LSUS FIN701 test 1

Galaxy Interiors income statement shows depreciation of $1,611, sales of $21,415, interest paid of $1,282, net income of $1,374, and costs of goods sold of $16,408. What is the amount of the noncash expenses?

$1,611

Williamsburg Markets has an operating S1,356 while current liabilities decreased by $2,662, cash flow of $4,267 and depreciation of $1,611. Current assets decreased by and net fixed assets decreased by $382 during the year. What is free cash flow for the year?

$1,732

The Harrisburg Store has net working capital of $2,715, net fixed assets of $22,407, sales of $3 1,350, and current liabilities of $3,908. How many dollars' worth of sales are generated from every $1 in total assets?

$1.08

Which one of the following represents the most liquid asset?

$100 of inventory that is sold today for $100 cash

At the beginning of the year, the long-term debt of a firm was $72,918 and total debt was $138,407. At the end of the year, long-term debt was $68,219 and total debt was $145,838. The interest paid was $6,430. What is the amount of the cash flow to creditors?

$11,129

Canine Supply has sales of $2,800, total assets of $1,900, and a debt-equity ratio of .5. Its return on equity is 15 percent. What is the net income?

$190

This morning, DJ's invested $225,000 to help fund future projects. How much additional money will the firm have three years from now if it can earn an annual interest rate of 4 percent rather than 3.5 percent?

$3,632.88

Walt can afford monthly car payments of $140 for 3 years, starting I month from now. The interest rate is 4.6 percent, compounded monthly. How much can he afford to borrow to buy a car?

$4,699.31

Al invested $3,630 in an account that pays 6 percent simple interest. How much money will he have at the end of five years?

$4,719

The What-Not Shop owns the building in which it is located. This building initially cost $647,000 and is currently appraised at $819,000. The fixtures originally cost $148,000 and are currently valued at $65,000. The inventory has a book value of $319,000 and a market value equal to 1.1 times the book value. The shop expects to collect 96 percent of the $21,700 in accounts receivable. The shop has $26,800 in cash and total debt of $414,700. What is the market value of the shop's equity?

$867,832

You own a classic car currently valued at $64,000. If the value increases by 2.5 percent annually, how much will the car be worth 15 years from now?

$92,691.08

Comer Books has a debt-equity ratio of 57. What is the total debt ratio?

.36

Bernice's has $823,000 in sales. The profit margin is 4.2 percent and the firm has 7,500 shares of stock outstanding. The market price per share is $16.50. What is the price-earnings ratio?

3.58

Assume the total cost of a college education will be $245,000 when your child enters college in 15 years. You presently have $108,000 to invest for this purpose. What rate of interest must you earn to cover the cost of your child's college education?

5.61 percent

Sixty years ago, your mother invested $4,500. Today, that investment is worth $430,065.11. What is the average annual rate of return she earned on this investment?

7.90 percent

The Up-Towner has sales of $913,400, costs of goods sold of $579,300, inventory of $123,900, and accounts receivable of $78,900. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?

78.07 days

Which one of the following will produce the lowest present value interest factor?

8 percent interest for 10 years

TJ's has annual sales of $813,200, total debt of $171,000, total equity of $396,000, and a profit margin of 5.78 percent. What is the return on assets?

8.29 percent

An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio?

Accounts receivable

Which one of the following is a current asset?

Accounts receivable

According to the Rule of 72, you can do which one of the following?

Approximately double your money in 11 years at 6.55 percent interest

Which one of the following will increase the cash flow from assets, all else equal?

Decrease in the change in net working capital

Which one of these identifies the relationship between the return on assets and the return on equity?

DuPont identity

Which one of the following accurately describes the three parts of the DuPont identity?

Equity multiplier, profit margin, and total asset turnover

Phillippe invested $1,000 ten years ago and expected to have $1,800 today He has neither added nor withdrawn any money since his initial investment. All interest was reinvested and compounded annually. As it turns out, he only has $1,680 in his account today. Which one of the following must be true?

