finance

Which one of the following relates to a negative change in net working capital?

Increase in current liabilities with no change in current assets for the period

Which one of the following will increase the current value of a stock?

Increase in the capital gains yield

Which one of the following best matches the primary goal of financial management?

Increasing the market value of the firm

A real rate of return is defined as a rate that has been adjusted for which one of the following?

Inflation

.The Underground Cafe has an operating cash flow of $187,000 and a cash flow to creditors of $71,400 for the past year. During that time, the firm invested $28,000 in net working capital and incurred net capital spending of $47,900. What is the amount of the cash flow to stockholders for the last year?

$39,700

A 7 percent bond has a yield to maturity of 6.5 percent. The bond matures in seven years, has a face value of $1,000, and pays semiannual interest payments. What is the amount of each coupon payment?

$35.00

A bond has a par value of $1,000, a current yield of 7.5 percent, and semiannual interest payments. The bond quote is 98.6. What is the amount of each coupon payment?

$36.98

The Paint Ball Range, Inc. paid $30,500 in dividends and $7,600 in interest over the past year. Sales totaled $211,800 with costs of $167,900. The depreciation expense was $16,500. The applicable tax rate is 34 percent. What is the amount of the operating cash flow?

$37,168

Able Co. has $218,000 in taxable income and Bravo Co. has $5,600,000 in taxable income. Suppose both firms have identified a new project that will increase taxable income by $12,000. The additional project will increase Able Co.'s taxes by _____ and Bravo Co.'s taxes by_____

$4,680; $4,080

The Brown Jug has compiled the following information

$42,100

Last year, The Pizza Joint added $4,100 to retained earnings from sales of $93,600. The company had costs of $74,400, dividends of $2,500, and interest paid of $1,400. The tax rate was 34 percent. What was the amount of the depreciation expense?

$7,800

Business Solutions, Inc. is expected to pay its first annual dividend of $1.00 per share three years from now. Starting in year 6, the company is expected to start increasing the dividend by 2 percent per year. What is the value of this stock today at a required return of 12 percent?

$7.70

If the appropriate discount rate for the following cash flows is 11.7 percent per year, what is the present value of the cash flows?

$78,270.77

Which one of the following is most apt to align management's priorities with shareholders' interests?

. Compensating managers with shares of stock that must be held for three years before the shares can be sold

Working capital management includes which one of the following?

. Determining which customers will be granted credit

Which one of the following is a working capital decision?

. How much cash should the firm keep in reserve?

Today is your 21st birthday and you just decided to start saving money so you can retire early. Thus, you are going to save $500 a month starting one month from now. You plan to retire as soon as you can accumulate $1 million. If you can earn an average of 8 percent on your savings, how old will you be when you retire?

54.39 years old

Global Trade, Inc. has $1,000 face value bonds outstanding with a market price of $1,013. The bonds pay interest annually, mature in 11 years, and have a yield to maturity of 5.34 percent. What is the current yield?

5.43 percent

A firm has $42,900 in receivables and $211,800 in total assets. The total asset turnover rate is 1.40 and the profit margin is 5.2 percent. How long on average does it take the firm to collect its receivables?

52.81 days

One year ago, Alpha Supply issued 15-year bonds at par. The bonds have a coupon rate of 6.5 percent and pay interest annually. Today, the market rate of interest on these bonds is 7.2 percent. How does the price of these bonds today compare to the issue price?

6.05 percent lower

The Treasury yield curve plots the yields on Treasury notes and bonds relative to the ____ of those securities.

maturity

If a firm has a negative cash flow from assets every year for several years, the firm

may be continually increasing in size

Scott borrowed $2,500 today. The loan agreement requires him to repay $2,685 in one lump sum payment one year from now. This type of loan is referred to as a(n):

pure discount loan

An income statement prepared according to GAAP

records expenses based on the matching principle

Generally speaking, bonds issued in the U.S. pay interest on a(n) _____ basis

semiannual

A note is a(n):

unsecured debt that is generally payable within the next 10 years

The daily financial operations of a firm are primarily controlled by managing the

working capital

The manager of Gloria's Boutique has approved Carla's application for credit. The maximum payment that has been approved is $65 a month for 24 months. The APR is 15.7 percent. What is the maximum initial purchase that Carla can make given this credit approval?

