FNCE Exam 1 study

What is the value today of $2,500 to be received in 7 years if the discount rate is 3.5 percent? Multiple choice question. $2,172.86 $3,180.70 $2,415.46 $1,964.98

$1,964.98 (Reason: PV = $2,500/(1 + 0.035)7 = $1,964.98)

Which one of these formulas illustrates the compounding of interest? Multiple choice question. $100 × (1 + 0.06) $100 × (1 + 0.06) × (1 + 0.06) $100 + $6 + $6 + $6 + $6 $100/(1 + 0.06)

$100 × (1 + 0.06) × (1 + 0.06)

Five years ago, Lewis Equipment purchased equipment costing $212,000. Two years ago, the firm paid $32,000 for updates to that equipment. This year, the firm sold the equipment for $189,000. Which of these cash flows is (are) cash inflows to Lewis Equipment? Multiple choice question. $212,000 original cost plus $32,000 in updates $32,000 updates $212,000 original cost $189,000 sale price

$189,000 sale price

A bank loaned money at 7 percent interest for five years to Stu. The loan will be repaid in one lump sum payment of $3,366.12. How much did Stu borrow? Multiple choice question. $2,400 $2,200 $2,100 $2,300

$2,400 (Reason: PV = $3,366.12/(1 + 0.07)5 = $2,400)

Susette invested $10,000 twenty years ago. Ten years ago, she invested an additional $5,000. Last year, she withdrew $8,000 to pay for a vacation. If you were to draw a time line of these events, which value(s) would be treated as a cash inflow(s) to Susette? Multiple choice question. $8,000 cash withdrawal $10,000 original investment $10,000 original investment plus $5,000 additional investment $5,000 additional investment

$8,000 cash withdrawal

You expect to receive the following annual cash flows starting at Year 1: $800, $500, $900, and $600. To develop a time line, what will the cash flow for Year 3 be? Multiple choice question. -$900 -$600 +$900 +$600

+$900

Ten years ago, you put $5,000 in a savings account. Today, your investment has the purchasing power of $4,800 What is your real rate of return? (just calculate like a normal interest rate) Multiple choice question. 4.000% -0.41% -4.00% -4.17%

-0.41% (We use the formula:A=P(1+r/100)^nwhereA=future valueP=present valuer=rate of interestn=time period. 4800=5000*(1+r/100)^10 (4800/5000)^(1/10)=(1+r/100) (1+r/100)=0.995926121 r=(0.995926121-1)*100 =--0.41%(Approx)(Negative))

Approximately how long will it take a $2,500 investment to grow to $5,000 at an interest rate of 6 percent? Multiple choice question. 8 years 1.20 years 0.08 years 12 years

12 Years (Reason: 72/6 = 12 years)

If you want to double your money in five years, what is the approximate annual rate of return you must earn using the Rule of 72? Multiple choice question. 12.0 percent 3.6 percent 14.4 percent 6.9 percent

14.4 percent (Reason: 72/5 = 14.4 percent)

How long will it take to increase a $2,200 investment to $10,000 if the interest rate is 6.5 percent? Multiple choice question. 15.59 years 24.04 years 27.22 years 19.67 years

24.04 years (Reason: Using a financial calculator: I = 6.5; PV = -2,200; PMT = 0; FV = 10,000

Twelve years ago, you invested $4,800. Today, your investment is worth $8,750. What is your rate of return? Multiple choice question. 13.45 percent 4.87 percent 5.13 percent 5.42 percent

5.13 percent (Reason: i = ($8,750/$4,800)1/12 - 1 = 5.13 percent)

How long will it take to double a $2,000 investment at 10% interest Multiple choice question. 14.54 years 10 years 7.00 years 7.27 years

7.27 years (Reason: Using a financial calculator: I = 10; PV = -2,000; PMT = 0; FV = 4,000)

Which one of these statements correctly applies to a balance sheet? Multiple choice question. A balance sheet reports assets on the right side and liabilities and equity on the left side. A balance sheet reports assets, liabilities and equity accounts in ascending order of liquidity. A balance sheet shows what a firm owns, what it owes, and what it is worth. A balance sheet reports cash inflows and outflows over a stated period of time.

