Financial Management

you want to have $25,000 for a down payment on a house 6 years from now. If you can earn 6.5%, compounded annually, on your savings, how much do you need to deposit today to reach your goal? A. $17,133.35 B. $17,420.73 C. $17,880.69 D. $18,211.17 E. $18,886.40

$17,133.35

You want to have $35,000 in cash to buy a car 4 years from today. You expect to earn 8%, compounded annually, on your savings. How much do you need to deposit today if this is the only money you save for this purpose? A. $23,618.92 B. $24,511.68 C. $25,726.04 D. $26,013.01 E. $26,311.15

$25,726.04

The Closet Shoppe has total sales of $713,200 and a profit margin of 5.8 percent. Currently, the firm has 12,500 shares outstanding . What are the earnings per share? A. $2.98 B. $3.31 C. $3.56 D. $3.89 E. $4.02

$3.31

Global Exporters has total assets of $84,300, net working capital of $22,900, owner's equity of $38,600, and long-term debt of $23,900. What is the value of the current assets? A. $21,600 B. $24,300 C. $38,900 D. $44,700 E. $46,100

$44,700

The daily financial operations of a firm are primarily controlled by managing the: A. Total debt level B. Working capital C. capital structure D. Capital budget E. Long-term liabilities

Working capital

Tim has been promoted and is now in charge of all fixed asset purchases. In other words, Tim is in charge of: A. Capital Structure management B. Asset Allocation C. risk management D. capital budgeting E. Working capital management

asset allocation

The primary goal of financial management is to maximize which one of the following for a corporation? A. Current profits B. Market share C. Number of shares outstanding D. market value of existing stock E. Revenue growth

market value of existing stock

Margie opened a used book store and is both the 100 percent owner and the store's manager. Which type of business entity does margie own if she is personally liable for all the store's debts? A. Sole proprietorship B. Limited Partnership C. Corporation D. Joint stock company E. General partnership

sole proprietorship

Which one of the following statements is correct concerning a firm's fixed assets? A. the market value is the expected selling price in today's economy. B. the market value is affected by the accounting method selected C. The market value is equal to the initial cost minus the depreciation to date D. The book value is equal to the market value minus the accumulated depreciation E. The book value is the greater of the initial cost or the current market value

the market value is the expected selling price in today's economy.

Which one of the following statements concerning market and book values is correct? A. The market value of accounts receivable is generally higher than the book value of those receivables. B. the market value trends to provide a better guide to the actual worth of an asset than does the book value. C. the market value of fixed assets will always exceed the book value of those assets D. Book value represents the amount of cash that will be received if an asset is sold E. The current book value of equipment purchased last ear is equal to the initial cost of the equipment

the market value trends to provide a better guide to the actual worth of an asset than does the book value.

The Global Network has sales of $418,700, cost of goods sold of $264,900, and inventory of $61,900. What is the inventory turnover rate? A. 1.33 B. 4.28 C. 6.76 D. 7.14 E. 8.47

4.28

Textile Mills has sales of $923,000, cost of goods sold of $748,000, and accounts receivable of %$106,700. How long on average does it take the firm's customers to pay for their purchases? A. 8.65 B. 11.28 C. 25.01 D. 42.19 E. 45.33

42.19

Galaxy Sales has sales of $746,700, cost of goods sold of $603,200, and inventory of $94,300. How long on average does it take the firm to sell its inventory? A. 6.40 days B. 7.23 days C. 48.68 days D. 57.06 days E. 61.10 days

57.06 days

Which one of the following terms is defined as the total tax paid divided by the total taxable income? A. Average tax rate B. Variable tax rate C. Marginal tax rate D. Absolute tax rate E. Contingent tax rate

Average tax rate

Which of the following is a capital structure decision? A. Determining the optimal inventory level B. Establishing the preferred debt-equity level C. Selecting new equipment to purchase D. Setting the terms of sale for credit sales E. Determining when suppliers should be paid

Determining the optimal inventory level

Will and bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and bill will equally share in the decision making and in the profits or losses. Which type of business did they create if they bot have full personal liability for the firm's debts? A. Sole proprietorship B. Limited partnership C. corporation D. Joint stock company E. General partnership

General partnership

Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital: A. Had to increase B. Had to decrease C. could have remained constant if the amount of the decrease in current assets equaled the amount of the increase in current liabilities D. Could have either increased, decreased, or remained constant

Had to decrease

A firm has a current ration of 1.4 and a quick ration of 0.9. Given this, you know for certain that the firm: A. pays cash for its inventory B. Has more that half its current assets invested in inventory B. Has more cash than inventory D. has more liabilities than it does current assets. E. Has positive net working capital

Has positive net working capital

The Du Pont identity can be used to help a financial manager determine the: I. degree of financial leverage used by a firm II. Operating efficiency of a firm. III. Utilization rate of a firm's assets. IV. rate of return on a firm's assets A. II and III B. I and III C. II, III, IV D. I, II, III E. I, II, III, IV

