LSU FIN 3716: Practice Exam 1

Today, you earn a salary of $36,000. What will be your annual salary twelve years from now if you earn annual raises of 3.6 percent? A. $55,032.54 B. $57,414.06 C. $58,235.24 D. $59,122.08 E. $59,360.45

A. $55,032.54

Which of the following are included in current liabilities? I. note payable to a supplier in eight months II. amount due from a customer next month III. account payable to a supplier that is due next week IV. loan payable to the bank in fourteen months A. I and III only B. II and III only C. I, II, and III only D. I, III, and IV only E. I, II, III, and IV

A. I and III only

You invested $1,650 in an account that pays 5 percent simple interest. How much more could you have earned over a 20-year period if the interest had compounded annually? A. $849.22 B. $930.11 C. $982.19 D. $1,021.15 E. $1,077.94

E. $1,077.94

Crandall Oil has total sales of $1,349,800 and costs of $903,500. Depreciation is $42,700 and the tax rate is 34 percent. The firm does not have any interest expense. What is the operating cash flow? A. $129,152 B. $171,852 C. $179,924 D. $281,417 E. $309,076

E. $309,076

Which one of the following terms is defined as the mixture of a firm's debt and equity financing? A. cost analysis B. capital budgeting C. working capital management D. cash management E. capital structure

E. capital structure

Interest earned on both the initial principal and the interest reinvested from prior periods is called: A. free interest B. dual interest C. simple interest D. interest on interest E. compound interest

E. compound interest

Cash flow to stockholders is defined as: A. the total amount of interest and dividends paid during the past year B. the change in total equity over the past year C. cash flow from assets plus the cash flow to creditors D. operating cash flow minus the cash flow to creditors E. dividend payments less net new equity raised

E. dividend payments less net new equity raised

A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a: A. generally partner. B. zero partner. C. sole proprietor. D. corporate shareholder. E. limited partner

E. limited partner

Which one of the following is defined as a firm's short-term assets and its short-term liabilities? A. net capital B. investment capital C. capital structure D. debt E. working capital

E. working capital

You are investing $100 today in a savings account at your local bank. Which one of the following terms refers to the value of this investment one year from now? A. future value B. present value C. principal amounts D. discounted value E. invested principal

A. future value

Which of the following are advantages of the corporate form of business ownership? I. limited liability for firm debt II. double taxation III. ability to raise capital IV. unlimited firm life A. I, III, and IV only B. I, II, III, and IV C. I and II only D. III and IV only E. II, III, and IV only

A. I, III, and IV only

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management? A. increase in the market value per share B. increase in the number of shares outstanding C. increase in the amount of the quarterly dividend D. decrease in the per unit production costs E. decrease in the net working capital

A. increase in the market value per share

Kaylor Equipment Rental paid $75 in dividends and $511 in interest expense. The addition to retained earnings is $418 and net new equity is $500. The tax rate is 35 percent. Sales are $15,900 and depreciation is $680. What are the earnings before interest and taxes? A. $589.46 B. $1,269.46 C. $1,331.54 D. $1,951.54 E. $1,949.46

B. $1,269.46

You are depositing $1,500 in a retirement account today and expect to earn an average return of 7.5 percent on this money. How much additional income will you earn if you leave the money invested for 45 years instead of just 40 years? A. $10,723.08 B. $11,790.90 C. $12,441.56 D. $12,908.19 E. $13,590.93

B. $11,790.90

You would like to give your daughter $75,000 towards her college education 17 years from now. How much money must you set aside today for this purpose if you can earn 8 percent on your investments? A. $18,388.19 B. $20,270.17 C. $28,417.67 D. $29,311.13 E. $32,488.37

B. $20,270.17

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? A. -$100 B. $300 C. $600 D. $1,700 E. $1,800

B. $300

Your older sister deposited $5,000 today at 8.5 percent interest for 5 years. You would like to have just as much money at the end of the next 5 years as your sister will have. However, you can only earn 7 percent interest. How much more money must you deposit today than your sister did if you are to have the same amount at the end of the 5 years? A. $321.19 B. $360.43 C. $387.78 D. $401.21 E. $413.39

B. $360.43

A firm has $520 in inventory, $1,860 in fixed assets, $190 in accounts receivables, $210 in accounts payable, and $70 in cash. What is the amount of the current assets? A. $710 B. $780 C. $990 D. $2,430 E. $2,640

B. $780

Which of the following are current assets? I. patent II. Inventory III. accounts payable IV. cash A. I and III only B. II and IV only C. I, II, and IV only D. I, II and III only E. II, III, and IV only

B. II and IV only

Which one of the following terms is defined as the management of a firm's long-term investments? A. agency cost analysis B. capital budgeting C. financial allocation D. working capital management E. capital structure

B. capital budgeting

Which type of business organization has all the respective rights and privileges of a legal person? A. general partnership B. corporation C. sole proprietorship D. limited partnership E. limited liability company

B. corporation

Corporate bylaws: A. describe the intended life and purpose of the organization B. determine how a corporation regulates itself C. cannot be amended once adopted D. must be amended should a firm decide to increase the number of shares authorized E. define the name by which the firm will operate

B. determine how a corporation regulates itself

Which of the following accounts are included in working capital management? I. accounts payable II. accounts receivable III. fixed assets IV. inventory A. II, III, and IV only B. II and IV only C. I, II, and IV only D. I and III only E. I and II only

C. I, II, and IV only

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? A. -$18,348 B. -$1,001 C. $11,129 D. $13,861 E. $19,172

C. $11,129

Alex invested $10,500 in an account that pays 6 percent simple interest. How much money will he have at the end of four years? A. $12,650 B. $12,967 C. $13,020 D. $13,256 E. $13,500

C. $13,020

Gerold invested $6,200 in an account that pays 5 percent simple interest. How much money will he have at the end of ten years? A. $8,710 B. $9,000 C. $9,300 D. $9,678 E. $10,099

C. $9,300

Given the tax rates as shown, what is the average tax rate for a firm with taxable income of $311,360? Taxable Income Tax Rate $0 - 50,000 15% 50,001 - 75,000 25% 75,001 - 100,000 34% 100,001 - 335,000 39% A. 28.25 percent B. 31.09 percent C. 33.62 percent D. 35.48 percent E. 39.00 percent

C. 33.62 percent

A business owned by a solitary individual who has unlimited liability for its debt is called a: A. general partnership B. limited liability company C. sole proprietorship D. corporation E. limited partnership

C. sole proprietorship

One year ago, you invested $1,800. Today it is worth $1,924.62. What rate of interest did you earn? A. 6.59 percent B. 6.67 percent C. 6.88 percent D. 6.92 percent E. 7.01 percent

D. 6.92 percent

The cash flow of a firm which is available for distribution to the firm's creditors and stockholders is called the: A. operating cash flow B. net capital spending C. net working capital D. cash flow from assets E. cash flow to stockholders

D. cash flow from assets