A balance sheet shows what a firm owns, what it owes, and what it is worth.

Which one of these reports the amount of money a firm owes its creditors within the next year? Multiple choice question. Current liabilities Fixed asset Current assets Long-term debt

Current liabilities

What are the two key characteristics of a hybrid organization? Multiple choice question. Limited size and double taxation Shared control and unlimited size Unlimited capital and unlimited liability Single taxation and limited liability

Single taxation and limited liability

Which one of these is not one of the four basic financial statements? Multiple choice question. Statement of ratios Statement of cash flows Balance sheet Income statement

Statement of ratios

Which party has a residual claim to a firm's cash flows? Multiple choice question. Employees Debt holders Managers Stockholders

Stockholders

A person who works for a firm, but is not necessarily an owner, is called Multiple choice question. a shareholder an agent the principal a stockholder

an agent

Sara invested $3,400 six years ago. Today, her investment is worth $4,200. Which formula will correctly compute her rate of return? Multiple choice question. i = [($4,200/$3,400) - 1]1/6 i= ($3,400/$4,200)1/6 i = ($4,200/$3,400)6 -1 i = ($4,200/$3,400)1/6 - 1

i = ($4,200/$3,400)^1/6 - 1

Which of these is the correct formula for computing the interest rate on an investment? Multiple choice question. i = (FVN/PV)N - 1 i = (FVN/PV)1/N i = (FVN/PV)N i = (FVN/PV)1/N - 1

i = (FVN/PV)^1/N - 1

Which one of these best defines a general partnership? Multiple choice question. Three brothers form a business. None of the brothers are liable for the firm's debts. Four sisters form a business which goes bankrupt. Only one sister is liable for all the firm's debts. A brother and sister form a business. The firm goes bankrupt but neither owner has to repay the firm's debts. A brother and sister form a business. Both share jointly unlimited personal liability for the debts of the firm.

A brother and sister form a business. Both share jointly unlimited personal liability for the debts of the firm.

What is the definition of a general partnership? Multiple choice question. A general partnership involves multiple business owners who are each personally responsible for all of the partnership's debts. A general partnership is defined as a business entity where each partner owns an equal share of the business. A general partnership is joint ownership of a firm where each owner is responsible for only a portion of the partnership's debts. A general partnership is defined as joint ownership of a firm with some partners having limited liability while others have unlimited liability.

A general partnership involves multiple business owners who are each personally responsible for all of the partnership's debts.

Which is the best definition of a hybrid organization? Multiple choice question. A hybrid organization is a firm that offers limited liability to its owners in exchange for double taxation, A hybrid organization is a business form that has some attributes of a corporation and some of proprietorships/partnerships. A hybrid organization is a firm that started as a sole proprietorship and changed its form to a corporation. A hybrid organization is a business form that offers single taxation of its profits.

A hybrid organization is a business form that has some attributes of a corporation and some of proprietorships/partnerships.

Which of these actions fits the definition of earnings management? Multiple choice question. A large sale was delayed until the customer could arrange financing for the purchase. Taxes are expensed when they are incurred, not when they are paid. Interest expense is recorded as it accrues. A major sale to a customer was purposely delayed one day so it would be recorded in a later accounting period.

A major sale to a customer was purposely delayed one day so it would be recorded in a later accounting period.

How is a public corporation defined? Multiple choice question. A public corporation is a firm with a large number of owners who directly control its operations. A public corporation is defined as a firm with 1,000 or more individual owners, A public corporation is a firm owned by a large number of stockholders from the general public. A public corporation is defined as a firm with a large number of owners, each of whom has unlimited liability for a percentage of the firm's debts.

A public corporation is a firm owned by a large number of stockholders from the general public.

What is the definition of a sole proprietorship? Multiple choice question. A sole proprietorship is owned by a single individual but is financed by a venture capitalist. A sole proprietorship is owned by a single individual whose personal assets are legally separated from the business assets. A sole proprietorship is owned by a single individual who enjoys limited liability. A sole proprietorship is a business entity that is not legally separate from its owner.