He earned a lower interest rate than he expected

Which one of the following questions is a working capital management decision?

How much inventory should be on hand for immediate sale?

Which one of the following actions by a financial manager is most apt to create an agency problem?

Increasing current profits when doing so lowers the value of the company's equity

Which one of the following statements concerning net working capital is correct?

Net working capital may be a negative value.

Which one of the following will decrease if a firm can decrease its operating costs, all else constant?

Price-earnings ratio

Which one of the following statements concerning a sole proprietorship is correct?

The owner of a sole proprietorship is personally responsible for all of the company's debts.

Which one of the following statements correctly defines a time value of money relationship?

Time and present value are inversely related, all else held constant

RJ's has a fixed asset turnover rate of 1.26 and a total asset turnover rate of .97. Sam's has a fixed asset turnover rate of 1.31 and a total asset turnover rate of .94. Both companies have similar operations. Based on this information, RJ's must be doing which one of the following?

Utilizing its total assets more efficiently than Sam's

The decision to issue additional shares of stock is an example of

a capital structure decision

The book value of a firm is:

based on historical cost.

The interest earned on both the initial principal and the interest reinvested from prior periods is called:

compound interest.

A business created as a distinct legal entity and treated as a legal "person" is called a(n):

corporation.

Net working capital is defined as:

current assets minus current liabilities.

Steve just computed the present value of a $10,000 bonus he will receive next year. The interest rate he used in his computation is referred to as the:

discount rate

The process of determining the present value of future cash flows in order to know their value today is referred to as:

discounted cash flow valuation

Terry is calculating the present value of a bonus he will receive next year. The process he is using is called:

discounting

One disadvantage of the corporate form of business ownership is the

double taxation of distributed profits.

Noncash items refer to:

expenses that do not directly affect cash flows.

Cash flow from assets is also known as the firm's:

free cash flow.

A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:

general partnership.

If a company produces a return on assets of 14 percent and also a return on equity of 14 percent, then the firm:

has an equity multiplier of 1.0

All of the following issues represent problems encountered when comparing the financial statements of two separate entities except the issue of the companies:

having the same fiscal year.

Capital structure decisions include determining

how much debt should be assumed to fund a project.

The growth of both sole proprietorships and partnerships is frequently limited by the firm's

inability to raise cash.

Your grandmother has promised to give you $10,000 when you graduate from college. If you speed up your graduation by one year and graduate two years from now rather than the expected three years, the present value of this gift will:

increase

Art invested $100 two years ago at 8 percent interest. The first year, he earned $8 interest on his $100 investment. He reinvested the $8. The second year, he earned $8.64 interest on his $108 investment. The extra $.64 he earned in interest the second year is referred to as:

interest on interest.

Your goal is to have $1 million in your retirement savings on the day you retire. To fund this goal, you will make one lump sum deposit today. If you plan to retire _____ rather than ______ and earn a _______ rate of interest, then you can deposit a smaller lump sum today.

later; sooner; higher

A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:

limited partner.

The Sarbanes-Oxley Act of 2002 is a governmental response to:

management greed and abuses

The price-sales ratio is especially useful when analyzing firms that have:

negative earnings

Kurt won a lottery and will receive $1,000 a year for the next 50 years. The current value of these winnings is called the:

present value

As the degree of financial leverage increases, the:

probability a firm will encounter financial distress increases.

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as ______ ratios

profitability

Shareholders' equity:

represents the residual value of a firm.

A common-size income statement is an accounting statement that expresses all of a firm's expenses as a percentage of

sales.

Financial managers should primarily focus on the interests of:

shareholders.

Ratios that measure a firm's liquidity are known as ________ ratios.

short-term solvency

A business owned by a solitary individual who has unlimited liability for the firm's debt is called a:

sole proprietorship.

The sources and uses of cash over a stated period of time are reflected on the

statement of cash flows.

