Problem: Assume that you purchase a 6-year, 8 percent savings certificate for $1,000. If interest in compounded annually, what will be the value of the certificate when it matures?
a. $630.17.
b. $1,469.33
c. $ 1, 677.10.
d. $1,586.87.
Problem 2. Which of the following statements about financial ratios is true?
a. With respect to the ratio of assets to equity, a value of 4.0 indicates less risk than a value of 3.0.
b. With respect to an organization's average collection period, the organization would prefer a high value rather than a low value.
c. High coverage ratios indicate a lesser ability to pay interest charges than low coverage ratios.
d. An HMO will most likely have total asset turnover values greater than for an acute care hospital.
Problem 3. To increase the level of interest rates, the Federal Reserve:
a. buys treasury securities
b. sells treasury securities
c. mandates that interest rates increase to a prescribed level.
d. Both A and C.
Problem 4. Which of the following capital structures most likely describes an investor-owned firm after a leveraged buyout?
a. 100% equity, 0% debt.
b. 50% equity, 50% debt.
c. 2% equity, 98% debt.
d. 0% equity, 100% debt.
Problem 5. A medical facility organized as a limited partnership provides the limited partners with which of the following advantages or disadvantages?
I. investment liability is limited only to the money they invest.
II. income is taxed only at their personal income tax level.
III. they can have an active role in management of the partnership.
a. I and II only
b. I and III only
c. II and III only
d. I, II, and III
Problem 6. If a firm has five accounting items amounting to: cash of $10,000, accounts payable of $7,000, office building of $65,000, debt of $46,000, then the amount of owner's equity is:
a. $22,000
b. $37,000
c. $128,000
d. $75,000
Problem 7. Which of the following statements about inventory and prepaid expenses is true?
a. Inventory is a current asset and prepaid expenses is a current liability.
b. Inventory is a current asset and prepaid expenses is a current asset.
c. Inventory is a current liability and prepaid expenses is a current asset.
d. Inventory is a current liability and prepaid expenses is a current liability.
Problem 8. From the point of view of budgets for revenue and cost, responsibility centers have:
a. revenue centers only
b. cost centers only
c. revenue and cost centers
d. neither revenue nor cost centers
Problem 9. All of the following are candidates for investment of excess cash except:
a. U.S. Treasury bills
b. U.S. Treasury bonds
c. Commercial paper
d. Both A and B are not candidates for investment of excess cash.
Problem 10. Trade credit terms quoted as "1/20, net 60" carry an opportunity cost of:
a. 9.125%
b. 18.25%
c. 36.5%
e. 4.5625%