A sole proprietorship is a business entity that is not legally separate from its owner.

Which of these provides the best description of the difference between accounting and finance? Multiple choice question. Finance is the recording of accounting transactions that have occurred or are expected to occur. Accounting and finance are interchangeable terms which have the same meaning and application. Accounting records past activities of a firm while finance helps with decisions regarding the firm's future. Accounting is centered on current and future activities while finance focuses on the analysis of past transactions.

Accounting records past activities of a firm while finance helps with decisions regarding the firm's future.

Select all that apply Which of these assets are generally converted into cash within one year? Select all that apply. Multiple select question. Accounts receivable Inventory Patents and trademarks Equipment

Accounts receivable Inventory

Alicia invested $1,000 three years ago at a fixed rate of 5 percent interest. Which one of these illustrates the compounding of interest on this investment? Multiple choice question. Alicia received $50 in interest in years 1, 2, and 3. Alicia withdrew $1,050 two years ago. Alicia's investment was worth $1,050 after one year and $1,102.50 after two years. Alicia spends her $50 of interest each year as soon as she receives it.

Alicia's investment was worth $1,050 after one year and $1,102.50 after two years.

Which one of these accounts is a noncash expense? Multiple choice question. Legal expense Utilities Amortization Employee benefits

Amortization

What is the definition of an agency problem? Multiple choice question. An agency problem is defined as a situation where the owners of a firm are also the firm's managers. An agency problem is defined as the difficulties that arise when a principal hires an agent and cannot fully monitor the agent's actions. An agency problem is defined as a situation where two employees of a firm cannot work together in harmony. An agency problem is defined as a situation where an employee puts the interests of his employer ahead of his own interests.

An agency problem is defined as the difficulties that arise when a principal hires an agent and cannot fully monitor the agent's actions.

An income statement is best defined by which one of these statements? Multiple choice question. An income statement reflects the total revenues that a firm earns over a period of time and the total expenses incurred to generate those sales. An income statement reflects the profits, but not the losses generated by a firm's revenues and expenses. An income statement reflects the total costs incurred to produce net sales for a given date. An income statement reflects values as of a single date.

An income statement reflects the total revenues that a firm earns over a period of time and the total expenses incurred to generate those sales.

What is the definition of an income statement? Multiple choice question. An income statement reports total revenues and expenses as of a specific date. An income statement reports the cash inflows and outflows of a firm over a specific period of time. An income statement reports total revenues and expenses over a specific period of time. An income statement reports the cash inflows and outflows of a firm as of a specific date.

An income statement reports total revenues and expenses over a specific period of time.

Putting the interests of which party first should be the primary goal of a corporation? Multiple choice question. Employees Government Shareholders Managers

Shareholders

How is an ordinary annuity defined? Multiple choice question. An ordinary annuity is a stream of unequal cash flows which occur at the end of every time period. An ordinary annuity is a series of equal cash flows that occur at random times. An ordinary annuity is a stream of equal cash flows paid at the end of every time period. An ordinary annuity is a series of level and equal cash flows paid at the beginning of every time period.

An ordinary annuity is a stream of equal cash flows paid at the end of every time period.

Which of one of these statements best illustrates the definition of a marginal tax rate? Multiple choice question. Don paid $28,000 in taxes on his $100,000 income, or 28 percent. Fredrico paid no tax on his $16,400 income, or zero percent. Suenette paid $13,400 in taxes on a taxable income of $52,000, or 25.8 percent. Antonio will pay $0.28 more in taxes if his taxable income increases by $1, or 28 percent.