Corporate dividends are:

taxable income of the recipient even though that income was previously taxed.

On a common-size balance sheet all accounts for the current year are expressed as a percentage of

total assets for the current year.

A perpetuity is defined as:

unending equal payments paid at equal time intervals

An example of a capital budgeting decision is deciding:

whether or not to purchase a new machine for the production line.

A firm's short-term assets and its short-term liabilities are referred to as the firm's:

working capital.

Nu Furniture has sales of $241,000, depreciation of $32,200, interest expense of $35,700, costs of $103,400, and taxes of $14,637. What is the operating cash flow for the year?

$122,963

HI Way Furniture has sales of $316,000, depreciation of $47,200, interest expense of $41,400, costs of $148,200, and taxes of $16,632. The firm has net capital spending of $36,400 and a decrease in net working capital of $14,300. What is the cash flow from assets for the year?

$129,068

Marti's coin collection contains fifty 1948 silver dollars. Her grandparents purchased them at their face value in 1948. These coins have appreciated by 7.6 percent annually. How much will the collection be worth in 2025?

$14,077.16

SS Stores has total debt of $4,910 and a debt-equity ratio of 0.52. What is the value of the total assets?

$14,352.31

At the beginning of the year, a firm had current assets of $121306 and current liabilities of $124509. At the end of the year, the current assets were $122,418 and the current liabilities were $103,718. What is the change in net working capital?

$21,903

Duane and Thad plan on retiring 27 years from today and plan to have the same amount saved at that time In preparation for this, Duane is depositing $15,000 today at an annual interest rate of 5.2 percent. How will Thad's deposit amount vary from Duane's if Thad also makes a deposit today but earns an annual interest rate of 6.2 percent?

$3,381.39 less

Outreach Funds established of 4.03 percent. How much money was contributed a trust that provides $150,000 in scholarships each year forever. The trust fund to the fund 20 years ago, assuming that earns a rate of return only the interest income is distributed?

$3,722,084.37

Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400. What is the amount of net working capital?

$300

An investment will pay $1,200 per quarter for 15 years. You require a return of 12 percent, compounded quarterly, for this type of investment. How much is this investment worth to you today?

$33,210.68

Nielsen Auto Parts had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411. During the year, assets with a book value of $6,943 were sold. Depreciation for the year was $42,822. What is the amount of net capital spending?

$33,763

A project is expected to produce cash flows of $12,800, $15,900, and $18,000 over the next 3 years, respectively. After 3 years, the project will be discontinued. What is this project worth today at a discount rate of i2.5 percent?

$36,582.72

You have a savings account valued at S1,500 today that earns an annual interest rate of 8,7 percent. How much more would this account be worth if you wait to spend the entire balance in 25 years rather than in 20 years?

$4,117.64

Angela expects to save $500 a year and earn an average annual return of 5.2 percent. How much will her savings be worth 35 years from now?

$47,076.06

Twenty years from now, you want to spend $175,000 for a fancy car. How much must you deposit as a lump sum today to achieve this goal at an annual interest rate of 6.6 percent?

$48,740.95

Rita plans to save $1,500, $1,500, and $2,500 a year over the next 3 years, respectively. How much would you need to deposit in one lump sum today to have the same amount as Rita 3 years from now if you both earn 3.5 percent, compounded annually?

$5,104.40

A firm has a debt-equity ratio of .62, a total asset turnover of 1.24, and a profit margin of 5.1 percent. The total equity is $489,600. What is the amount of the net income?

$50,159

A firm has net working capital of $560. Long-term debt is $3,970, total assets are $7,390, and fixed assets are $3,910, What is the amount of the total liabilities?

$6,890

A firm has $680 in inventory, $2,140 in fixed assets, $210 in accounts receivables, $250 in accounts payable, and $80 in cash. What is the amount of the net working capital?

