chp 1-5
Fast Kars has a return on equity of 22.3 percent, a profit margin of 14.2 percent, and total equity of $467,000. What is the net income? $113,875 $104,141 $109,897 $69,608 $66,314
104,141
Donegal's has compiled the following information. What is the operating cash flow for the year? $114,700 $102,600 $93,500 $96,700 $90,900
114,700
You want to invest an amount of money today and receive back twice that amount in the future. You expect to earn 6 percent interest. Approximately how long must you wait for your investment to double in value?
12 years
Rusty Antiques has a marginal tax rate of 39 percent and an average tax rate of 26.9 percent. If the firm owes $37,265 in taxes, how much taxable income did it earn? $137,098 $137,750 $138,532 $136,800 $139,957
138,532
Last year, The Pizza Joint added $6,230 to retained earnings from sales of $104,650. The company had costs of $87,300, dividends of $2,500, and interest paid of $1,620. Given a tax rate of 34 percent, what was the amount of the depreciation expense? $3,414 $1,908 $2,503 $2,407 $3,102
2,503
Assume you pay $24,000 today in exchange for an annuity with monthly payments, an APR of 6.75 percent, and a life of 15 years.What is the payment amount? $319.27 $212.38 $203.16 $338.09 $266.67
212.38
You're trying to save to buy a new car valued at $48,690. You have $38,000 today that can be invested at your bank. The bank pays 3.7 percent annual interest on its accounts. How long will it be before you have enough to buy the car for cash? Assume the price of the car remains constant. 6.82 years 7.08 years 5.13 years 9.29 years 4.67 years
23.95
E-Z Loans is offering a special on one-year loans. The company will loan you $1,500 today with no waiting and no credit check, in exchange for one payment of $2,000 one year from now. What is the APR on this loan? 21.20 percent 30.63 percent 25.63 percent 17.93 percent 33.33 percent
33.33
Bill just financed a used car through his credit union. His loan requires payments of $275 a month for five years. Assuming that all payments are paid on time, his last payment will pay off the loan in full. What type of loan does Bill have?
Amortized
Probably the least effective means of aligning management goals with shareholder interests is:
Automatically increasing management salaries on an annual basis
Which one of the following terms is defined as the total tax paid divided by the total taxable income?
Average tax rate
The financial statement that summarizes a firm's accounting value as of a particular date is called the:
Balance Sheet
Security dealers:
Buy and sell from their own inventory
Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's:
Capital Structure
Which one of the following functions should be assigned to the corporate treasurer rather than to the controller?
Cash management
Which of the following occupations best fits into the corporate area of finance?
Chief Financial officer
Which of the following is most apt to align management's priorities with shareholders' interests?
Compensating managers with shares of stock that must be held for a minimum of three years
Corporate shareholders:
Have the ability to change the corporation's bylaws
Which one of the following is a working capital decision?
How much cash should the firm keep in reserve
Precision Engineering invested $125,000 at 6 percent interest, compounded annually for 3 years. How much interest on interest did the company earn over this period of time? $1,284 $1,369 $2,679 $1,377 $1,317
1,377
Starlite Industries will need $2.2 million 4.5 years from now to replace some equipment. Currently, the firm has some extra cash and would like to establish a savings account for this purpose. The account pays 3.6 percent interest, compounded annually. How much money must the company deposit today to fully fund the equipment purchase? $1,798,407.21 $1,412,308.18 $1,350,868.47 $1,679,947.20 $1,876,306.49
1,876,306.49
Bed Bug Inn has annual sales of $137,000. Earnings before interest and taxes is equal to 5.8 percent of sales. For the period, the firm paid $4,700 in interest. What is the profit margin if the tax rate is 34 percent? -6.11 percent 1.56 percent -5.29 percent -2.43 percent 3.33 percent
1.56
Wilberton's has total assets of $537,800, net fixed assets of $412,400, long-term debt of $323,900, and total debt of $388,700. If inventory is $173,900, what is the current ratio? A) .84 B) 1.18 C) 1.94 D) .52 E) 2.01
1.94
Which of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?