Antonio will pay $0.28 more in taxes if his taxable income increases by $1, or 28 percent

Which one of these formulas correctly defines the Rule of 72? Multiple choice question. Approximate number of years to double money × Interest rate = 72 Interest rate × Exact number of years to double money = 72 Approximate number of years to double money/72 = Interest rate Interest rate × 72 = Approximate number of years to double money

Approximate number of years to double money × Interest rate = 72

Select all that apply Which of these assets have useful lives exceeding one year and are classified as fixed assets? Select all that apply. Multiple select question. Building Land Inventory Machinery

Building Land Machinery

Select all that apply Which of these are equity accounts? Select all that apply. Multiple select question. Common stock Retained earnings Accounts payable Preferred stock

Common stock Retained earnings Preferred stock

Which one of these is the definition of the compounding of interest? Multiple choice question. Compounding is the process of paying equal interest payments on a fixed investment amount over equal periods of time. Compounding involves the receiving and spending of a fixed amount of interest each year for a number of years. Compounding is the payment of interest over multiple years on the original deposit amount only. Compounding is the process of earning interest both on the original investment and on the interest payments received earlier.

Compounding is the process of earning interest both on the original investment and on the interest payments received earlier.

Which one of these best defines corporate governance? Multiple choice question. Corporate governance is the official chain of command within an organization. Corporate governance is the ongoing process of monitoring managers and aligning their incentives with shareholder goals. Corporate governance ensures all decision makers within a firm are also shareholders of that firm. Corporate governance is the compilation and production of a document which outlines acceptable corporate behavior.

Corporate governance is the ongoing process of monitoring managers and aligning their incentives with shareholder goals.

A financial statement provides an Blank______-based picture of a firm's financial condition. Multiple choice question. market management accounting marketing

accounting

_______ holders have first claim to the cash flows of the firm.

Debt

Which one of these accounts is a noncash expense? Multiple choice question. Depreciation Wages Dividends paid Rent

Depreciation

Which term is defined as the process of finding a present value by reducing a future value using the applicable rates of interest? Multiple choice question. Analyzing Investing Compounding Discounting

Discounting

Select all that apply Which of these features could accurately be included in the definition of a corporation? Select all that apply. Multiple select question. Limited access to capital Double taxation Separate legal entity Division of ownership and control

Double taxation Separate legal entity Division of ownership and control

Which of these best defines ethics? Multiple choice question. Ethics is the study of values, morals, and morality. Ethics is the study of how people behave when they are monitored. Ethics is the process of changing people's behaviors to match your own ideals. Ethics is the study of how people act when they are not being monitored.

Ethics is the study of values, morals, and morality.

Which one of these statements related to the recording of financial statement items based on GAAP is (are) correct? Multiple choice question. The cost of salaries are recorded on the income statement when those wages are paid. The cost of a fixed asset is expensed when payment for the asset is made. Expenses related to the production of a product are recorded on the income statement when cash is used to pay those expenses. Expenses related to the production of a product are recorded on the income statement when that product is sold, not when the expenses are paid.

Expenses related to the production of a product are recorded on the income statement when that product is sold, not when the expenses are paid.

Which of these factors are credited for providing financial institutions with high profit margins? Multiple choice question. Inefficient markets and monopoly power Expertise and monopoly power Expertise and unique assets Unique assets and market control

Expertise and unique assets

OCF = Operating cash flow, IOC = Investment in operating capital, and EBIT = Earnings before interest and taxes Which one of these formulas defines free cash flow (FCF)? Multiple choice question. FCF = EBIT(1 - Tax rate) + Depreciation FCF = OCF + Depreciation FCF = OCF - IOC FCF = IOC + OCF

FCF = OCF - IOC

How is free cash flows (FCF) defined? Multiple choice question. FCF is the cash available for distribution to the investors of the firm if no additional investments are made. FCF is the cash available for distribution to the investors of the firm after the investments are made to sustain the firm's ongoing operations. FCF is the cash available for common stock dividends once the preferred dividends have been paid. FCF is another term for the operating cash flows.

FCF is the cash available for distribution to the investors of the firm after the investments are made to sustain the firm's ongoing operations.

