Financial Management Midterm

Determining the number of shares of stock to issue is an example of a ______ decision. a. capital structure b. capital budgeting c. net working capital d. capital rationing

a. capital structure

Which one of the following is most likely to be a fixed cost? a. Shipping and freight b. Rent c. Raw materials d. Manufacturing wages e. Management bonuses

b. Rent

On your tenth birthday, you received $300 which you invested at 4.5 percent interest, compounded annually. Your investment is now worth $756. How old are you today? a. Age 21 b.Age 23 c. Age 30 d. Age 20 e. Age 31

e. Age 31

Usually, the treasurer of a corporation reports directly to the: a. chief executive officer b. board of directors c. chair of the board. d. vice president of finance e. president

vice president of finance

Symone sold shares of Naraghi Corporation stock to Aleena. The stock is listed on the NYSE. This trade occurred in which one of the following? a. Primary, dealer market b. Secondary, auction market c. Secondary, dealer market d. Secondary, OTC market e. Primary, auction market

b. Secondary, auction market

Which one of the following is an expense for accounting purposes, but is not an operating cash flowfor financial purposes? a. Administrative expenses b. Taxes c. Labor costs d. Cost of goods sold e. Interest expense

e. Interest expense

Which one of the following best states the primary goal of financial management? a. Maintain steady growth while increasing current profits b. Maximize current dividends per share c. Maximize profit A d. void financial distress e. Maximize the current value per share

e. Maximize the current value per share

Twelve years ago, your parents set aside $8,000 to help fund your college education. Today, that fund is valued at $23,902. What annually compounded rate of interest is being earned on this account? a 9.55% b 8.99% c 9.42% d 9.67% 9 e .06%

a 9.55%

A firm has inventory of $29,406, accounts receivable of $46,215, net working capital of $4,507, and current liabilities of $90,549. What is the quick ratio? a. .92 b .94 c.1.55 d. 1.32 e..75

e..75

Running Gear has sales of $316,000, depreciation of $47,200, interest expense of $41,400, costs of $148,200, and taxes of $16,632. The firm has net capital spending of $36,400 and a decrease in net working capital of $14,300. What is the cash flow from assets for the year? a. $120,810 b. $119,655 c. $129,068 d. $134,585 e. $145,985

151186 - 36400 - (-14300) c. $129,068

Silva Enterprises has inventory of $11,600, fixed assets of $22,400, total liabilities of $12,900, cash of$1,900, accounts receivable of $8,700, and long-term debt of $6,500. What is the net working capital? a.$12,600 b. $44,600 c.$9,300 d. $15,700 e.$15,800

22,200 - 6400 e.$15,800

Bianchi Crafts has an operating cash flow of $4,267 and depreciation of $1,611. Current assets decreased by $1,356 while current liabilities decreased by $2,662, and net fixed assets decreased by $382 during the year. What is free cash flow for the year? a. $2,247 b. $3,915 c. $4,267 d. $1,732 e. $2,961

4,267- 1229- 1306= d. $1,732

Matsumoto Training has sales of $705,000, depreciation of $17,600, interest expense of $2,090, costs of $144,000, and a tax rate of 21 percent. What is the operating cash flow for the year? a. $436,018 b. $447,325 c. $434,409 d. $432,451 e. $418,899

543400 + 17600 - 113675 = b . 447,325

Noma plans to save $4,000 per year for the next 35 years. If she can earn an annual interestrate of 9.8 percent, how much will she have in 35 years?A) $1,136,913.40 B) $140,000.00 C) $1,035,440.25 D) $990,421.11 E) $966,410.90

C) $1,035,440.25

You want to buy a house and will need to borrow $205,000. The interest rate on your loan is5.29 percent compounded monthly and the loan is for 20 years. What are your monthlymortgage payments? A) $1,339.77 B) $1,455.26 C) $1,385.97 D) $1,404.72 E) $1,379.88

C) $1,385.97

What is the effective annual rate for an APR of 11.50 percent compounded quarterly? A) 12.13% B) 12.07% C) 11.52% D) 12.01% E) 12.61%

