future value is referred to as the _____ rate.
A) Compound; discount
B) Compound; simple
C) Compound; compound
D) Discount; discount
E) Discount; compound
Ans: E Level: Basic Subject: Discount Rate Versus Compound Rate Type: Definitions
100.On a financial calculator, the symbol "N" represents the:

A) Current value.
B) Time periods.
C) Future value.
D) Rate of simple interest.
E) Rate of compound interest.
Ans: B Level: Basic Subject: Number Of Periods Type: Definitions

101.Ito invested $4,350. After seven years he had an account value of $6,980.58. Maria invested $5,920.
After six years she had an account value of $8,834.62. Which one of the following statements is
correct?
A) Maria earned a rate of interest that was 0.9% higher than Ito's rate.
B) Maria earned a rate of interest of 5.89%.
C) Ito earned a rate of interest that was 0.09% higher than Maria's rate.
D) Ito earned a rate of interest of 6.90%.
E) Both Ito and Maria earned the same rate of interest.
Ans: C Level: Intermediate Subject: Interest Rate Type: Problems
102.Koji invested $3,300 at 7.75% interest. After a period of time he withdrew $9,383.31. How long did
Koji have his money invested?
A) 13 years
B) 14 years
C) 15 years
D) 16 years
E) 17 years
Ans: B Level: Basic Subject: Number Of Periods Type: Problems
103.Sampson, Inc. invested $1.325 million in a project that earned an 8.25% rate of return. Sampson sold
their investment for $3,713,459. How much sooner could Sampson have sold the company if they
only wanted $3 million from the project?
A) 2.69 years
B) 3.33 years
C) 5.17 years
D) 6.67 years
E) 10.31 years
Ans: A Level: Challenge Subject: Number Of Periods Type: Problems
104.Lakeside Inc. invested $735,000 at an 11.25% rate of return. The company sold their investment for
$1,067,425. How much longer would Lakeside have had to wait if they had wanted to sell their
investment for $1.25 million?
A) .98 year
B) 1.48 years
C) 1.98 years
D) 2.31 years
E) 3.50 years
Ans: B Level: Intermediate Subject: Number Of Periods Type: Problems

105.Martha is going to receive $6,000 in two years from Tom. She will receive an additional $4,000 in
three years from Tom. She earns 7.15% on her investments. How much is this money from Tom
worth to Martha today?
A) $7,893.46
B) $8,477.47
C) $8,891.74
D) $9,225.97
E) $9,251.50
Ans: B Level: Intermediate Subject: Present Value Type: Problems
106.The I.C. James Co. invested $10,000 six years ago at 5% simple interest. The I.M. Smart Co.
invested $10,000 six years ago at 5% interest which is compounded annually. Which one of the
following statements is true concerning these two investments?
I. The I.C. James Co. has an account value of $13,400.96 today.
II. The I.C. James Co. will have an account value of $13,400.96 six years from now.
III. The I.M Smart Co. will earn $525 interest in the second year.
IV Both the I.C. James Co. and the I.M. Smart Co. will earn $500 interest in the first year.
A) I and III only
B) I, III and IV only
C) II and IV only
D) II, III and IV only
E) III and IV only
Ans: E Level: Challenge Subject: Interest Rate Type: Problems
107.The Smith Co. has $450,000 to invest at 5.5% interest. How much more money will they have if they
invest these funds for eight years instead of five years?
A) $62,948.21
B) $68,851.36
C) $74,250.00
D) $78,408.62
E) $102,476.93
Ans: E Level: Intermediate Subject: Future Value Type: Problems
108.Today Richard is investing $1,000 at 5% interest for five years. One year ago, Richard invested
$1,000 at 6.25% for six years. How much money will Richard have saved in total five years from
now if both investments compound interest annually?
A) $2,543.77
B) $2,641.98
C) $2,678.81
D) $2,630.36
E) $2,714.99
Ans: E Level: Intermediate Subject: Future Value Type: Problems