Which formula computes the value in year 9 of a $10,000 investment in year 2 if the interest rate is 6 percent? Multiple choice question. PV = $10,000/(1 + 0.06)7 FV = $10,000 × (1 + 0.06)9 FV = $10,000 × (1 + 0.06)7 PV = $10,000/(1 + 0.06)9

FV = $10,000 × (1 + 0.06)^7

Which formula illustrates the value of $100 invested for one year at 5 percent interest? Multiple choice question. FV = $100 × 10.05 FV = $100/(1 + 0.05) FV = $100 × (0.05)1 FV = $100 × (1 + 0.05)

FV = $100 × (1 + 0.05)

How is the future value of $500 invested for one year at 6 percent annual interest computed? Multiple choice question. FV = $500 + $500 × (1 + 0.06) FV = $500 × (1 + 0.06)1 FV = $500 × (1.06)12 FV = $500/(1 + 0.06)1

FV = $500 × (1 + 0.06)^1

Which formula moves a cash flow of $800 ahead six years in time at an interest rate of 5 percent? Multiple choice question. FV = $800 × (1 + 0.05)6 PV = $800/(1 + 0.06)5 PV = $800/(1 + 0.05)6 FV = $800 × (1 + 0.06)5

FV = $800 × (1 + 0.05)6

True or false: Finance is more concerned about the past while accounting is more concerned about the future. True false question.TrueFalse

False

True or false: Ethics is the study of values, morals, and business judgments. True false question.TrueFalse

False Ethics is the study of values, morals, and morality.

How is future value best defined? Multiple choice question. Future value is the value of an investment after one or more periods. Future value is a value that will be reached sometime after today. Future value is the amount that a future cash flow is worth today. Future value is the value that an investment made today will be worth sometime in the future.

Future value is the value of an investment after one or more periods.

Which one of these correctly defines the future value of a $1,000 investment? Multiple choice question. The initial $1,000 investment is the future value. The future value is the value that is obtained by discounting the $1,000 for a stated period of time. Future value is the value of the $1,000 investment at any point in time prior to the date of investment. Future value is the value of the investment at any date after the initial investment date.

Future value is the value of the investment at any date after the initial investment date.

Corporate governance is the set of laws, policies, incentives, and monitors designed to handle issues arising from which one of these? Multiple choice question. Separation of business divisions Separation of geographic business locations Separation of ownership and control Separation of internal and external accountants

Separation of ownership and control

Explain why following GAAP to record sales on an income statement may differ from the cash flows generated by those sales. Multiple choice question. GAAP allows each firm to determine when it will record a sale. Cash flows from sales may occur at a different time. GAAP requires the revenue from a sale be recorded at the time of sale, which may not coincide with the cash flow from the sale. GAAP requires the revenue from a sale be recorded only when all the costs of that sale have been paid, not when the cash flow from the sale occurs. GAAP requires the revenue from a sale be recorded when payment is received, so there are no differences.

GAAP requires the revenue from a sale be recorded at the time of sale, which may not coincide with the cash flow from the sale.

Which one of these statements is correct concerning the relationship of i to PV, FV, and N? Multiple choice question. If you increase the interest rate, all else held constant, the time period will increase. If you increase the interest rate, all else held constant, the time period will remain constant. If you increase the interest rate, all else held constant, the future value will increase. If you increase the interest rate, all else held constant, the present value will increase.

If you increase the interest rate, all else held constant, the future value will increase.

Which one of the following is a use of cash? Multiple choice question. Sale of common stock Increase in a fixed asset Increase in a current liability Net income

Increase in a fixed asset

Select all that apply Which of these is (are) a source of cash? Select all that apply. Multiple select question. Increase in long-term debt Decrease in inventory Increase in accounts receivable Decrease in accounts payable

Increase in long-term debt Decrease in inventory

Which one of the following statements correctly identifies a group that supplies money to the financial markets? Multiple choice question. Banks provide money to the financial markets. The research and development departments of major corporations provide money to the financial markets. Young, start-up firms provide money to the financial markets. Individuals saving for retirement provide money to the financial markets.

Individuals saving for retirement provide money to the financial markets.