$1,331.42

Goshen Industrial Sales has sales of $828,900, total equity of $539,200, a profit margin of 4.6 percent, and a debt-equity ratio of 0.55. What is the return on assets?

4.56 percent

What is the future value of $20 a week for 10 years at 6 percent interest? Assume the first payment occurs at the end of this week.

$14,239.14

Spiral Staircase is offering preferred stock which is commonly referred to as 10-10 stock. This stock will pay an annual dividend of $10 a share starting 10 years from now. What is this stock worth to you today if you desire a 15 percent rate of return?

$18.95

The Sports Club plans to pay an annual dividend of $1.20 per share next year, $1.00 per share a year for the following two years, and then cease paying dividends altogether. How much is one share of this stock worth to you today if you require a 19 percent rate of return?

$2.31

This morning, you purchased a stock that will pay an annual dividend of $1.90 per share next year. You require a 12 percent rate of return and the annual dividend increases at 3.5 percent annually. What will your capital gain be on this stock if you sell it three years from now?

$2.43

A firm expects to increase its annual dividend by 20 percent per year for the next two years and by 15 percent per year for the following two years. After that, the company plans to pay a constant annual dividend of $3 a share. The last dividend paid was $1 a share. What is the current value of this stock if the required rate of return is 12 percent?

$20.50

The Embroidery Shoppe had beginning retained earnings of $18,670. During the year, the company reported sales of $83,490, costs of $68,407, depreciation of $8,200, dividends of $950, and interest paid of $478. The tax rate is 35 percent. What is the retained earnings balance at the end of the year?

$21,883.25

Classic Pickles is a mature manufacturing firm. The company just paid a $4 annual dividend, but management expects to reduce the payout by 4 percent per year, indefinitely. If you require a 12 percent return on this stock, what will you pay for a share today?

$24.00

Jim just deposited $13,000 into his account at Traditions Bank. The bank will pay 1.3 percent interest, compounded annually, on this account. How much interest on interest will he earn over the next 15 years?

$244.20

Horseshoe Stables is losing significant market share and thus its managers have decided to decrease the firm's annual dividend. The last annual dividend was $0.90 a share but all future dividends will be decreased by 10 percent annually. What is a share of this stock worth today at a required return of 15 percent?

$3.24

Granger Corp. stock currently sells for $48.29 per share. The market requires a 13 percent return on the firm's stock. If the company maintains a constant 5.5 percent growth rate in dividends, what was the most recent annual dividend per share paid on the stock?

$3.43

Lamey Headstones increases its annual dividend by 1.5 percent annually. The stock sells for $28.40 a share at a required return of 14 percent. What is the amount of the last dividend this company paid?

$3.50

. The Three Amigos Restaurant just paid an annual dividend of $4.20 per share and is expected to pay annual dividends of $4.40 and $4.50 per share the next two years, respectively. After that, the firm expects to maintain a constant dividend growth rate of 2 percent per year. What is the value of this stock today if the required return is 15 percent?

$33.93

Laura Lynn owns 20,700 shares of Global Exporters. Her shares have a total market value of $787,270. In total, the firm has 65,000 shares outstanding. Each share is entitled to one vote under the straight voting policy of the firm. The next election is in four months at which time two directors are up for election. How much more must Laura Lynn invest in this firm to guarantee that she is elected to the board?

$448,820

Bridgewater Furniture has sales of $811,000, costs of $658,000, and interest paid of $21,800. The depreciation expense is $56,100 and the tax rate is 34 percent. At the beginning of the year, the firm had retained earnings of $318,300 and common stock of $250,000. At the end of the year, the firm has retained earnings of $322,500 and common stock of $280,000. What is the amount of the dividends paid for the year?