D) 12.01%

The income statement of Lashari Design shows depreciation of $1,611, sales of $21,415, interest paidof $1,282, net income of $1,374, and costs of goods sold of $16,408. What is the amount of thenoncash expenses? a. $1,611 b. $2,351 c. $740 d. $1,282 e. $2,893

a. $1,611

Navarrete Incorporated has net income of $62,300, a tax rate of 21 percent, and a net profit margin of 6.7 percent. Total assets are $1,100,500 and current assets are $328,200. How many dollars of sales are being generated from every dollar of net fixed assets? a. $1.20 b. $.84 c.$1.37 d. $1.23 e. $2.83

a. $1.20

Hennessey Chicken and Waffles had $594,500 in sales, and a net profit margin of 4 percent. The firm has 2,750 shares of stock outstanding, with a market price per share of $42.40. What is the price-earnings ratio? a. 4.90 b. 3.97 c. 1.70 d. 8.85 e. 0.20

a. 4.90

What is the future value in 60 years of $7,440 invested today at 9 percent interest, compounded annually? a. $1,314,038 b. $91,006 c. $1,309,673 d. $14,469,253 e. $38,256

c. $1,309,673

Which one of the following involves a working capital management decision? a. What is the most efficient process for producing a product? b. Should a newly available parcel of land be acquired? c. What is the maximum level of cash to be kept in the firm's bank account? d. How many hours of overtime should manufacturing employees be allowed to work? e. When is the appropriate time to replace the delivery fleet?

c. What is the maximum level of cash to be kept in the firm's bank account?

When utilizing the percentage of sales approach, managers: a. estimate company sales based on a desired level of net income and thecurrent net profit margin b.consider only those assets that vary directly with sales c. consider the current production capacity level d. can project net income but not net cash flows e.assume all liability accounts will remain constant.

c. consider the current production capacity level

With a sales level of $547,200 and fixed assets of $471,000, Esquivel's is operating at full capacity.The net profit margin is 5.4 percent. If sales are to increase by 4 percent, what is the requiredaddition to fixed assets? a. $14,680 b. $22,400 c. $10,709 d. $18,840 e. $16,76

d. $18,840

Which one of the following statements related to the cash flow to creditors must be correct? a. if the cash flow to creditors is positive, the firm must have borrowed more money than it repaid b. If the cash flow to creditors is zero, a firm has no long-term debt. c. If the cash flow to creditors is negative, the firm must have a negative cash flow from assets. d. A positive cash flow to creditors means that a firm has increased its long-term debt. e. A positive cash flow to creditors represents a net cash outflow from the firm.

e. A positive cash flow to creditors represents a net cash outflow from the firm.

Which one of the following statements regarding corporations is correct? a. The majority of firms in the U.S. are structured as corporations b. Shareholders directly elect the chief financial officer c. Undistributed corporate profits are taxable income to the shareholders d. Shareholders are protected from all potential losses e. Corporations can have an unlimited life.

e. Corporations can have an unlimited life.

The DuPont identity can be used to help managers answer which of the following questions related to a company's operations? I. How many sales dollars are being generated per each dollar of assets? II. How many dollars of assets have been acquired per each dollar in shareholders' equity? III. How much net profit is being generated per dollar of sales? IV. Does the company have the ability to meet its debt obligations in a timely manner? a. II and IV only b. I, II, III, and IV c. I and III only d. II, III and IV only e. I, II, and III only

e. I, II, and III only

Which one of the following is an agency cost? a. Hiring outside accountants to audit the company's financial statements b. Investing in a new project that creates firm value c. Accepting an investment opportunity that will add value to the firm d. Closing a division of the firm that is operating at a loss e. Increasing the quarterly dividend

a. Hiring outside accountants to audit the company's financial statements

Barker Fabricating is operating at 79 percent capacity and earning a substantial profit. An increasein sales is least likely to increase the firm's: a. fixed assets b.inventory c.accounts receivable d.cost of goods sold e.accounts payable

a. fixed assets

Schuetz Wholesale has net income of $12,400, a tax rate of 21 percent, and interest expense of $1,600. What is the times interest earned ratio for the year? a.14.97 b. 10.81 c. 9.63 d. 10.97 e. 7.75

b. 10.81

All else constant, if a firm decreases its operating costs, which one of the following will also decrease? a. Return on equity b. Price-earnings ratio c. Total asset turnover d. Return on assets e. Net profit margin

b. Price-earnings ratio

The process of determining the present value of future cash flows in order to know their value today is referred to as: a. future value interest factoring b. discounted cash flow valuation c. interest on interest valuation d. complex factoring e. compound interest valuation.