Increase the number of firms that "go dark"
Which one of the following is the maximum growth rate that a firm can achieve without any additional external financing?
Internal Growth Rate
A firm's liquidity level decreases when:
Inventory is purchased with cash
Capital budgeting includes the evaluation of which of the following?
Size, timing, and risk of future cash flows?
Which of the following correctly defines a common chain of command within a corporation?
The controller reports directly to the chief financial officer.
Today, Charity wants to invest less than $3,000 with the goal of receiving $3,000 back some time in the future. Which one of the following statements is correct?
The period of time she has to wait decreases as the amount she invests increases.
Which of the following applies to a general partnership?
The profits of a general partnership are taxed the same as those of a corporation
The Wood Shop generates $.97 in sales for every $1 invested in total assets. Which one of the following ratios would reflect this relationship?
Total asset turnover
South Central Bank pays 2.5 percent interest, compounded annually, on its savings accounts. Northern Bank pays 2.5 percent simple interest on its savings accounts. You want to deposit sufficient funds today so that you will have $1,500 in your account 2 years from today. The amount you must deposit today:
Will be greater if you invest in northern bank
The daily financial operations of a firm are primarily controlled by managing the:
Working capital
One advantage of the corporate form of organization is the:
ability to raise larger sums of equity capital than other organizations
The shareholders of Weil's markets would benefit if the firm were to be acquired by better foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:
an agency conflict
Which one of the following is a measure of long-term solvency?
cash coverage ratio
A loan has an APR of 8.5 percent and an EAR of 8.5 percent. Given this, the loan must:
charge interest annually
Which one of the following is an intangible fixed asset?
copyright
The goal of financial management is to increase the:
current market value per share
Computing the present value of a future cash flow to determine what that cash flow is worth today is called:
discounted cash flow valuation
A firm can increase its sustainable rate of growth by decreasing its:
dividends
Marcos is investing $5 today at 7 percent interest so he can have $35 later. This $35 is referred to as the:
future value
A firm has a current ratio of 1.4 and a quick ratio of .9. Given this, you know for certain that the firm:
has positive networking capital
A common-size balance sheet helps financial managers determine:
if changes are occurring in a firm's mix of assets.
Which one of the following changes during a year will increase cash flow from assets but not affect the operating cash flow?
increases in accounts payable
Kendall is investing $3,333 today at 3 percent annual interest for three years. Which one of the following will increase the future value of that amount?
increasing the interest rate
Cash flow to creditors is defined as:
interest paid minus net new borrowing.
Net working capital increases when:
inventory is sold at a profit
Given a profitable firm, depreciation:
lowers taxes
The equity multiplier is equal to:
one plus the debt equity ratio
Financial statement analysis: provides useful information to shareholders but not to debtholders. is limited to internal use by a firm's managers. is primarily used to identify account values that meet the normal standards. is enhanced by comparing results to those of a firm's peers but not by comparing results to prior periods. provides useful information that can serve as a basis for forecasting future performance.
provides useful information that can serve as a basis for forecasting future performance
An income statement prepared according to GAAP:
records expenses based on the matching principle
The recognition principle states that:
sales should be recorded when the earnings process is virtually completed and the value of the sale can be determined.
You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the:
secondary market
If a firm has an inventory turnover of 15, the firm:
sells the entire inventory an average of 15 times each year
The matching principle states that:
the costs of producing an item should be recorded when the sale of that item is recorded as revenue.
Shareholders' equity is best defined as:
the residual value of a firm.
In a general partnership, each partner is personally liable for:
the total debts of the partnership, even if he or she was unaware of those debts
Tower Pharmacy pays out a fixed percentage of its net income to its shareholders in the form of annual dividends. Given this, the percentage shown on a common-size income statement for the dividend account will:
vary in direct relation to the net profit percentage.
Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts as referred to as:
working capital management
The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?
Agency
Roscoe's fixed assets were purchased three years ago for $1.8 million. These assets can be sold to Stewart's today for $1.2 million. Roscoe's current balance sheet shows net fixed assets of $960,000, current liabilities of $348,000, and net working capital of $121,000. If all the current assets were liquidated today, the company would receive $518,000 cash. The book value of the firm's assets today is ________ and the market value is ________. $1,429,000; $1,308,000 $1,081,000; $1,308,000 $1,307,000; $1,429,000 $1,429,000; $1,718,000 $1,081,000; $1,718,000
$1,429,000; $1,718,000
Marcie's has sales of $179,600,depreciation of $14,900, costs of goods sold of $138,200, and other costs of $28,400. The tax rate is 35 percent. What is the net income? $1,204 -$1,235 $13,665 $382 $14,660
-1,235
The balance sheet of Binger, Inc. has the following balances. What is the amount of the change in net working capital? -$8,100 -$1,800 $8,100 $1,800 -$7,400
-1,800
Leslie Printing has net income of $26,310 for the year. At the beginning of the year, the firm had common stock of $55,000, paid-in surplus of $11,200, and retained earnings of $48,420. At the end of the year, the firm had total equity of $142,430. The firm paid dividends of $32,500. What is the amount of the net new equity raised during the year? $25,000 $0 $42,500 $21,500 $34,000
34,000
You expect to receive $5,000 at graduation one year from now. Your plan is to invest this money at 6.5 percent, compounded annually, until you have $50,000. At that time, you plan to travel around the world. How long from now will it be until you can begin your travels? 34.55 years 32.08 years 37.57 years 31.08 years 36.57 years
37.57
Spring Falls Gifts has sales of $680,300, total assets of $589,100, and a profit margin of 4.3 percent. What is the return on assets? 7.01 percent 4.97 percent 6.54 percent 3.83 percent 4.30 percent
4.97
Last year, Teresa's Fashions earned $2.03 per share and had 15,000 shares of stock outstanding. The firm paid a total of $16,672 in dividends. What is the retention ratio? 45.25 percent 54.75 percent 52.00 percent 40.21 percent 64.07 percent
45.25
Good Foods has net income of $82,490, total equity of $518,700, and total assets of $1,089,500. The dividend payout ratio is .30. What is the internal growth rate? 3.57 percent 4.94 percent 2.87 percent 2.32 percent 5.60 percent
5.60
Western Hardwoods has total equity of $318,456, a profit margin of 3.79 percent, an equity multiplier of 1.68, and a total asset turnover of .97. What is the amount of the firm's sales? $518,956 $195,420 $190,839 $639,440 $473,550
518,956
Eight years from now, you will be inheriting $100,000. What is this inheritance worth to you today if you can earn 7.25 percent interest, compounded annually? $53,003.15 $61,798.47 $58,419.05 $63,215.46 $57,124.39
57,124.39
Delmont Movers has a profit margin of 7.1 percent and net income of $63,700. What is the common-size percentage for the cost of goods sold if that expense amounted to $522,600 for the year? Selected Answer: Incorrect 23.50 percent Answers: 12.19 percent Correct 58.25 percent 61.06 percent 53.25 percent 23.50 percent
58.25
Fried Donuts has sales of $764,900, total assets of $687,300, total equity of $401,300, net income of $68,200, and dividends paid of $27,000. What is the internal growth rate? 5.48 percent 7.92 percent 6.38 percent 7.34 percent 5.98 percent
6.38
Jenny needs to borrow $5,500 for four years. The loan will be repaid in one lump sum at the end of the loan term. Which one of the following interest rates is best for Jenny? 6.80 percent interest, compounded annually 6.5 percent interest, compounded annually 6.75 percent interest, compounded annually 6.6 percent simple interest 6.5 percent simple interest
6.5 percent simple interest
A firm has a return on equity of 17.8 percent, a return on assets of 11.3 percent, and a 65 percent dividend payout ratio. What is the sustainable growth rate? 7.12 percent 11.38 percent 5.72 percent 6.84 percent 6.64 percent