109. Lisa deposited $500 in a savings account this morning. The account pays 2.5% simple
interest. If Lisa leaves this money in the account for five years, how much total interest will she
earn?
A. $10.75
B. $12.50
C. $53.75
D. $62.50
E. $67.25
110. Many economists view a 3% annual inflation rate as "acceptable". Assuming a 3% annual
increase in the price of automobiles, how much will a new Suburban cost you five years from
now, if today's price is $48,000?
A. $41,405
B. $48,000
C. $54,024
D. $55,200
E. $55,645
111. Today, you earn a salary of $37,800. What will your annual salary be twelve years from
now if you receive annual raises of 3.6%?
A. $55,981.03
B. $56,324.17
C. $56,907.08
D. $57,784.17
E. $58,213.46
112. Your big brother deposited $10,000 today at 9% interest for 6 years. You would like to have
just as much money at the end of the next 6 years as your brother. However, you can only earn
7.5% interest. How much more money must you deposit today than your brother did if you are to
have the same amount at the end of the 6 years?
A. $398.68
B. $487.63
C. $575.00
D. $648.21
E. $866.96
113. Today, you earn a salary of $42,500. What will be your annual salary 10 years from now if
you earn annual raises of 3.2%?
A. $56,100.00
B. $57,414.06
C. $58,235.24
D. $59,122.08
E. $59,360.45
114. You setup an educational savings plan that will pay $15,000 to your newborn child in 18
years. If the plan uses a rate of 4.75% per year, what was contributed into this plan?
A. $4,459
B. $5,800
C. $6,506
D. $7,007
E. $8,576
115. Cooper invests $6,500 in a savings account at his local bank. The bank pays 2.75% simple
interest. Cooper does not make any additional withdrawals or deposits to this account. How
much will his account be worth after 12 years?
A. $2,145
B. $2,655
C. $6,679
D. $8,645
E. $9,001
116. Calculate cash given the following information. Total current assets $57,000; supplies
$4,000; average collection period 60.83 days; days' sales in inventory 97.33 days; sales 90,000;
cost of goods sold 75,000.
A. $24,000
B. $22,000
C. $20,000
D. $18,000
E. $16,000
117. A firm currently has sales of $1.32 million and $964,500 in fixed assets. Currently
operations are at 84% of capacity. By how much can sales increase without requiring the firm to
purchase any additional fixed assets? (Enter values in dollars)
A. $154,320
B. $183,714
C. $211,200
D. $251,429
E. $355,500
118. Suppliers, Inc. has current sales of $2,400 and a profit margin of 9%. The firm estimates
that sales will decrease by 4% next year and that all costs will vary in direct relationship to sales.
What is the pro forma net income?
A. $207.36
B. $210.82
C. $216.00
D. $224.64
E. $230.14
119. JanexCorporation had OCF of $250, net capital spending of $500 and change in net
working capital of $150. Given this information, determine its cash flow from assets.
A. $400
B. $800
C. $(400)
D. $(800)
E. $150
120. Shareholders' equity in a firm is $500. The firm owes a total of $400 of which 75 percent is
payable this year. The firm has net fixed assets of $600. What is the amount of the net working
capital?
A. -$200
B. -$100
C. $0
D. $100
E. $200
121. RDJ Manufacturing had 300 million shares of stock outstanding at the end of 2015. During
2015, the company reported net income of $600 million, retained earnings of $900 million, and
$240 million in dividends paid. What is RDJ's earnings per share?
A. $0.50
B. $0.67
C. $0.80
D. $1.25
E. $2.00
122. The Burger Joint paid $420 in dividends and $611 in interest expense. The addition to
retained earnings is $397.74 and net new equity is $750. The tax rate is 34 percent. Sales are
$6,250 and depreciation is $710. What are the earnings before interest and taxes?
A. $1,576.67
B. $1,582.16
C. $1,660.00
D. $1,780.82
E. $1,850.00
123. Using the Du Pont Identity Method, calculate the equity multiplier given the following
information. Profit margin 17%; total asset turnover 0.88; return on equity 17.95%.
A. 1.6
B. 1.4
C. 1.2
D. 1.0
E. 0.8
124. Using the Du Pont Identity Method, calculate the equity multiplier given the following
information. Profit margin 19%; total asset turnover 1.5; return on equity 37.05%.
A. 1.2
B. 1.3
C. 1.4
D. 1.5
E. 1.6
125. Calculate price earnings growth ratio given the following information: net income =
$1,250,000; shares outstanding = 400,000; stock price = $35; future earnings growth rate = 8%.
A. 1.30
B. 1.35
C. 1.40
D. 1.45
E. 1.50
126. Cash is $500, inventory is $4,800, accounts receivable is $3,200 and accounts payable is
$2,400. What is the quick ratio?
A. 0.77
B. 1.54
C. 1.67
D. 3.33
E. 3.54
127. Calculate the current ratio given the following information: current liabilities = $40,000;
sales = $90,000; cost of goods sold = $32,000; cash ratio = 1.10; accounts receivable turnover =
5; inventory turnover = 3.
A. 1.60
B. 1.70
C. 1.80
D. 1.90
E. 2.00
128. Herman's Bar and Grill paid $1,618 in interest and $265 in dividends last year. The times
interest earned ratio is 1.9 and the depreciation expense is $50. What is the value of the cash
coverage ratio?
A. 1.62
B. 1.87
C. 1.93
D. 1.99
E. 2.11
129. Little's Inc. provides a 10% return on equity. Sales are $100,000 on total assets of $140,000
and total equity of $85,000. What is the profit margin?
A. 6.07%
B. 8.50%
C. 10.00%
D. 11.77%
E. 14.00%
130. Frederico's has a profit margin of 6 %, a return on assets of 8 %, and an equity multiplier of
1.4. What is the return on equity?
A. 6.7 %
B. 8.4 %
C. 11.2 %
D. 14.6 %
E. 19.6 %
131. Calculate the times interest earned ratio given the following information: depreciation
expense = $30,000; EBIT = $180,000; cash coverage ratio = 14 times.
A. 8.0 times
B. 7.5 times
C. 11.5 times
D. 12.0 times
E. 12.5 times
132. A London Ontario firm has a net income of $32,000 which provides a 12% return on assets.
The firm has a debt-equity ratio of .40. What is the return on equity?
A. 7.20%
B. 8.57%
C. 11.67%
D. 12.00%
E. 16.80%
133. Calculate net working capital turnover given the following data. Total fixed assets
$200,000; long-term liabilities $55,000; total liabilities $80,000; total shareholders' equity
$220,000; total sales $800,000.
A. 13.75
B. 12.67
C. 11.75
D. 10.67
E. 9.67
134. An individual who places an order to buy 1000 shares of IBM stock:
A. Is involved in a private placement of securities.
B. Is most likely involved in an IPO.
C. Is most likely participating in the secondary market.
D. Must have hired a dealer to perform this transaction.
E. Has to be listed as a private dealer.
135. Working capital management:

A. Includes the daily oversight of a firm's cash requirements.
B. Involves the determination of how much long-term debt should be issued.
C. Is the oversight of a firm's long-term assets.
D. Deals with the refinancing of the firm's debt if interest rates decline.
E. Deals with the allocation of equipment to various jobs on a daily basis.
136. Which one of the following actions by a financial manager is most aligned with the goal of
financial management?
A. Increasing the size of a firm by acquiring a non-profitable competitor.
B. Increasing the sales of the firm by expanding the company's sales force.
C. Issuing additional shares of stock to repay all of the firm's long-term debt.
D. Improving the efficiency of the company such that the value of the stock increases.
E. Increasing the bonuses paid to the top executives as the size of the firm increases.
A. It was intended to protect investors from corporate abuses.

B. It was intended to increase corporate social responsibility of publicly listed organizations.
C. It was intended to provide consumer protection on product quality.
D. It was intended to protect employees through better corporate codes of conduct.
E. It was intended to harmonize accounting standards in North America.
138. An entity wherein one or more owners may elect to actively manage the firm while other
owners choose limited liability instead of management responsibility is called a:
A. Corporation.
B. General partnership.
C. Limited liability corporation.
D. Limited liability company.
E. Limited partnership.
139. Limited liability may be a characteristic of each of the following form(s) of organization
EXCEPT a ________________.
A. Sole proprietorship.
B. Corporation.
C. Limited partnership.
D. Limited liability company.
E. Co-operative(Co-op)
140. A business that is a distinct legal entity is a:

