FIN201 Exam 1 w/ correct answers

Bill thinks that Bank of America stock (BAC) is going to drop. On 10/1/11 Bill sold 1,000 shares of BAC short at a price of $6.50. On 10/5/11 BAC stock dropped to $5.00 a share. On 10/7/11 BAC stock went up to $7.50 and Bill bought to cover BAC (1,000 shares) on 10/7/11. How much money did Bill make or lose on this transaction?

$1,000 loss.

Suppose Walmart reported total revenues of $14,000,000 and total expenses of $6,000,000 for 2010. A the end of 2010 Walmart had cash of $5,000,000 reported on its balance sheet and had 1,000,000 shares of common stock outstanding. What is Walmart's EPS for 2010?

$8.00

John bought a car in 2008 for $10,000. He took out a $9,000 loan in 2008 to borrow the car. At 10/1/11 John has $500 total cash. His car is now worth $6,000 and his outstanding loan balance is $7,000. What is John's net worth?

-$500

If a company has net income of $10,000 for 2010, with 1,000 shares outstanding and it trades at a stock price of $40, what is this company's P/E ratio?

4

Which of the following equations equals "Net Worth"?

Assets - Liabilities

What is the standard accounting equation for business?

Assets = Liabilities + Owner's Equity

Which of the following is NOT one of the 12 points in the article "One for the Money"?

Avoid debt

The financial statement that is considered a "snap-shot" in time is the:

Balance Sheet

Generally, if the stock market drops 20% it is considered a:

Bear market

The first step discussed in the Financial Planning Process is:

Calculate your current financial position, or your "Net Worth."

Which of the following would be found on the balance sheet?

Cash $2,500

Which of the following is NOT a major US stock exchange?

DOW

For long—term investing-more than five years—most investment strategist recommend putting all of your investment dollars into one company's stock.

False

If a company is not yet listed on a stock exchange and wishes to raise money, it could issue stock through a process called:

IPO

Which of the following companies is not a component of The Dow:

MSFT WMT GS CAT all of the above are components of The Dow

In creating a budget, which type of expense would usually be easiest to choose a budget amount for, when you are using the method of starting with "expense tracking" first?

Monthly car payment.

Assume ABC company is a company with stock listed on the NYSE and is in good standing with the stock exchange. Which of the following in NOT true:

No financial statements of ABC are available to the public, since they may disclose competitive information about the company and its business in a way that could harm the company.

Which of the following accounts would be found on the income statement?

Rent expense $500

Which of the following statements is NOT true about The Dow:

Some of the Dow components are public companies and some are private companies.

Online stock sites (such as finance.yahoo.com) and the online sites of companies that have stocks traded on an exchange, may contain all of the following information except:

The actual future stock price

After Elder Ashton spoke, Pres. Kimball endorsed his talk and said that "every family should have a budget."

True

The "Net Change in Cash" amount for a company is usually found on the statement of the company called the Cash Flow Statement.

True

When you borrow money to buy a stock, it is called "Buying on the Margin."

True

Sally is given a new laptop from her Grandma. The laptop has a fair-market value of $1,000. For Sally's personal net worth statement, the laptop is:

a $1,000 asset

Which of the following items did NOT list tithing as the first step or principle in personal financial management?

all of the above list tithing as the first step or principle.

In the pamphlet, "All is Safely Gathered In," it states to "Avoid debt, with the exception of_________ or ________ or ________."

buying a modest home; paying for education; other vital needs

A company's P/E ratio, or price - earnings ratio, is computed by:

current stock price / EPS

What type of stock usually performs independent of the general economy—such as companies that produce food and medicine—so that when the general economy is down, they are not normally down also?

defensive stock

In tracking family expenses and setting budgets, which of the following methods is the best?

envelope, notebook, excel spreadsheets, budgeting software

According to Elder Ashton's pamphlet "One for the Money," one of the greatest favors parents can do for their children is not allow them to work while they are home and attending school so that they can concentrate on their studies.

false

As evident by the stock market game, on a short-term daily basis it is easy to predict the direction of the stock market.

false

EBITDA is an acronym standing for "Earnings before interest, transportation, deficits, and accumulation."

false

Financial goals must always be short-term goals (one-year's time).

false

Market capitalization is calculated by multiplying a company's total assets by its EPS.

false

Under "Accrual Basis" accounting, you only record a transaction when the cash is received or paid out.

false

Jim bought a used car for $5,000. He borrowed $4,000 from the bank to buy his car. For Jim, the $4,000 loan is a(n):

liability

From the pamphlet, "All is Safely Gathered In," please put the following basic steps in order:

pay tithes, avoid debt, use a budget, build a reserve, teach family

In the Debt-Elimination Calendar in the pamphlet "One for the Money," it advises to first pay off the debt with:

the highest interest rate the earliets payoff date

A company's EPS, or earnings per share, is computed by: (the / sign means divided by)

total earnings of company / shares of company outstanding

According to the "One for the Money" pamphlet, "The American Bar Association has indicated that 89% of all divorces can be traced to quarrels and accusations over money."

true