Finance Exam Homework Questions

Tristan just deposited $3,500 in an account that will earn 7.0 percent per year in compound interest for 8 years. If Jose deposits $3,500 in an account at the same time that earns simple interest, then what interest rate per year must Jose earn to have the same amount of money in 8 years from today as Tristan will have in 8 years from today?

8.98 %

Which one of the following statements is correct? NASDAQ has more listed stocks than does the NYSE. The NYSE is a dealer market. NASDAQ is an auction market. NASDAQ has the most stringent listing requirements of any U.S. exchange. The trading floor for NASDAQ is located in Chicago.

NASDAQ has more listed stocks than does the NYSE

Total asset book value

NWC + liabilities + net fixed assets

Lester's BBQ has $121,000 in current assets and $109,000 in current liabilities. These values as referred to as the firm's: capital structure. cash equivalents. working capital. net assets. fixed accounts.

Working capital

Which of the following could cause return on equity to increase, all other things equal?

a decrease in equity

Which of the following could cause return on assets to decrease, all other things equal?

an increase in days sales in inventory

The current ratio of a firm is 1.3. If the firm uses cash to pay short-term notes payable (current liabilities), would the transaction increase or decrease the current ratio and return on assets ratio?

both the current ratio and return on assets would increase

Current assets are those that are expected to:

converted to cash over the next 12 months

Total asset market value

current assets + fixed assets (what it can be sold for)

A purchase of new fixed assets will:

decrease cash flow from assets

An increase in current assets will:

decrease cash flow from assets

An increase in operating cash flow will:

increase cash flow from assets

Retiring (paying off) debt will:

increase cash flow to creditors

An issue of new stock would:

increase net new equity raised and decrease cash flow to stockholders

Which one of the following successful strategies will increase the return on assets, all else equal?

increase the profit margin

The least liquid current asset is typically considered to be:

inventory

An increase in the current ratio would cause which turnover to decrease, all else equal?

net working capital ratio

You just purchased a used car from your local dealership. The dealership has offered you 3 possible payment options described in the table. If the discount rate is 8.0%, which of the assertions is true? Option Terms of payment (amount and timing) from you to the dealership A $10,000 today B $11,500 in 2 years from today C $14,000 in 4 years from today

option B

You just purchased a used car from your local dealership. The dealership has offered you 3 possible payment options described in the table. If the discount rate is 8.0%, which of the assertions is true? Option Terms of payment (amount and timing) from you to the dealership A $10,000 today B $11,500 in 2 years from today C $14,000 in 4 years from today

option C

Which of the following measures investors' expectations of growth in a company?

price earnings ratio

Return on assets (ROA) measures a firm's:

profitable use of its assets

The daily financial operations of a firm are primarily controlled by managing the: total debt level. working capital. capital structure. capital budget. long-term liabilities.

working capital

Which one of the following functions should be assigned to the treasurer rather than the controller? Data processing Cost accounting Tax management Cash management Financial accounting

Cash management

Which one of the following is most apt to align management's priorities with shareholders' interests? -Increasing employee retirement benefits -Compensating managers with shares of stock that must be held for three years before the shares can be sold -Allowing a manager to decorate his or her own office once he or she has been in that office for a period of three years or more -Increasing the number of paid holidays that long-term employees are entitled to receive -Allowing employees to retire early with full retirement benefits

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? Deciding which new projects to accept Deciding whether to purchase a new machine or fix a current machine Determining which customers will be granted credit Determining how many new shares of stock should be issued Establishing the target debt-equity ratio

Determining which customers will be granted credit

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

Establishing the preferred debt-equity level

Jamie is employed as a commercial loan officer for a regional bank centered in the midwestern section of the U.S. Her job falls into which one of the following areas of finance? International finance Financial institutions Corporate finance Capital management Investments

Financial institutions

Which of the following is LEAST likely to have a book value near its market value?

Fixed assets

Which one of the following is a working capital decision? How should the firm raise additional capital to fund its expansion? What debt-equity ratio is best suited to the firm? What is the cost of debt financing? Which type of debt is best suited to finance the inventory? How much cash should the firm keep in reserve?

How much cash should the firm keep in reserve

Jacob has $11,000 to invest and is looking at two different investment alternatives. Investment A pays 5.5%, compounded annually. Investment B pays 6.3%, compounded annually. Assuming that Jacob chooses investment B, how much more money will Jacob have after investing his $11,000 for 7 years than if he chooses investment A?

Jacob will have 868.94 more by investing in Investment B after 7 years

Kramer just invested $7,200 for 7 years and will earn compound interest of 8.5 percent per year. Justin also just invested $7,500 for 7 years and will earn simple interest of 9.5 percent per year. In 7 years, who will have more money and by how much?

Kramer will have $257.52 more than Justin in 7 years