A. Proprietorship.
B. Partnership with only two partners.
D. General partnership.
E. Corporation.
141. It is easiest to raise capital for a project under which form of business organization?
A. Corporation.
D. Sole proprietorship.
E. The form of business organization does NOT affect the ability to raise capital.
142. Robert Fischer is one of the owners of a firm which generated $18,000 in taxable income
last year. Robert did not have to pay any personal tax on his share of the firm's income. Robert
must be a partial owner of a:
D. Non-dividend paying corporation.
E. Limited liability company.
143. Which type of business organization has all the respective rights and privileges of a legal
person?
D. Corporation.
144. Which form of business structure faces the greatest agency problems?
D. Corporation.
145. Which of the following are advantages of the corporate form of ownership?
A. Limited personal liability and limited firm life.
B. Ability to raise capital and limited firm life.
C. Limited personal liability and ability to raise capital.
D. Ease of ownership transfer and simplicity of company formation.
E. Simplicity of company formation and the ability to raise capital.
146. Working capital management is concerned with which statement of financial position
accounts?
A. Current assets only.
B. Current and long-term assets only.
C. Long-term assets only.
D. Current assets and current liabilities only.
E. Current assets, long-term assets and current liabilities only.
147. Which of the following is not an agency cost?
A. Flying an executive overseas without a genuine business purpose for doing so.
B. Paying more than the actual market value to purchase a competitor.
C. Low-interest loans to corporate executives.
D. Protecting management jobs which could effectively be eliminated.
E. Interest paid on long-term corporate borrowing.
148. Conflicts that arise between the interests of managers and stockholders are referred to as:
A. Control problems.
B. Agency problems.
C. Management conflicts.
D. Stockholder conflicts.
E. Proxy fights.
149. Which of the following is a capital structure decision?

A. Cost of acquiring funds for the company.
B. Management of current assets and liabilities.
C. Management of net working capital.
D. Which projects should be accepted or rejected.
E. Timing and risks of cash flows for an upcoming project.
150. Which one of the following best illustrates the agency problem?
A. An employee offers a suggestion which will save the company money and reduce the stress of
his job.
B. The company creates a management bonus program whereby managers are rewarded when
the market price of the firm's stock rises.
C. Management rejects a merger which was desired by the shareholders.
D. Management expands its operations overseas which is favourably received by the financial
markets.
E. Management reduces the risk level of the firm while maintaining a steady stock price.

Review Test Submission: Practice Quiz 1 - Module 1: Quizzes and Tests

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Review Test Submission: Practice Quiz 1 - Module 1: Quizzes and Tests

Încărcat de

Drepturi de autor:

Formate disponibile

6/28/2020 Review Test Submission: Practice Quiz 1 - Module 1 – ...

Ajil Mohan 136

H Quizzes and Tests Review Test Submission: Practice Quiz 1 - Module 1

Review Test Submission: Practice Quiz 1 - Module 1

User Ajil Mohan

Results Displayed All Answers, Submitted Answers, Correct Answers

Question 1 0 out of 1 points

I. Is subject to double taxation.

Answers: I and III only

II and III only

II, III, and IV only

I, II, and III only

I, II, III, and IV

Question 2 0 out of 1 points

Answers: Primary market.

Question 3 0 out of 1 points

Which one of the following statements concerning a partnership is true?

Limited partners in a limited partnership should be actively involved in

Income from a limited partnership is taxed as corporate income.

A primary advantage of a partnership is the ease of transferring ownership.

A partnership terminates at the death of any partner.

Question 4 0 out of 1 points

Question 5 0 out of 1 points

Which one of the following statements concerning a proprietorship is true?

Income from a proprietorship is taxed as a separate entity.

A proprietor is personally responsible for 100% of the firm's liabilities.

A partial transfer of ownership is easier with a proprietorship than with a

Income from a proprietorship is taxed at a lower rate than other personal

Question 6 0 out of 1 points

Both an OTC and an auction market.

An electronic market trading solely in corporate and government bonds.

An electronic market which has no physical location.

A market with far fewer listings than the NYSE.

Question 7 0 out of 1 points

Answers: primary market.

Question 8 0 out of 1 points

Answers: Cash management.

Working capital management.

Question 9 0 out of 1 points

Which of the following is a disadvantage of the corporate form of ownership?

Answers: Limited liability

Ease of transfer of ownership

Ability to raise capital

The life of the corporation

Question 10 0 out of 1 points

Requiring stockholders approval of all management compensation decisions

Basing management bonuses on the attainment of specific financial goals

Question 11 1 out of 1 points

The agency problem is best defined as a conflict of interest between a firm's:

Answers: Various employees.

Managers and the firm's employees.

Stockholders and the firm's managers.

Stockholders and the firm's debtors.

Question 12 0 out of 1 points

Double taxation refers to which of the following scenarios?

The corporation pays taxes on revenues and expenses.

The corporation pays taxes on revenues and earnings.

Question 13 1 out of 1 points

Working capital management:

Involves the determination of how much long-term debt should be issued.

Is the oversight of a firm's long-term assets.

Deals with the allocation of equipment to various jobs on a daily basis.

Question 14 0 out of 1 points