MBA 702 - Choi - M2 Study Set
Which one of the following will produce the lowest present value interest factor?
8 percent interest for 10 years
Which one of these will increase the present value of a set amount to be received sometime in the future?
Decrease in the interest rate.
Which one of these identifies the relationship between the return on assets and the return on equity?
DuPont identity
Which one of the following accurately describes the three parts of the DuPont identity?
Equity multiplier, profit margin, and total asset turnover
You are investing $100 today in a savings account. Which one of the following terms refers to the total value of this investment one year from now?
Future value
Phillippe invested $1,000 ten years ago and expected to have $1,800 today. He has neither added nor withdrawn any money since his initial investment. All interest was reinvested and compounded annually. As it turns out, he only has $1,680 in his account today. Which one of the following must be true?
He earned a lower interest rate than he expected.
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 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?
I, II, and III only
Change Lee is going to receive $20,000 six years from now. Soo Lee is going to receive $20,000 nine years from now. Which one of the following statements is correct if both individuals apply a discount rate of 7 percent?
In today's dollars, Change Lee's money is worth more than Soo Lee's.
Which one of the following statements correctly defines a time value of money relationship?
Time and present value are inversely related, all else held constant.
An increase in which of the following must increase the return on equity, all else constant?
Total asset turnover and debt-equity ratio
RJ's has a fixed asset turnover rate of 1.26 and a total asset turnover rate of .97. Sam's has a fixed asset turnover rate of 1.31 and a total asset turnover rate of .94. Both companies have similar operations. Based on this information, RJ's must be doing which one of the following?
Utilizing its total assets more efficiently than Sam's
Kurt won a lottery and will receive $1,000 a year for the next 50 years. The current value of these winnings is called the:
present value.
Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as ______ ratios.
profitability
A common-size income statement is an accounting statement that expresses all of a firm's expenses as a percentage of:
sales
Ratios that measure a firm's liquidity are known as ______ ratios.
short-term solvency
The sources and uses of cash over a stated period of time are reflected on the:
statement of cash flows
On a common-size balance sheet all accounts for the current year are expressed as a percentage of:
total assets for the current year
A perpetuity is defined as:
unending equal payments paid at equal time intervals.
An increase in which one of the following will increase a firm's quick ratio without affecting its cash ratio?
Accounts receivable
Which one of the following will decrease if a firm can decrease its operating costs, all else constant?
Price-earnings ratios
The interest earned on both the initial principal and the interest reinvested from prior periods is called:
compound interest.
Christina invested $3,000 five years ago and earns 2 percent annual interest. By leaving her interest earnings in her account, she increases the amount of interest she earns each year. The way she is handling her interest income is referred to as:
compounding.
Steve just computed the present value of a $10,000 bonus he will receive next year. The interest rate he used in his computation is referred to as the:
discount rate.
The process of determining the present value of future cash flows in order to know their value today is referred to as:
discounted cash flow valuation.
Terry is calculating the present value of a bonus he will receive next year. The process he is using is called:
discounting.
An ordinary annuity is best defined as:
equal payments paid at the end of regular intervals over a stated time period.
If a company produces a return on assets of 14 percent and also a return on equity of 14 percent, then the firm:
has an equity multiplier of 1.0.
All of the following issues represent problems encountered when comparing the financial statements of two separate entities except the issue of the companies
having the same fiscal year
Your grandmother has promised to give you $10,000 when you graduate from college. If you speed up your graduation by one year and graduate two years from now rather than the expected three years, the present value of this gift will:
increase.
Art invested $100 two years ago at 8 percent interest. The first year, he earned $8.64 interest on his $108 investment. The extra $.64 he earned in interest the second year is referred to as:
interest on interest.
Your goal is to have $1 million in your retirement savings on the day you retire. To fund this goal, you will make one lump sum deposit today. If you plan to retire ______ rather than ______ and earn a ______ rate of interest, then you can deposit a smaller lump sum today.
later; sooner, high
The price-sales ratio is especially useful when analyzing firms that have:
negative earnings.