Select all that apply Which of the following are finance functions that fall under the supervision of the treasurer? Multiple select question. Interest rate hedging Managing cash Managing taxes Capital spending

Interest rate hedging Managing cash Capital spending

Which of these correctly defines a role of investments? Investments are concerned with which operations should be conducted overseas. Investments addresses which projects a firm should finance.: Investments address the timing of cash flows most desired by investors. Investments are concerned with helping banks determine the amount of capital they can lend. Investments address the timing of cash flows most desired by investors.

Investments address the timing of cash flows most desired by investors.

Select all that apply $100 represents the present value, as it is used in the present value formula, for which of these problems? Select all that apply. Multiple select question. Shawn invested $40 which has increased in value to $100 today. Marcus received $100 today from a bond purchased for $50 several years ago. Janice invested $100 today at 9 percent interest for ten years. Russ' savings account increased in value from $100 five years ago to $111 today.

Janice invested $100 today at 9 percent interest for ten years. Russ' savings account increased in value from $100 five years ago to $111 today.

Which type of depreciation offers the greatest tax deferral benefit in the early years of an asset's life? Multiple choice question. MACRS and straight-line depreciation offer the same tax deferral benefits each year. Neither MACRS nor straight-line depreciation offer any tax deferral benefits. MACRS depreciation Straight-line depreciation

MACRS depreciation

Which type of depreciation offers the greatest tax deferral benefit in the early years of an asset's life? Multiple choice question. MACRS depreciation MACRS and straight-line depreciation offer the same tax deferral benefits each year. Neither MACRS nor straight-line depreciation offer any tax deferral benefits. Straight-line depreciation

MACRS depreciation

Which one of these functions is a treasury function? Multiple choice question. Managing the firm's pension plan Overseeing the data processing functions Overseeing the accounting functions Managing the firm's taxes

Managing the firm's pension plan

Select all that apply Which of these are personal financial decisions? Multiple select question. Marie decided that leasing a car was cheaper for her than buying a car. Samantha financed her mortgage for 20 rather than 30 years to save on interest. Kendyll moved money from her checking account to her savings account to earn interest. Jessica decided to spend her morning mowing the yard rather than cleaning the house.

Marie decided that leasing a car was cheaper for her than buying a car. Samantha financed her mortgage for 20 rather than 30 years to save on interest. Kendyll moved money from her checking account to her savings account to earn interest.

Select all that apply Which of the following are the well-developed viewpoints that have arisen regarding the goal of a firm? Multiple select question. Maximize sales Emphasize social responsibility Maximize market share Maximize shareholder wealth

Maximize shareholder wealth Emphasize social responsibility

Today, both Marti and Neil invested $5,000. Marti's investment will return 4 percent while Neil's will return 8 percent. Both rates will be compounded. Which one of these statements is correct? Multiple choice question. Neil's investment will be worth exactly twice as much as Marti's in ten years. Marti's investment will increase faster in value than Neil's. Neil's investment will increase in value faster than Marti's. Both Marti's and Neil's investment will be worth the same amount after one year.

Neil's investment will increase in value faster than Marti's.

The statement of retained earnings reconciles the dividends paid and the change in retained earnings to which one of these? Multiple choice question. Change in cash and marketable securities Net income Change in common stock Interest income

Net income

The statement of retained earnings reconciles the dividends paid and the change in retained earnings to which one of these? Multiple choice question. Net income Change in cash and marketable securities Interest income Change in common stock

Net income

Which one of these formulas depicts the definition of the statement of retained earnings? Multiple choice question. Net income = Dividends paid + Change in retained earnings Net income = Retained earnings + Dividends paid Net income = Retained earnings - Dividends paid Net income + Dividends paid = Change in retained earnings

Net income = Dividends paid + Change in retained earnings

Charity House has been promised a $25,000 donation five years from today. How much would that gift be worth next year? Assume an interest rate of 8 percent. Multiple choice question. PV = $25,000/(1 + 0.08)4 PV = $25,000/(1 + 0.08)5 PV = $25,000 × (1 + 0.08)4 PV = $25,000 × (1 + 0.08)5