b. discounted cash flow valuation

Madelyn is calculating the present value of a bonus she will receive next year. The process she is using is called: a.compounding b. discounting c. growth analysis d. accumulating e. reducing

b. discounting

Cash flow to stockholders is defined as: a. the total amount of interest and dividends paid during the past year b. dividend payments less net new equity raised c.the change in total equity over the past year. d. cash flow from assets plus the cash flow to creditors e. operating cash flow minus the cash flow to creditors

b. dividend payments less net new equity raised

A limited partnership: a. can opt to be taxed as a corporation b. must have at least one general partner. c. is the newest form of business organization. d. consists solely of limited partners e. has a limited tax liability.

b. must have at least one general partner.

In a typical corporate organizational structure: a. the vice president of finance reports to the chair of the board b. the controller reports to the chief financial officer c. the treasurer reports to the president. d. the chief executive officer reports to the president. e. the chief operations officer reports to the vice president of production.

b. the controller reports to the chief financial officer

Zeng Graphics has taxable income of $48,900 and a tax rate of 21 percent. What is the change in retained earnings if the firm pays $20,200 in dividends for the year? a. $19,374 b. $19,948 c. $18,431 d. $18,942 e. $18,574

c. $18,431

If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the following? a. 2.0 b. 1.5 c..5 d. 0 e. 1.0

c.5

Moreno Refurbishing is currently operating at full-capacity sales. Accordingly, sales are currentlybeing limited by the firm's level of: a. long-term debt b.net working capital c.fixed assets d.inventory e.equity.

c.fixed assets

Which one of the following is a working capital management decision? a. What equipment will be required to complete a project? b. What percentage of the firm's equity should the firm issue to fund an acquisition? c. Which one of several acceptable projects should be implemented? d. What amount of long-term debt is required to complete a project? e. Should the firm require immediate payment from customers or offer credit terms?

e. Should the firm require immediate payment from customers or offer credit terms?

A sole proprietorship: a. is the most regulated form of organization b. is taxed the same as a C corporation. c. can generally raise large sums of capital quite easily d. can transfer ownership of the firm more easily than a corporation can e. has a limited life.

e. has a limited life

The value of which one of the following is excluded from the firm's book value, but is included in the market value? a. Transportation b. equipment c. Computer software d. Distribution warehouse e.Employees' collective experience level

e.Employees' collective experience level

The maximum rate of growth a corporation can achieve can be increased by: a. avoiding new external equity financing b.increasing the sales forecast c.increasing the dividend payout ratio d.increasing the corporate tax rate e.increasing the retention ratio.

e.increasing the retention ratio.

As the degree of financial leverage increases, the: a. number of outstanding shares of stock increases b.amount of a firm's total debt decreases c.less debt a firm has per dollar of total assets d.accounts payable balance decreases e.probability a firm will encounter financial distress increases

e.probability a firm will encounter financial distress increases

Herrera Corporation has total sales of $3,110,400 and costs of $2,776,000. Depreciation is$258,000 and the tax rate is 21 percent. The firm is all-equity financed. What is the operating cashflow? a.$334,400 b. $60,356 c. $522,176 d. $264,176 e. $318,356

76,400 + 258,000 - 16,044 e. $318,356

You will receive 27 annual payments of $22,500. The first payment will be received 7 yearsfrom today and the interest rate is 5.1 percent. What is the value of the payments today? A) $241,885.62 B) $230,148.07 C) $359,870.96 D) $228,447.53 E) $249,948.47

A) $241,885.62

our grandparents would like to establish a trust fund that will pay you and your heirs $140,000 per year forever with the first payment one year from today. If the trust fund earnsan annual return of 2.7 percent, how much must your grandparents deposit today? A) $5,185,185.19 B) $4,537,037.04 C) $4,786,324.79 D) $4,320,987.65 E) $5,925,925.93