6.64
You're trying to save to buy a new car valued at $48,690. You have $38,000 today that can be invested at your bank. The bank pays 3.7 percent annual interest on its accounts. How long will it be before you have enough to buy the car for cash? Assume the price of the car remains constant. 6.82 years 7.08 years 5.13 years 9.29 years 4.67 years
6.82
Comfy Inn earned $218,310 in taxable income for the year. How much tax does the company owe? $85,140.90 $69,998.20 $68,390.90 $65,240.10 $86,311.20
68,390.90
For the year, Movers United has net income of $31,800, net new equity of $7,500, and an addition to retained earnings of $24,200. What is the amount of the dividends paid? $100 $15,100 $7,600 $7,500 $16,700
7,600
Lisa has $1,000 in cash today. Which one of the following investment options is most apt to double her money? 8 percent interest for 9 years 7 percent interest for 9 years 6 percent interest for 10 years 12 percent interest for 5 years 6 percent interest for 3 years
8 percent interest in 9 years
Your grandparents just gave you a gift of $6,500. You are investing this money for 6 years at 4 percent simple interest. How much money will you have at the end of the 6 years? $7,800 $6,760 $6,938 $7,280 $8,060
8,060
A firm has net income of $4,238 and interest expense of $898. The tax rate is 35 percent. What is the firm's times interest earned ratio?
8.26
Dockside Warehouse has net working capital of $42,400, total assets of $519,300, and net fixed assets of $380,200. What is the value of the current liabilities? $102,900 $111,500 $61,700 $88,40000 $96,700
96,700
The Corner Bakery needs $86,000 today for remodeling. They have obtained a 2-year, pure-discount loan at an interest rate of 6.8 percent, compounded annually. How much must they repay in two years? $98,093.66 $91,159.39 $89,540.21 $94,064.20 $90,860.00
98,9093.66
Which one of the following best indicates a firm is utilizing its assets more efficiently than it has in the past?
A decrease in the capital intensity ratio
Stacey deposits $5,000 into an account that pays 2 percent interest, compounded annually. At the same time, Kurt deposits $5,000 into an account paying 3.5 percent interest, compounded annually. At the end of three years: Kurt will earn exactly twice the amount of interest that Stacey earns. Stacey will have more money saved than Kurt. Both Stacey and Kurt will have accounts of equal value. Kurt will have twice the money saved that Stacey does. Kurt will have a larger account value than Stacey will.
Kurt will have a larger account value than Stacey will
The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the:
Marginal tax rate
Which one of the following statements is correct?
NASDAQ has more listed stocks than does NYSE
Which one of these is correct?
Net income is distributed either to dividends or retained earnings.
Which of the following statements correctly applies to a sole proprietorship?
Obtaining additional equity is dependent on the owner's personal finance
Which one of the following indicates that a firm has generated sufficient internal cash flow to finance its entire operations for the period?
Positive cash flow from assets
Limited Liability Company (LLC)
Prefers it's profits to be taxed as personal income to its owners
Katlyn needs to invest $5,318 today in order for her savings account to be worth $8,000 six years from now. Which one of the following terms refers to the $5,318?
Present Value
All else held constant, which one of the following will decrease if a firm increases its net income? Return on equity Return on assets Profit margin Price-sales ratio Price-earnings ratio
Price earnings Ratio
Which of the following is contained in the corporate bylaws?
Procedures for electing corporate directors
Cindy is taking out a loan today. The cash amount that she is receiving is equal to the present value of the lump sum payment that she will be required to pay two years from today. Which type of loan is this?
Pure discount