I, II, III, IV

Which of the following situations is most apt to create an agency conflict? A. Compensating a manager based on his or her division's net income B. Giving all employees a bonus if a certain level of efficiency is maintained C. Hiring an independent consultant to study the operating efficiency of the firm D. Rejecting a profitable project to protect employee jobs E. Selling an underproducing segment of the firm

Rejecting a profitable project to protect employee jobs

An increase in which one of the following will increase net income? A. Fixed costs B. depreciation C. Marginal tax rate D. Revenue E. Dividends

Revenue

Delivery trucks are classified as: A. non-cash expenses B. Current liabilities C. Current assets D. Tangible fixed assets E. Intangible fixed assets

Tangible fixed assets

Underwood homes Sales has total assets of $589,900 and total debt of $318,000. What is the equity multiplier? A. 0.46 B. 0.54 C. 1.21 D. 1.85 E. 2.17

2.17

Six years from now, you will be inheriting $100,000. What is this inheritance worth to you today if you earn 6.5 % interest, compounded annually? A. $68,533.41 B. $70,008.21 C. $72, 419.05 D. $72,798.47 E. $74,003.15

$68,533.41

What is the future value of $4,900 invested for 8 years at 7% compounded annually? A. $8,397.74 B. $8,419.11 C. $8,511.15 D. $8,513.06 E. $8,520.22

$8,419.11

The Jelly Jar has total assets of $79,600 and an equity multiplier of 1.35. What is the debt-equity ratio? A. 0.28 B. 0.35 C. 0.47 D. 0.58 E. 0.67

0.35

Wilson's Realty has total assets of $46,800, net fixed assets of $37,400, current liabilities of $6,100, and long-term liabilities of $24,600. What is the total debt ratio? A. 0.41 B. 0.60 C. 0.66 D. 0.78 E. 0.86

0.66

Aardvaark & Co. has sales of $291,200, cost of goods sold of $163,300, net profit of $11,360, net fixed assets of $154,500, and current assets of $89,500. What is the total asset turnover rate? A. 1.08 B. 1.11 C. 1.19 D. 1.24 E. 1.28

1.19

Peter's Motor Works has total assets of $689,400, long-term debts of $299,500, total equity of $275,000, net fixed assets of $497,800, and sales of $721,500. The profit margin is 4.6 percent. What is the current ratio? A. 0.60B. 0.91 C. 1.01 D. 1.67 E. 2.16

1.67

It takes The Corner Store an average of 51 days to sell its inventory and 32 days to collect its accounts receivable. The firm has sales of $568,700 and costs of goods sold of $398,800. What is the accounts receivable turnover rate? A. 11.23 B. 11.41 C. 11.78 D. 12.23 E. 12.25

11.41

You just won $25,000 and deposited your winnings into an account that pays 6.2 % interest, compounded annually. How long will you have to wait until your winnings are worth $50,000? A. 11.52 years B. 12.00 years C. 12.29 years D. 12.67 years E. 12.90 years

11.52 years

Which one of the following statements is true concerning the price-earnings (PE) ratio? A. A high PE ratio may indicate that a firm is expected to grow significantly B. A PE ratio of 16 indicates that investors are willing to pay $1 for every $16 of current earnings C. PE ratios are unaffected by the accounting methods employed by a firm D. The PE ratio is classified as a profitability ratio E. The PE ratio is a constant value for each firm

A high PE ratio may indicate that a firm is expected to grow significantly

Which one of the following will increase the cash flow from assets for a tax-paying firm, all else constant? A. An increase in net capital spending B. A decrease in the cash flow to creditors C. An increase in depreciation D. An increase in the change in net working capital E. A decrease in dividends paid

An increase in depreciation

Lee pays one percent per month interest on his credit card account. When his monthly rate is multiplied by 12, the resulting answer is referred to as the: A. Annual percentage rate B. Compounded rate C. Effective annual rate D. perpetual rate E. simple rate

Annual percentage rate

Travis is buying a car and will finance it with a loan which requires monthly payments of $265 for the next years. His car payments can be described by which one of the following terms? A. Perpetuity B. Annuity C. Consol D. Lump Sum E. Factor

Annuity

Which one of the following has nearly the same meaning as free cash flow? A. Net income B. Cash flow from assets C. operating cash flow D. cash flow to shareholders E. Addition to retained earnings

Cash flow from assets

Tom earned $120 in interest on his savings account last year. Tom has decided to leave the $120 in his account so that he can earn interest on the $120 this year. This process of earning interest on prior interest earnings is called: A. Discounting B. Compounding C. Duplicating D. Multiplying E. Indexing

Compounding

Which one of the following is an intangible fixed asset? A. Inventory B. Machinery C. Copyright D. Accounts Receivable E. Building

Copyright

Net working capital is defined as: A. The depreciated book value of a firm's fixed assets. B. The value of a firm's current assets. C. Available cash minus current liabilities D. Total assets minus total liabilities E. Current assets minus current liabilities

Current assets minus current liabilities

Cash flow to stockholders is defined as: A. Cash flow from assets plus cash flow to creditors B. Operating cash flow minus cash flow to creditors C. Dividends paid plus the change in retained earnings D. Dividends paid minus net new equity raised E. Net income minus the addition to retained earnings