$45,366

Home Supply, Inc. has compiled the following information... For 2014, the cash flow from assets is _____ and the cash flow to shareholders is ____

$49,100; $62,500

New Gadgets is growing at a very fast pace. As a result, the company expects to pay annual dividends of $0.55, 0.80, and $1.10 per share over the next three years, respectively. After that, the dividend is projected to increase by 5 percent annually. The last annual dividend the firm paid was $0.40 a share. What is the current value of this stock if the required return is 16 percent?

$8.50

Jeffries, Inc. has 6 percent coupon bonds on the market that have 11 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 7.4 percent, what is the current bond price?

$897.08

The Pretzel Factory has net sales of $821,300 and costs of $698,500. The depreciation expense is $28,400 and the interest paid is $8,400. What is the amount of the firm's operating cash flow if the tax rate is 34 percent?

$93,560

For the past year, LP Gas, Inc. had cash flow from assets of $38,100 of which $21,500 flowed to the firm's stockholders. The interest paid was $2,300. What is the amount of the net new borrowing?

-$14,300

Travis invests $10,000 today into a retirement account. He expects to earn 8 percent, compounded annually, on his money for the next 26 years. After that, he wants to be more conservative, so only expects to earn 5 percent,compounded annually. How much money will he have in his account when he retires 38 years from now, assuming this is the only deposit he makes into the account?

. $132,827.88

Precision Engineering invested $110,000 at 6.5 percent interest, compounded annually for 4 years. How much interest on interest did the company earn over this period of time?

. $2,911.30

General Importers announced today that its next annual dividend will be $2.60 per share. After that dividend is paid, the company expects to encounter some financial difficulties and is going to suspend dividends for five years. Following the suspension period, the company expects to pay a constant annual dividend of $1.30 per share. What is the current value of this stock if the required return is 18 percent?

. $4.88

Baugh & Essary has net income of $149,200, sales of $936,800, a capital intensity ratio of 0.74, and an equity multiplier of 1.5. What is the return on equity?

. 32.25 percent

A fire has destroyed a large percentage of the financial records of the Strongwell Co. You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 13.8 percent. Sales were $979,000, the total debt ratio was 0.42, and total debt was $548,000. What is the return on assets?

. 8.00 percent

Christie is buying a new car today and is paying a $500 cash down payment. She will finance the balance at 7.25 percent interest. Her loan requires 36 equal monthly payments of $450 each with the first payment due 30 days from today. Which one of the following statements is correct concerning this purchase?

. To compute the initial loan amount, you must use a monthly interest rate

.If Treasury bills are currently paying 3.2 percent and the inflation rate is 2.8 percent, what is the approximate real rate of interest? The exact real rate?

0.40 percent; 3.89 percent

Martha's Fabric House has sales of $137,200, total equity of $74,400, and a debt-equity ratio of 0.45. What is the capital intensity ratio?

0.79

A firm earns $0.18 in profit for every $1 of equity in the firm. The company borrows $0.60 for every $1 of equity. What is the firm's return on assets?

11.25 percent

A loan that compounds interest monthly has an EAR of 14.40 percent. What is the APR?

13.53 percent

A credit card has a stated interest rate of 14.56 percent. What is the APR if interest is compounded monthly?

14.56 percent

What is the effective annual rate of 6.5 percent compounded quarterly?

6.66 percent

Last year, when the stock of Alpha Minerals was selling for $55 a share, the dividend yield was 3.2 percent. Today, the stock is selling for $41 a share. What is the total return on this stock if the company maintains a constant dividend growth rate of 2.5 percent?

6.90 percent

.Joshua's Antiques has a total asset turnover rate of 1.2, an equity multiplier of 1.4, a profit margin of 5 percent, a retention ratio of 0.8, and total assets of $120,000. What is the sustainable growth rate?

7.20 percent

Last year, you earned a rate of return of 12.37 percent on your bond investments. During that time, the inflation rate was 3.6 percent. What was your real rate of return?