$720

Beach Front Industries has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000, and a tax rate of 21 percent. The firm paid $59,000 in cash dividends. What is the addition to retained eanings?

$98,210

TL Enterprises (TLE) is considering purchasing DMM. DMM has expected cash flows of $42,800, $56,700, and $37,100 for the next 3 years, respectively. After that, the products DMM produces will be obsolete and thus DMM will be worthless. If TLE requires a return of 18 percent, what amount should they offer as a purchase price?

$99,572.45

If a firm has a debt-equity ratio of 1.0, then its total debt ratio must

.5

Duke's Garage has cash of $68, accounts receivable of $142, accounts payable of $235, and inventory of $318. What is the value of the quick ratio?

.89

Tracie invested $60,000 in exchange for payments of $2,500 a year forever. What rate of return is she earning?

4.17%

Which one of the following accounts is the most liquid?

Accounts Receivable

The DuPont identity can be used to help managers answer which of the following questions related to a company's operations? I How many sales dollars are being generated per each dollar of assets? II. How many dollars of assets have been acquired per each dollar in shareholders' equity? III. How much net profit is being generating per dollar of sales? IV. Does the company have the ability to meet its debt obligations in a timely manner?

I, II, and III only

Chang Lee is going to receive $20,000 six years from now. Soo Lee is going to receive $20,000 nine years from now. Which one of the following statements is correct if both individuals apply a discount rate of 7 percent?

In today's dollars, Chang Lee's money is worth more than Soo Lee's

The cash flow that is available for distribution to a corporation's creditors and stockholders is called the:

cash flow from assets.

The cash flow related to interest payments less any net new borrowing is called the:

cash flow to creditors

Christina invested $3,000 five years ago and earns 2 percent annual interest. By leaving her interest earnings in her account, she increases the amount of interest she earns each year. The way she is handling her interest income is referred to as:

compounding

An increase in which of the following must increase the return on equity, all else constant?

Total asset turnover and debt-equity ratio

Oil Creek Auto has sales of $3,340, net income of $274, net fixed assets of $2,600, and current assets of $920. The firm has $430 in inventory. What is the common-size statement value of inventory?

12.22 percent

You're trying to save to buy a new $68,000 sports car. Currently, you have saved $36,840 which is invested at 4.9 percent annual interest. How many years will it be before you purchase the car, assuming the price of the car remains constant?

12.81 years

Erickson's is considering a project with an initial cost of $623,000. The project will produce cash inflows of $33,500 monthly for 21 months. What is the annual rate of return on this project?

13.59%

Frank's Used Cars has sales of $807,200, total assets of $768,100, and a profit margin of 6.68 percent. The firm has a total debt ratio of 54 percent. What is the return on equity?

15.26 percent

Oscar's Dog House has a profit margin of 5.6 percent, a return on assets of 12.5 percent, and an equity multiplier of 1.49. What is the return on equity?

18.63 percent

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date?

Balance sheet

Which one of the following terms is defined as the management of a firm's long-term investments?

Capital budgeting

Which one of the following terms is defined as the mixture of a firm's debt and equity financing?

Capital structure

You recently purchased a grocery store. At the time of the purchase, the store's market value and its book value were equal. The purchase included the building, fixtures, and inventory. Which one of the following is most apt to cause the market value of this store to be less than its book value?

Construction of a new restricted access highway located between the store and the surrounding residential areas

Which one of these will increase the present value of a set amount to be received sometime in the future?

Decrease in the interest rate

You are investing $100 today in a savings account. Which one of the following terms refers to the total value of this investment one year from now?

Future value

Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value?

Good reputation of the company

Four years ago, Saul invested $500. Three years ago, Trek invested $600. Today, these two investments are worth $800. Assume each account continues to earn its respective rate of return. Which one of the following statements is correct concerning these investments?

One year ago, Saul's investment was worth less than Trek's investment

An ordinary annuity is best defined as:

equal payments paid at the end of regular intervals over a stated time period