A) $5,185,185.19

Claire's coin collection contains fifty 1948 silver dollars. Her grandparents purchased them at their face value in 1948. These coins have appreciated by 7.6 percent annually. How much is the collection expected to be worth in 2025? a. $14,077.16 b. $11,218.27 c. $14,122.01 d. $18,987.56 e. $13,611.18

a. $14,077.16

For the past year, Pellicier Incorporated had depreciation of $2,419, beginning total assets of$23,616, and ending total assets of $21,878. Current assets decreased by $1,356. What was theamount of net capital spending for the year? a. $2,037 b. $2,801 c. $1,172 d. −$382 e,$1,993

a. $2,037

Assume you own a violin currently valued at $64,000. If the value increases by 2.5 percent annually, how much will the violin be worth 15 years from now? a. $92,691.08 b. $86,008.17 c. $94,035.00 d. $91,480.18 e. $80,013.38

a. $92,691.08

Vasquez Pottery has shareholders' equity of $218,700. The firm owes a total of $141,000, only 40 percent of which is payable within the next 12 months. The firm has net fixed assets of $209,800. What is the amount of the net working capital? Multiple Choice a. $93,500 b. −$47,500 c. $125,600 d. $149,900 e. $56,500

a. $93,500

Curtis and Company currently has annual sales of $52,600, net fixed assets of $38,900, and total assets of $56,300. The firm is currently operating at 79 percent of capacity. What is the capital intensity ratio at full capacity? a. .85 b. .961 c. .10 d. .911 e. .18

a. .85

The retention ratio can be computed as: a. 1 - (Cash dividends/Net income) b. 1 + Dividend payout ratio c.(Change in retained earnings + Cash dividends)/Net income d.Change in retained earnings/Cash dividends e.1 − Plowback ratio

a. 1 - (Cash dividends/Net income)

Marissa and Raj are equal general partners in a business. They are content with their current management and tax situation but are uncomfortable with the idea of unlimited liability. If they wish to remain as the only two owners of the business, which form of business entity should they consider to replace their current arrangement? a. Limited liability company b. Corporation c. Joint stock company d. Limited partnership e Sole proprietorship

a. Limited liability company

Which one of the following is a correct formula for computing the return on equity? a. ROA × Equity multiplier b. Net profit margin × Total asset turnover × Debt-equity ratio c. Net profit margin × ROA d. Net income/Total assets e. Debt-equity ratio × ROA

a. ROA × Equity multiplier

The articles of incorporation: a. describe the purpose of the firm and set forth the number of shares of stock that can be issued b. explain how corporate directors are to be elected and the length of their terms. c. include only the corporation's name and intended life d. are amended periodically especially prior to corporate elections e. set forth the procedures by which a firm regulates itself.

a. describe the purpose of the firm and set forth the number of shares of stock that can be issued

Riggs Company has current assets of $10,406, long-term debt of $4,780, and current liabilities of $9,822 at the beginning of the year. At year end, current assets are $11,318, long-term debt is $5,010, and current liabilities are $9,741. The firm paid $277 in interest and $320 in dividends during the year. What is the cash flow to creditors for the year? a. −$507 b. $47 c. $507 d. −$47 e. −$97

b. $47

Okafor Design has equity of $168,500, total assets of $195,000, net income of $63,000, anddividends of $37,800. What is the sustainable growth rate? a. 10.78% b. 17.59% c. 12.76% d.14.33% e. 21.60%

b. 17.59%

Roller Sport has a net profit margin of 8.3 percent and a payout ratio of 42 percent. The firm hasannual sales of $386,400, current liabilities of $37,200, long-term debt of $123,800, net workingcapital of $16,700, and net fixed assets of $391,500. No external equity financing is possible. What isthe internal growth rate? a. 5.91% b. 4.36% c. 6.14% d. 3.44% e.4.02%

b. 4.36%

Which of the following actions would be considered an agency problem? a. A shareholder in a corporation sells shares of the company's stock when the price rises b. A manager in a corporation makes online personal travel arrangements during work hours c. A manager in a corporation buys shares of the company's stock when the price falls d. Both partners in a general partnership close the office early one day to go skiing e. An owner of a sole proprietorship takes company office supplies for personal use

b. A manager in a corporation makes online personal travel arrangements during work hours