8.47 percent

Waldale Pools has total equity of $289,100 and net income of $64,500. The debt-equity ratio is 0.55 and the total asset turnover is 1.6. What is the profit margin?

9.00 percent

Whitts BBQ would like to issue some semiannual coupon bonds at par. Comparable bonds have a current yield of 9.16 percent, an effective annual yield of 9.68 percent, and a yield to maturity of 9.50 percent. What coupon rate should Whitts BBQ set on its bonds?

9.50 percent

Martha's Sweet Shop reduced its fixed assets this year without affecting the shop's operations, sales, or equity. This reduction will increase which of the following ratios? I. Capital intensity ratio II. Return on assets III. Total asset turnover IV. Return on equity

II and III only

Bill just financed a used car through his credit union. His loan requires payments of $275 a month for five years. Assuming that all payments are paid on time, his last payment will pay off the loan in full. What type of loan does Bill have?

Amortized

When you refer to a bond's coupon, you are referring to which one of the following?

Annual interest payment

Janis just won a scholarship that will pay her $500 a month, starting today, and continuing for the next 48 months. Which one of the following terms best describes these scholarship payments?

Annuity due

Which one of the following statements is correct?

Both preferred stock and corporate bonds can be callable

The current yield on a bond is equal to the annual interest divided by which one of the following?

Current market price

Which one of the following represents additional compensation provided to bondholders to offset the possibility that the bond issuer might not pay the interest and/or principal payments as expected?

Default risk premium

Which one of the following is the price that an investor pays to purchase an outstanding bond?

Dirty price

Which one of the following is a capital structure decision?

Establishing the preferred debt-equity level

Which one of the following statements is correct?

From a legal perspective, preferred stock is a form of corporate equity.

Which of the following are effective means of aligning management goals with shareholder interests? I. Employee stock options II. Threat of a takeover III. Management bonuses tied to performance goals IV. Threat of a proxy fight

I, II, III, and IV

The T-shirt Hut successfully managed to reduce its general and administrative costs this year. This cost improvement will increase which of the following ratios? I. Profit margin II. Return on assets III. Total asset turnover IV. Return on equity

I, II, and IV only

Which of the following are advantages of the corporate form of organization? I. Ability to raise large sums of equity capital II. Ease of ownership transfer III. Profits taxed at the corporate level IV. Limited liability for all owners

I, II, and IV only

You just borrowed $3,000 from your bank and agreed to repay the interest on an annual basis and the principal at the end of three years. What type of loan did you obtain?

Interest-only

The concept of marginal taxation is best exemplified by which one of the following?

Mitchell's Grocer increased its sales by $52,000 last year and had to pay an additional $16,000 in taxes

What is the primary purpose of bond covenants?

Protect the lender

Which one of the following situations is most apt to create an agency conflict?

Rejecting a profitable project to protect employee jobs

Terry invested $2,000 today in an investment that pays 6.5 percent annual interest. Which one of the following statements is correct, assuming all interest is reinvested?

Terry could have the same future value and invest less than $2,000 initially if he could earn more than 6.5 percent interest.

. Sixty years ago, your grandparents opened two savings accounts and deposited $200 in each account. The first account was with City Bank at 3 percent, compounded annually. The second account was with Country Bank at 3.5 percent, compounded annually. Which one of the following statements is true concerning these accounts?

The Country Bank account has paid $397.30 more in interest than the City Bank account.

Which one of the following statements is correct?

The EAR, rather than the APR, should be used to compare both investment and loan options.

You've just found a 7 percent coupon bond on the market that sells for par value. What is the maturity on this bond?

The bond could have any maturity date

The written agreement that contains the specific details related to a bond issue is called the bond:

indenture

.Cash flow to creditors is equal to

beginning long-term debt minus ending long-term debt plus interest paid

A bond has a make-whole call provision. Given this, you know that the:

call price is inversely related to the market rate of interest