Finance mid-term
Net working capital is defined as
current assets - current liabilities
What is the future value of $1,200 a year for 40 years at 8 percent interest? Assume annual compounding.
$310,868
depreciation is
reduces both taxes and net income
A common-size income statement is an accounting statement that expresses all of a firm's expenses as percentage of:
Sales
What is the future value of $6,200 invested for 23 years at 9.25 percent compounded annually
47,433.47
Today, you are retiring. You have a total of $411,016 in your retirement savings and have the funds invested such that you expect to earn an average of 7.10 percent, compounded monthly, on this money throughout your retirement years. You want to withdraw $2,500 at the beginning of every month, starting today. How long will it be until you run out of money?
48.19 years
What is the present value of $150,000 to be received 10 years from today if the discount rate is 11 percent?
52,827.67
Which one of the following will produce the highest present value interest factor?
6% interest for 5 years
Gerold invested $5,600 in an account that pays 5 percent simple interest. How much money will he have at the end of ten years?
8,400
The bonds issued by Stainless Tubs bear an 8 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds sell for $962. What is the yield to maturity?
8.54 %
A $1,000 face value bond can be redeemed early at the issuer's discretion for $1,030, plus any accrued interest. The additional $30 is called which one of the following?
Call Premium
A bond that can be paid off early at the issuer's discretion is referred to as being which one of the following?
Callable
The process of determining the present value of future cash flows in order to know their worth today is called which one of the following?
Discounted cash flow valuation
which account is the most liquid
accounts receivable
Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?
agency problem
Which one of the following terms is used to describe a loan wherein each payment is equal in amount and includes both interest and principal?
amortized loan
A stakeholder is:
any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm.
is the financial statement that shows the accounting value of a firm's equity as of a particular date?
balance sheet
Your grandmother has promised to give you $5,000 when you graduate from college. She is expecting you to graduate two years from now. What happens to the present value of this gift if you delay your graduation by one year and graduate three years from now?
decreases
Pete paid $1,032 as his total cost of purchasing a bond. This price is referred to as the:
dirty price
Steve just computed the present value of a $10,000 bonus he will receive in the future. The interest rate he used in this process is referred to as which one of the following?
discount rate
An ordinary annuity is best defined by which one of the following?
equal payments paid at regular intervals over a stated time period
Noncash items refer to:
expenses which do not directly affect cash flows
Relationships determined from a firm's financial information and used for comparison purposes are known as:
financial rations
Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?
income statement
Ratios that measure a firm's financial leverage are known as _____ ratios.
long-term solvency
Which one of the following best describes the primary advantage of being a limited partner instead of a general partner?
maximum loss limited to the capital invested
Your grandmother is gifting you $125 a month for four years while you attend college to earn your bachelor's degree. At a 6.4 percent discount rate, what are these payments worth to you on the day you enter college?
$5,281.20
The Design Team just decided to save $1,500 a month for the next 5 years as a safety net for recessionary periods. The money will be set aside in a separate savings account which pays 4.5 percent interest compounded monthly. The first deposit will be made today. What would today's deposit amount have to be if the firm opted for one lump sum deposit today that would yield the same amount of savings as the monthly deposits after 5 years?
$80,760.79
debt-equity rate in 2012
.99
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
1,3,4
Russell's Deli has cash of $136, accounts receivable of $95, accounts payable of $210, and inventory of $409. What is the value of the quick ratio?
1.10
Return on equity in 2012
15.64%
You are purchasing a 20-year, zero-coupon bond. The yield to maturity is 8.86 percent and the face value is $1,000. What is the current market price?
176.60
You just received a $3,000 gift from your grandmother. You have decided to save this money so that you can gift it to your grandchildren 50 years from now. How much additional money will you have to gift to your grandchildren if you can earn an average of 8.5 percent instead of just 8 percent on your savings?
36,554.11
You are borrowing $17,800 to buy a car. The terms of the loan call for monthly payments for 5 years at 8.6 percent interest. What is the amount of each payment?
366.05
operating cash flow 2011
4,267
The outstanding bonds of The River Front Ferry carry a 6.5 percent coupon. The bonds have a face value of $1,000 and are currently quoted at 102.9. What is the current yield on these bonds?
6.32%
dividends paid in 2011
800
Oil Well Supply offers 7.5 percent coupon bonds with semiannual payments and a yield to maturity of 7.86 percent. The bonds mature in 6 years. What is the market price per bond if the face value is $1,000?
983.04
Tracy invested $1,000 five years ago and earns 4 percent interest on her investment. By leaving her interest earnings in her account, she increases the amount of interest she earns each year. The way she is handling her interest income is referred to as which one of the following?
Compounding
The formula which breaks down the return on equity into three component parts is referred to as which one of the following?
Du Pont ID
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?
Future Value
The common set of standards and procedures by which audited financial statements are prepared is known as the:
GAAP
Which statement is correct related to growing annuities and perpetuities?
The present value of a growing perpetuity will decrease if the discount rate is increased
Which of the following relationships is correct?
Time and present value are inversely related, all else held constant
Currently, the bond market requires a return of 11.6 percent on the 10-year bonds issued by Winston Industries. The 11.6 percent is referred to as which one of the following?
Yield to maturity
Which one of the following terms is defined as the mixture of a firm's debt and equity financing?
capital structure
A business created as a distinct legal entity and treated as a legal "person" is called a:
corporation
relates to the cash flow which results from a firms ongoing, normal business activities
operating cash flow
Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.
profitability
Shareholders probably have the most interest in which one of the following sets of ratios?
return on equity n price-earnings
Which one of the following is a primary market transaction?
sale of a new share of stock to an individual investor
The sources and uses of cash over a stated period of time are reflected on the:
statement of cash flow
Which one of the following characteristics applies to a limited liability company?
taxed similar to a partnership
The pure time value of money is known as the:
term structure of interest rates
an indenture is:
the legal agreement between the bond issuer and the bondholders
Corporations can raise large amounts of capital generally easier than partnerships can. true/false
true
Which one of the following accurately defines a perpetuity?
unending equal payments paid at equal time intervals
Which one of the following is defined as a firm's short-term assets and its short-term liabilities?
working capital