PV = $25,000/(1 + 0.08)^4

Which one of the following is the correct application of the present value formula for this problem: Maria expects to receive $5,000 from her grandmother upon her graduation in three years. What is the current value of this gift if the interest rate is 4 percent? Multiple choice question. $5,000 = FV/(1 + 0.04)3 PV = $5,000/(1 + 0.04)3 $5,000 = FV/(1 + 0.03)4 PV = $5,000/(1 + 0.03)4

PV = $5,000/(1 + 0.04)^3

You expect to receive a gift of $5,000 six years from today. Which formula provides the value of this gift two years from today if the discount rate is 9 percent? Multiple choice question. PV = $5,000 × (1 + 0.09)6 PV = $5,000/(1 + 0.09)6 PV = $5,000/(1 + 0.09)4 PV = $5,000 × (1 + 0.09)4

PV = $5,000/(1 + 0.09)^4

An agency problem is defined as a situation where a firm's managers fail to put the interests of which one of these parties first when making decisions? Multiple choice question. Shareholders Employees Government Community

Shareholders

Which group has individual investors as participants and is a lender of funds to the financial markets? Multiple choice question. People with ideas and no money lend funds to the financial markets. People with both money and ideas lend funds to the financial markets. People with money and no ideas lend funds to the financial markets. People with no ideas and no money lend funds to the financial markets.

People with money and no ideas lend funds to the financial markets.

Earnings management is the process of controlling which of these for a firm? Multiple choice question. Taxes Assets Profits Debt

Profits

What does a balance sheet do? Multiple choice question. Reflects the amount of cash that is available for distribution to the firm's investors. Reflects a firm's cash flows over time Reports a firm's assets, liabilities, and equity at a particular point in time Reports the changes in a firm's assets, liabilities, and equity over a period of time

Reports a firm's assets, liabilities, and equity at a particular point in time

How is risk defined? Multiple choice question. Risk is the probability that an asset will increase in value. Risk is a potential future negative impact to value and/or cash flows. Risk is the certainty that a certain cash flow will occur as predicted. Risk is any event that increases an expected future cash flow.

Risk is a potential future negative impact to value and/or cash flows.

A discussion of risk in which of the following terms best serves as an overall definition of risk? Multiple choice question. Risk is best defined in terms of the percentage of a future cash flow that is guaranteed. Risk is best defined in terms of the timing of all expected future cash flows. Risk is best defined in terms of future expected rewards. Risk is best defined in terms of the probability of a loss and the expected magnitude of that loss.

Risk is best defined in terms of the probability of a loss and the expected magnitude of that loss.

Which one of these statements correctly applies to straight-line depreciation? Multiple choice question. Straight-line depreciation decreases a firm's taxes more in the early years than does MACRS depreciation. Straight-line depreciation provides a greater tax deduction over the life of an asset than does MACRS depreciation. Straight-line depreciation is most commonly used when computing a firm's taxes. Straight-line depreciation is commonly used when compiling financial statements.

Straight-line depreciation is commonly used when compiling financial statements.

The profitability of financial market intermediaries depends upon which of these? Multiple choice question. Aggressive sales and advertising staff Successful execution of unique professional services Market domination within a firm's industry Questionable business practices

Successful execution of unique professional services

Which one of these is an investments activity? Multiple choice question. Kristie pays $200 a month on her credit card. Kate pays $800 a month for food. Sue has $200 a month deposited into a stock mutual fund. Mark spent $800 on a new TV.

Sue has $200 a month deposited into a stock mutual fund.

Which of these is an example of a personal financial decision? Multiple choice question. Faith decided to watch TV rather than one of the DVDs she owns. Tom decided to spend his Saturday cleaning out his garage rather than planting his garden. Sue opted to increase her company retirement plan contribution to 6 percent of her salary. Tami decided to order her new car in red rather than in blue.

Sue opted to increase her company retirement plan contribution to 6 percent of her salary.

Which one of the following best illustrates the definition of a sole proprietorship? Multiple choice question. Ido's portion of a firm's debts was $38,000 but he only lost the $20,000 investment he had in the company when it went bankrupt. Alberto received 60 percent of the income from a business and had that income taxed as personal income. The income Maria received from her business interest was taxed twice as income. Ted was forced to sell his personal home in order to pay the debts of a business he owned in entirety.