Dividends paid minus net new equity raised

The accounting statement which measures revenues, expenses, and net income of a firm over a period of time is called the: A. statement of cash flows B. Income statement C. GAAP statement D. Balance sheet E. Net working capital schedule

Income statement

Sara is investing $1,000 today. Which one of the following will increase the future value of that amount? A. Shortening the investment time period B. Paying interest only on the principal amount C. Paying simple interest rather than compound interest D. Paying interest only at the end of the investment period rather than throughout the investment period E. Increasing the interest rate

Increasing the interest rate

Which of the following best matches the primary goal of financial management? A. Increasing the dollar amount of each sale B. Increasing traffic flow within the firm's stores C. Transforming fixed costs into variable costs D. Increasing the firm's liquidity E. Increasing the market value of firm

Increasing the market value of firm

Cash flow to creditors is defined as: A. Interest paid minus net new borrowing B. Interest paid plus net new borrowing C. The operating cash flow minus net capital spending minus change in net working capital D. Dividends paid plus net new borrowing E. Cash flow from assets plus net new equity

Interest paid minus net new borrowing

Which one of the following will decrease the net working capital of the firm? A. Obtaining a 3 year loan and using the proceeds to buy inventory B. Collecting payment from a credit customer C. Obtaining a 5 year loan to buy equipment D. Selling inventory to make a profit E. Making a payment on a long-term debt

Making a payment on a long-term debt

Which one of the following is the tax rate that applies to the next dollar of taxable income that a firm earns? A. Average tax rate B. Variable tax rate C. Marginal tax rate D. Absolute tax rate E. Contingent tax rate

Marginal tax rate

Which one of the following statements related to the income statement is correct? A. Depreciation has no effect on taxes B. Interest paid is a noncash item C. Taxable income must be a positive value D. Net income is distributed either to dividends or retained earnings E. Taxable income plus interest and depreciation equals earnings before interest and taxes

Net income is distributed either to dividends or retained earnings

Cash flows from assets is defined as: A. the cash flow to shareholders minus the cash flow to creditors B. Operating cash flow plus the cash flow to creditors plus the cash flow to shareholders C. Operating cash flow minus the change in net working capital minus net capital spending D. Operating cash flow plus net capital spending plus the change in net working capital E. Cash flow to shareholders minus net capital spending plus the change in net working capital

Operating cash flow minus the change in net working capital minus net capital spending

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? A. Ordinary Annuity B. Annuity Due C. Consol D. Ordinary Perpetuity E. Perpetuity due

Ordinary Annuity

The Jones Brothers recently established a trust fund that will provide annual scholarships of $12,000 indefinitely. These annual scholarships can best be descried by which one of the following terms? A. Ordinary annuity B. Annuity due C. Amortized payment D. Perpetuity E. Continuation

Perpetuity

Which one of the following statements is correct? A. The APR is equal to the EAR for a loan that charges interest monthly B. The EAR is always greater than the APR C. The APR on a monthly loan is equal to (1+ monthly interest rate)^12 -1 D. The APR is the best measure of the actual rate you are paying on a loan E. The EAR, rather than the APR, should be used to compare both investment and loan options

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

In a general partnership, each partner is personally liable for: A. the partnership debts that he or she created B. His or her proportionate share of all partnership debts regardless of which partner incurred that debt C. The total debts of the partnership, even if he or she was unaware of those debts D. The debs of the partnership up to the amount he or she invested in the firm E. All personal and partnership debts incurred by any partner, even if he or she was unaware of those debts.

The total debts of the partnership, even if he or she was unaware of those debts

Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following ratios would reflect this relationship? A. Receivables turnover B. Equity Multiplier C. Profit Margin D. Return on assets E. Total Asset turnover

Total Asset turnover

Which one of the following is an example of a perpetuity? A. Trust income of $1,200 forever B. Retirement pay of $2,200 a month for 20 years C. Lottery winnings of $1,000 a month for life D. Car payments of $260 a month for 60 months E. Apartment rent payment of $800 a month for one year

Trust income of $1,200 forever

The financial statement that summarizes a firm's accounting value as of a particular date is called the: A. Income statement B. Cash flow statement C. Liquidity position D. balance sheet E. periodic operating statement

balance sheet

Stadford, Inc. is financed with 40 percent debt and 60 percent equity. This mixture of debt and equity is referred to as the firm's: A. Capital structure B. Capital budget. C. asset allocation D. working capital E. risk structure

capital structure

Net capital spending is equal to: A. ending net fixed assets minus beginning net fixed assets plus depreciation B. Beginning net fixed assets minus ending net fixed assets plus depreciation C. Ending net fixed assets minus beginning net fixed assets minus depreciation D. Ending total assets minus beginning total assets plus depreciation E. Ending total assets minus beginning total assets minus depreciation

ending net fixed assets minus beginning net fixed assets plus depreciation

A sole proprietorship: A. Provides limited liability for its owner B. involves significant legal costs during the formation process C. has an unlimited life D. has its profits taxed as personal income E. can generally raise significant capital from non-owner sources

has its profits taxed as personal income