Which one of the following statements is generally correct? a. All secondary markets are auction markets b. Auction markets match buy and sell orders c. Dealer markets have a physical trading floor d. Dealers arrange trades but never own the securities traded e. Private placements must be registered with the SEC

b. Auction markets match buy and sell orders

Which of the following actions could cause a company's change in net working capital to be negative for a given year? a. Pay off long-term debt before the due date b. Borrow money from the bank using a note payable in nine months c. Increase the dividends paid to stockholders d. Purchase additional inventory with cash e. Use long-term debt to buy a building

b. Borrow money from the bank using a note payable in nine months

Which one of the following is excluded from a firm's accounting value, but included in its market value? a. Real estate purchased by the firm b. Recognition of the firm's brand c. Equipment owned by the firm d. An item held by the firm for future sale e. Money due from a customer

b. Recognition of the firm's brand

Cullen invested $5,000 five years ago and earns 6 percent annual interest. By leaving his interest earnings in her account, he increases the amount of interest he earns each year. His investment is best described as benefitting from: a. aggregating b. compounding c. simplifying. d discounting e. accumulat

b. compounding

According to the statement of cash flows, an increase in inventory will ______ the cash flow from ______ activities. a. increase; operating b. decrease; operating c. decrease; financing d. increase; financing e. increase; investment

b. decrease; operating

Javier and Alex plan on retiring 27 years from today. At that time, they plan to have saved the same amount. Javier is depositing $15,000 today at an annual interest rate of 5.2 percent. How will Alex's deposit amount vary from Javier's if Alex also makes a deposit today, but earns an annual interest rate of 6.2 percent? Alex's deposit will need to be ______ than Javier's. (Assume annual compounding on both accounts.) a. $4,118.42 more b. $4,333.33 less c. $3,381.39 less d. $3,417.09 more e. $4,274.12 less

c. $3,381.39 less

Mahmood Productions had sales of $843,800 and costs of $609,900. The company paid $38,200in interest and $35,000 in dividends. The depreciation was $76,400. The firm has a combined taxrate of 24 percent. What was the addition to retained earnings for the year? a.$68,400 b. $56,200 c. $55,668 d. $57,240 e. $61,060

c. $55,668

In 1903, the winner of a competition was paid $50. In 2020, the winner's prize was $235,000. What will the winner's prize be in 2040 if the prize continues increasing at the same rate? a. $1,043,378 b. $983,534 c. $997,188 d. $975,678 e. $954,327

c. $997,188

he Music Alliance has a debt-equity ratio of .57. What is the total debt ratio? Multiple Choice a. 2.75 b. 2.27 c. .36 d. .44 e.30

c. .36

Based on the tax table below, what is the average tax rate for a sole proprietor with taxable income of $155,000? Ignore any standard or itemized deductions. Taxable IncomeTax Rate$ 0 − 9,875 -> 10% 9,875 − 40,125 --> 12% 40,125 − 85,525 --> 22% 85,525 − 163,300 --> 24% a. 16.26% b. 24.00% c. 20.18% d. 21.00% e. 10.76%

c. 20.18

Which one of the following actions by a financial manager is most apt to create an agency problem? a. Agreeing to pay bonuses based on the market value of the company's stock rather than on its level of sales b. Refusing to expand the company if doing so will lower the value of the equity c. Increasing current profits when doing so lowers the value of the company's equity d. Refusing to borrow money when doing so will create losses for the firm e. Refusing to lower selling prices if doing so will reduce the net profits

c. Increasing current profits when doing so lowers the value of the company's equity

Which one of the following questions involves a capital budgeting decision? a. How much inventory should the firm keep on hand? b. Should the firm borrow money to acquire new equipment? c. Should the firm purchase a new machine for the production line? d. How much money should be kept in the checking account? e. How many shares of stock should the firm issue?

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

The coding system established by the U.S. government to classify companies by the nature of their business operations is known as the: a. Governmental ID codes. b. Centralized Business Index. c. Standard Industrial Classification codes. d. Government Engineered Coding System. e. Peer Grouping codes.

c. Standard Industrial Classification codes.