Ted was forced to sell his personal home in order to pay the debts of a business he owned in entirety.

Which of these statements correctly defines the Rule of 72? Multiple choice question. The Rule of 72 provides an approximation of the number of years needed to double your money given a particular rate of interest. The Rule of 72 states that you can double your money in one year if you can earn a rate of return of 72 percent for the year. The Rule of 72 is the theory that money has a 72 percent probability of doubling in value within a ten-year period. The Rule of 72 provides an exact number of years needed to double your money if the interest rate is 7.2 percent.

The Rule of 72 provides an approximation of the number of years needed to double your money given a particular rate of interest.

Which one of these correctly summarizes the future value formula? Assume the interest rate is positive. Multiple choice question. The higher the interest rate, the lower the future value, all else held constant. The greater the number of time periods, the higher the future value, all else held constant. The lower the interest rate, the greater the future value, all else held constant. The higher the present value, the lower the future value, all else held constant.

The greater the number of time periods, the higher the future value, all else held constant.

What is the definition of a marginal tax rate? Multiple choice question. The marginal tax rate is the percentage of each dollar of taxable income that the firm pays in taxes. The marginal tax rate is defined as the total tax liability stated as a percentage of the total taxable income. The marginal tax rate is the percentage of every additional dollar of sales that a firm must pay out in taxes. The marginal tax rate is the amount of additional taxes a firm must pay out for every additional dollar of taxable income it earns.

The marginal tax rate is the amount of additional taxes a firm must pay out for every additional dollar of taxable income it earns.

You have decided to save $500 a year for the next five years and then increase that amount to $700 a year for the following five years. Which one of these correctly reflects a multiple annuity time line for the future value of your savings? The time line will have a +$500 cash flow for Years 1 - 10 and an additional +$200 cash flow for Years 6 - 10. The time line will have a -$700 cash flow for Years 1 - 5 and a -$500 cash flow for Years 6-10. The time line will have a -$500 cash flow for Years 1 - 10 and an additional -$200 cash flow for Years 6 - 10. The time line will have a +$500 cash flow for Years 1 - 5 and a +$700 cash flow for Years 6 - 10.

The time line will have a -$500 cash flow for Years 1 - 10 and an additional -$200 cash flow for Years 6 - 10.

Travis owns a bakery and Mia is a baker. How could an agency relationship exist between these two individuals? Multiple choice question. Travis could hire Mia to work for him. Travis would be the agent and Mia would be the principal. Travis could sell part of the business to Mia creating a partnership. Mia would then be the agent and Travis would be the principal. Travis could sell part of the business to Mia creating a partnership. Mia would then be the principal and Travis would be the agent. Travis could hire Mia to work for him. Travis would be the principal and Mia would be the agent.

Travis could hire Mia to work for him. Travis would be the principal and Mia would be the agent.

True or false: If you invest $1,000 and earn compound interest, the dollar amount of your annual interest payment will increase each year. True false question.TrueFalse

True

True or false: Managerial finance helps managers make decisions related to cash management, capital investments, and risk reduction. True false question.TrueFalse

True

What result should you expect from firms that make wise financial decisions? Multiple choice question. You should expect firms to decrease their level of output. You should expect the wealth of individuals to increase in the future. You should expect the economy to remain stable over time. You should expect investors to lose their excess funds.

You should expect the wealth of individuals to increase in the future.

Select all that apply Solving which of the following problems illustrates discounting? Select all that apply. Multiple select question. What is a $1,000 gift to be received next year worth today if the interest rate is 5 percent? How much do you need to invest today at 7 percent interest to have $40,000 available for college expenses in 17 years? Three years ago, you deposited $1,200 in a savings account that pays 1.5 percent interest. How much is the account worth today? If you invest $6,000 today at 5 percent interest, how much will you have 6 years from now?

What is a $1,000 gift to be received next year worth today if the interest rate is 5 percent? How much do you need to invest today at 7 percent interest to have $40,000 available for college expenses in 17 years?