EXAM 1 REVIEW

A sole proprietorship:

has a limited life

You are going to deposit $2,500 in an account that pays .51 percent interest per quarter. How much will you have in 5 years? *Use FV formula

$2,767.74

A firm has common stock of $87, paid-in surplus of $240, total liabilities of $395, current assets of $360, and net fixed assets of $570. What is the amount of the shareholders' equity?

535

A firm's liquidity is measured with which one of the following ratios?

current ratio

Which one of the following financial statements summarizes a firm's revenue and expenses during a period of time?

income statement

Which one of the following is classified as a tangible fixed asset?

Computer equipment

Deciding which long-term investment a firm should make is a ______ decision.

capital budgeting

Which one of the following is a source of cash?

decrease in inventory

The ______ tax rate is the percentage of the last dollar you earned that must be paid in taxes.

marginal tax rate

You need to have $25,000 for a down payment on a house in 5 years. If you can earn an annual interest rate of 3.2 percent, how much will you have to deposit today?

$21,357.06

Hoodoo Voodoo Company has total assets of $67,200, net working capital of $20,800, owners' equity of $32,600, and long-term debt of $24,700. What is the company's current assets?

$30,700

You find the following financial information about a company: net working capital = $1,206; fixed assets = $7,617; total assets = $11,846; and long-term debt = $4,511. What is the company's total equity?

$4,312

You want to have $10,000 in 6 years for a dream vacation. If you can earn an interest rate of .5 percent per month, how much will you have to deposit today?

$6,983.02

A company has $1,364 in inventory, $4,809 in net fixed assets, $652 in accounts receivable, $290 in cash, $610 in accounts payable, $1,017 in long-term debt, and $5,404 in equity. What are the company's total assets?

$7115

A company has $516 in inventory, $1,777 in net fixed assets, $204 in accounts receivable, $77 in cash, and $226 in accounts payable. What are the company's total current assets?

$797

A company has $593 in inventory, $1,876 in net fixed assets, $270 in accounts receivable, $121 in cash, and $314 in accounts payable. What are the company's total current assets?

$984

The Music Alliance has a debt-equity ratio of .57. What is the total debt ratio?

.36

Humphries has cash of $10,000, accounts receivable of $2,500, accounts payable of $900, and inventory of $1,200. What is the value of the quick ratio?

13.89

If the tax rate is 21 percent in 2020. What is the average tax rate for a firm with taxable income of $131,013?

21.00%

One year ago, you invested $2,850. Today, it is worth $3,650. What rate of interest did you earn?

28.07%

Jonathan invested $6,220 in an account that pays 11 percent simple interest. How much money will he have at the end of 40 years?

33,588

AdVentures has sales of $528,700, costs of goods sold of $252,100, inventory of $43,900, accounts receivable of $78,900, and accounts payable of $32,400. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?

63.53

When your father was born 49 years ago, his grandparents deposited $600 in an account for him. Today, that account is worth $58,000. What was the annual rate of return on this account?

9.78%

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

An increase in the market value per share

Which one of the following is a use of cash?

Decrease in accounts payable

Which one of the following is a disadvantage of the corporate form of business?

Double taxation

Which one of the following describes a noncash item?

Expenses that do not consume cash

A sole proprietorship:

Has a limited life

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

How much inventory should the company keep on hand?

A firm's mixture of debt and equity financing is the result of its ______ decisions.

capital structure

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

sales

You find the following financial information about a company: net working capital = $735; fixed assets = $5,385; total assets = $8,190; and long-term debt = $4,281. What are the company's total liabilities?

$6,351

Which one of the following statements regarding corporations is correct?

Corporations can have an unlimited life.

A firm owned by a single person who has unlimited liability for the firm's debt is called a:

sole proprietorship

A business that is a legal entity separate from the owners, yet treated as a legal person, is called a(n):

Corporation

Assume 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 questions involves a capital structure decision?

How much debt should the firm incur to fund a project?

Which one of the following questions involves a capital budgeting decision?

Should the firm purchase a new machine for the production line?

The book value of a firm is:

based on historical transactions

What is the present value of $12,250 to be received 3 years from today if the discount rate is 5 percent?

$10,582.01

A company has a pension liability of $530,000,000 that it must pay in 28 years. If it can earn an annual interest rate of 4.9 percent, how much must it deposit today to fund this liability?

$138,855,216.58

Thomas invests $120 in an account that pays 4 percent simple interest. How much money will Thomas have at the end of 6 years?

$148.80

Bob bought some land costing $16,090. Today, that same land is valued at $46,217. How long has Bob owned this land if the price of land has been increasing at 6 percent per year?

18.11 (you got 18.09) close enough, for some reason the financial calculator rounds off.

A company has net working capital of $2,507, current assets of $6,650, equity of $22,530, and long-term debt of $10,640. What is the company's net fixed assets?

30663

AdVentures has sales of $528,700, costs of goods sold of $252,100, inventory of $43,900, accounts receivable of $78,900, and accounts payable of $32,400. How many days, on average, does it take the firm to sell its inventory assuming that all sales are on credit?

63.59

For the past year, Momsen Limited had sales of $45,797, interest expense of $3,620, cost of goods sold of $16,134, selling and administrative expense of $11,481, and depreciation of $5,980. If the tax rate was 21 percent, what was the company's net income?

6780

You have $13,500 and will invest the money at an interest rate of .38 percent per month until the account is worth $20,200. How many years do you have to wait until you reach your target account value?

8.85 years

Mario's Home Systems has sales of $2,820, costs of goods sold of $2,160, inventory of $504, and accounts receivable of $430. How many days, on average, does it take Mario's to sell its inventory?

85.17 days

Mario's Home Systems has sales of $2,740, costs of goods sold of $2,080, inventory of $488, and accounts receivable of $422. How many days, on average, does it take Mario's to sell its inventory?

85.63

Determining the number of shares of stock to issue is an example of a ______ decision.

capital structure

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

compound interest.

Net working capital is defined as:

current assets minus current liabilities

net working capital is defined as

current assets minus current liabilities

According to the statement of cash flows, an increase in inventory will ______ the cash flow from ______ activities.

decrease; operating

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

discounting

Which one of the following describes a noncash item?

expenses that do not consume cash

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

general partnership

The cash coverage ratio directly measures the ability of a company to meet its obligation to pay:

interest to a lender.

Which one of the following is classified as a current asset?

inventory

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

maximize the current value per share

A firm's ______ is the firm's mix of short-term assets and short-term liabilities.

net working capital

Hayley won a lottery and will receive $1,000 each year for the next 30 years. The current value of these winnings is called the:

present value

Financial managers should primarily focus on the interests of:

shareholders

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

short term solvency ratios

An investor who was not as astute as he believed invested $261,500 into an account 10 years ago. Today, that account is worth $201,600. What was the annual rate of return on this account?

−2.57 %