Which one of the following statements is correct concerning the NYSE? a. Any corporation desiring to be listed on the NYSE can do so for a fee b. The publicly traded shares of an NYSE-listed firm must be worth at least $250 million c. The listing requirements for the NYSE are more stringent than those of Nasdaq d. The NYSE is the largest dealer market for listed securities in the United States e. The NYSE is an OTC market functioning as both a primary and a secondary market.

c. The listing requirements for the NYSE are more stringent than those of Nasdaq

Which one of the following describes a noncash item? a. Ownership of intangible assets such as patents b. Sales that are made using store credit c. Inventory items purchased using credit d. Expenses that do not consume cash e. Fixed expenses

d. Expenses that do not consume cash

Both Archer's and Burger Bar have price-earnings ratios of 16.2. However, Archer's has a higher PEG ratio than Burger Bar. It must be true that Archer's ______ than Burger Bar. a. has a higher earnings growth rate b. has a higher market value per share c. has a higher market-to-book ratio is increasing i d. Its earnings at a slower rate e. has more net income

d. Its earnings at a slower rate

Assuming accrual accounting is employed, which one of the following statements is correct? a. Interest is a noncash expense. b. The addition to retained earnings is equal to net income plus dividends paid. c. Credit sales are recorded on the income statement when the cash from the sale is collected. d. The costs of acquiring a product are expensed when the product is sold. e. Depreciation expenses increase a firm's marginal tax rate.

d. The costs of acquiring a product are expensed when the product is sold.

A ______ has all the respective rights and privileges of a legal person. a. limited partnership b. sole proprietorship c. general partnership d. corporation e. limited liability company

d. corporation

Hulsey Outdoor had a return on assets of 15 percent and a return on equity of 15 percent. Given this information, the firm: a. is using its assets as efficiently as possible. b. has a debt-equity ratio of 1.0. c. has no net working capital. d. has an equity multiplier of 1.0. e. may have short-term, but not long-term debt.

d. has an equity multiplier of 1.0.

Which form of business would be the best choice if it were necessary to raise large amounts of capital? a. Corporation b. Limited partnership c. Limited liability company d. General partnership e. Sole proprietorship

a. Corporation

The Sarbanes-Oxley Act of 2002 is a governmental response to: a. management greed and abuses b. deregulation of the stock exchanges c. the terrorist attacks on 9/11/2001 d. decreasing corporate profits e. the harm caused to stock markets by SARS, MERS, COVID-19, and other pandemics

a. management greed and abuses

A firm is operating at less than 100 percent of capacity. When preparing pro forma statements, thisinformation is primarily needed to project which one of the following account values? a. Accounts receivable b. Fixed assets c. Long-term debt d. Sales e. Cost of goods sold

b. Fixed assets

Which one of the following would cause a cash outflow from a corporation? a. Taking out a loan from a bank b. Paying dividends c. Receiving a tax refund from the government d.Assigning common stock to employees e. issuing new securities

b. Paying dividends

Dance World has a net profit margin of 5 percent and a dividend payout ratio of 20 percent. Thetotal asset turnover is 1.6 and the debt-equity ratio is .4. What is the sustainable growth rate? a. 9.60% b. 11.20% c. 9.84% d. 9.26% e. 10.89%

c. 9.84%

Which one of the following statements related to corporate income taxes is correct? a. Above a certain level, if the corporation earns additional income, it will be taxed at a higher rate. b. A corporation's taxes equals its taxable income multiplied by the marginal tax rate. c. Corporations pay the same rate of taxes regardless of the amount of taxable income. d. The marginal tax rate will always exceed a corporation's average tax rate. e. A corporation's marginal tax rate must be equal to or lower than its average tax rate.

c. Corporations pay the same rate of taxes regardless of the amount of taxable income.

Which one of the following statements is correct? a. Financial statements are rarely used as the basis for performance evaluations b. Book values should always be given precedence over market values c. Historical information is useful when projecting a company's future performance d. Reviewing financial information over time has very limited value e. Potential lenders place little value on financial statement information.

c. Historical information is useful when projecting a company's future performance

Which one of the following statements related to liquidity is correct? a. Liquid assets are defined as assets that can be sold quickly regardless ofthe price obtained b.Liquid assets are valuable to a firm c.Any asset that can be sold for cash is considered liquid d.Inventory is more liquid than accounts receivable because inventory is tangible e.Liquid assets tend to earn a higher rate of return than illiquid assets

b liquid assets are valuable to a firm

Which one of the following is a current liability? a. A loan payable to the bank in 4 years b.An amount due from a customer, which is already past due c.An invoice payable to a supplier in 45 days d. An amount due from a customer in 90 days e.A note payable to a lender in 18 months

c.An invoice payable to a supplier in 45 days

Cash flow from assets is also known as the firm's: a. capital structure. b. historical cash flow c.free cash flow d.hidden cash flow e. equity structure.

c.free cash flow

Williams & Gillespie has net fixed assets of $36,200, total assets of $51,300, long-term debt of $22,000, and total debt of $29,700. What is the net working capital to total assets ratio? a. 14.42% b. 17.79% c. 12.18% d. 9.90% e. 16.82%

a. 14.42%

Williams & Gillespie has net fixed assets of $36,200, total assets of $51,300, long-term debt of $22,000, and total debt of $29,700. What is the net working capital to total assets ratio? a. 14.42% b. 17.79% c. 12.18% d. 9.90% e. 16.82%

a. 14.42%

Hello Robin! has accounts receivable of $4,511, inventory of $1,810, sales of $138,609, and cost of goods sold of $64,003. How many days does it take the firm to sell its inventory and collect the payment on the sale assuming that all sales are on credit? a. 22.20 days b. 18.67 days c. 16.23 days d. 11.88 days e. 14.50 days

a. 22.20 days

All else constant, which one of the following will result in the lowest present value of a lump sum? a. 8 percent interest for 10 years b. 8 percent interest for 5 years c. 6 percent interest for 5 years d. 6 percent interest for 8 years e. 6 percent interest for 10 years

a. 8 percent interest for 10 years

An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio? a. Accounts receivable b. Accounts payable c. Fixed assets d.Cash e. Inventory

a. Accounts receivable

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date? a. Balance sheet b. Creditor's statement c. Income statement d. Dividend statement e. Statement of cash flows

a. Balance sheet

Which one of the following will decrease the value of a firm's net working capital? a. Donating inventory to charity b. Purchasing inventory on credit c. Collecting an accounts receivable d. Depreciating an asset e. Using cash to pay a supplier

a. Donating inventory to charity

Which one of the following accurately lists the three components of the DuPont identity? a. Equity multiplier, net profit margin, and total asset turnover b. Return on assets, net profit margin, and equity multiplier c. Operating efficiency, equity multiplier, and profitability ratio d. Financial leverage, operating efficiency, and profitability ratio e. Debt-equity ratio, capital intensity ratio, and net profit margin

a. Equity multiplier, net profit margin, and total asset turnover

On the statement of cash flows, which one of the following is considered an operating activity? a. Decrease in accounts payable b. Purchase of equipment c. Dividends paid d. Increase in net fixed assets e. Repayment of long-term debt

a. decrease in accounts payable

A Procrustes approach to financial planning is based on: a. developing a plan around the goals of senior managers b.a flexible capital budget c .a flexible capital structure d.a proactive approach to the economic outlook e.a policy of producing a financial plan once every five years

a. developing a plan around the goals of senior managers

A firm owned by two or more people who each have unlimited liability for all of the firm's debts is called a: a. general partnership b. limited liability company c. limited partnership d. corporation e. sole proprietorship

a. general partnership

Which one of the following is an unintended result of the Sarbanes-Oxley Act? a. Identification of internal control weaknesses b. Corporations delisting from major exchanges c. Increased management awareness of internal controls d. More detailed and accurate financial reporting e. increased responsibility for corporate officers

b. Corporations delisting from major exchanges

When preparing pro forma statements, which one of the following is an analyst most likely toestimate first? a. Desired dividend payments b. Projected sales c. Need for additional fixed assets d. Desired net income e Current fixed costs

b. Projected sales

Powell's has net income for the most recent year of $24,650 and a combined federal and state tax rate of 24 percent. The firm paid $1,800 in total interest expense and deducted $2,900 in depreciation expense. What was the cash coverage ratio for the year? a. 13.69 times b. 11.48 times c. 20.63 times d. 19.39 times e. 20.48 times

c. 20.63 times

Which one of the following standardizes items on the income statement and balance sheet relative to their values as of a chosen point in time? a. Statement of cash flows b. Statement of standardization c. Common-base year statement d. Common-size statement e. Base reconciliation statement

c. Common-base year statement

Agency problems are most likely to be associated with: a. limited liability companies b. limited partnerships c. corporations d. sole proprietorships e. general partnerships.

c. corporations

Relationships determined from a company's financial information and used for comparison purposes are known as: a. scenario analysis b. dimensional analysis c. financial ratios. d. identities e. solvency analysis.

c. financial ratios.

The sources and uses of cash over a stated period of time are reflected on the: a. balance sheet b. statement of operating position c. statement of cash flows d. income statement e. tax reconciliation statement.

c. statement of cash flows

This morning, Clayton deposited $2,500 into an account that pays 5 percent interest, compounded annually. Also this morning, Jayda deposited $2,500 at 5 percent interest, compounded annually. Clayton will withdraw his interest earnings and spend it as soon as possible. Jayda will reinvest her interest earnings into her account. Given this information, which one of the following statements is true? a. Clayton will earn compound interest b. Jayda will earn more interest in Year 1 than Clayton will earn c. After five years, Clayton and Jayda will both have earned the same amount of interest d. Jayda will earn more interest in Year 2 than Clayton will earn e. Clayton will earn more interest in Year 3 than Jayda will earn

d. Jayda will earn more interest in Year 2 than Clayton will earn

Which one of the following statements is correct? a. Only firms organized as partnerships have limited lives b. Partnerships are the most complicated type of business to form c. A general partnership is a legal person d. Taxable income earned by a partnership is treated as individual income e. All partnerships are required to have at least one limited partner.

d. Taxable income earned by a partnership is treated as individual income

A firm's ______ is the firm's mix of short-term assets and short-term liabilities. a. net debt b. capital structure c. net currency d. net working capital e. investment capital

d. net working capital

During the year, the accounts payable of a company rose from $115,200 to $134,300. This change represents a: a. use of $19,100 of cash as an operating activity. b. use of $19,100 of cash as investment activity c. source of $$19,100 of cash as an investment activity d. source of $19,100 of cash as an operating activity. e. source of $19,100 of cash as a financing activity.

d. source of $19,100 of cash as an operating activity

Njoku Marketing paid $1,282 in interest and $975 in dividends last year. Current assets increased by $2,700, current liabilities decreased by $420, and long-term debt increased by $2,200. What was the cash flow to creditors? a. 2,132 b. −$530 c. $1,839 d. −$918 e. $3,094

d. −$918

Which one of the following statements related to an income statement is correct? a. Depreciation does not affect taxes since it is a noncash expense b.Net income is distributed to dividends and paid-in surplus c.Interest expense increases the amount of tax due d.Income taxes reduce both net income and operating cash flow. e. Interest expense is included in operating cash flow

d.Income taxes reduce both net income and operating cash flow.

At the beginning of the year, Scoopers Ice Cream had cash of $183, accounts receivable of $392, accounts payable of $463, and inventory of $714. At year end, cash was $167, accounts payable was $447, inventory was $682, and accounts receivable was $409. What is the amount of the net source or use of cash by working capital accounts for the year? a. Net use of $16 cash b. Net use of $15 cash c. Net source of $17 cash d. Net source of $15 cash e. Net use of $17 cash

d.Net source of $15 cash

Which one of the following statements concerning corporate income taxes is correct? a. The marginal tax rate will always be lower than the average tax rate b.Corporations pay no tax on their first $50,000 of income.U.S c. corporations are exempt from federal taxation. d.The federal income tax is applied at a flat rate across all levels of taxableincome e..The first 25 percent of corporate income is exempt from taxation

d.The federal income tax is applied at a flat rate across all levels of taxable income

Pro forma statements: a. must assume that no dividends will be paid b.must assume that no new equity is issued c .exclude net working capital needs d.are projections, not guarantees e .are limited to a balance sheet and income statement

d.are projections, not guarantees