1. A current ratio is presently 2 : 1 for a corporation that sells sporting goods. Which of the following statements about the ratio is correct?
A. The quick ratio is smaller than the current ratio.
B. The current ratio is unaffected by exchanging bonds for stock.
C. The current ratio is increased by purchasing a store with cash, with potential to increase corporate sales.
D. The current ratio is unchanged by using cash to retire accounts payable.
2. Accountants suggest that assets should be valued at
A. cost.
B. the lower of market or cost.
C. market.
D. the higher of market or cost.
3. If annual interest rates are 10 percent, which of the following values will be the lowest?
A. The future value of a $100 investment after 3 years
B. The future value of an investment after 4 years, if $100 is deposited annually
C. The present value of an investment that will be worth $100 after 2 years
D. The present value of an annuity that will pay $200 a year, at the end of each of the next 4 years
4. If $800 is deposited in a savings account that pays an interest rate of 5 percent annually, how much money will be in the account after 15 years?
A. $1,663
B. $384
C. $1,609
D. $238
5. Profitability ratios are used to measure
A. liquidity.
B. performance.
C. leverage.
D. turnover.
6. If the interest rate on an account is 8 percent annually, what is the present value of $40,000 to be received 5 years from today?
A. $6,188
B. $10,018
C. $22,073
D. $27,223
7. Which of the following is calculated by adding total liabilities plus equity?
A. Total assets
B. Hidden assets
C. Inventory
D. Operating income
8. What is the future value of an ordinary annuity if you deposit $500 per year for the next 10 years in an account that earns an interest rate of 13 percent annually?
A. $1,700
B. $5,000
C. $9,210
D. $14,990
9. At an interest rate of 20 percent compounded annually, how many years will it take for an investment of $6,000 to grow to $10,000?
A. 1 year
B. 3 years
C. 5 years
D. 7 years
10. Which of the following types of ratio is used to measure activity?
A. A leverage ratio
B. A turnover ratio
C. A profitability ratio
D. A liquidity ratio
11. If you deposit $700 in an account today, and the money grows to $1,800 in 14 years, what rate of annual interest have you earned?
A. 4 percent
B. 7 percent
C. 10 percent
D. 50 percent
12. Which of the following is considered to be a current liability?
A. Work-in-process
B. Raw materials
C. Accounts payable
D. Short-term money market instruments
13. Which of the following would be the most likely cause of an increase in inventory turnover?
A. The faster collection of accounts receivable
B. Lowered sales
C. An increase in the inventory level
D. A reduction in the price of the product
14. What is the future value of an ordinary annuity if you deposit $1,500 per year for the next 5 years into an account that earns an interest rate of 5 percent annually?
A. $8,288
B. $7,500
C. $6,322
D. $1,914
15. Which of the following is calculated by subtracting the cost of goods sold and administrative expense from net sales?
A. Operating income
B. Accounts receivable
C. Total liabilities
D. Inventory cost
16. If an account has an annual interest rate of 12 percent, what is the present value of $1,000,000 to be received 10 years from today?
A. $3,105,848
B. $789,633
C. $321,973
D. $56,984
17. If an account currently has a value of $84,000 and earns an interest rate of 4 percent annually, for how many years can you withdraw $10,000 from the account?
A. 8
B. 10
C. 12
D. 20
18. If you deposit $10,000 in an investment that yields 6 percent annually, how many years will it take for your investment to double in value?
A. 12 years
B. 15 years
C. 18 years
D. 20 years
19. Discounting determines the worth of funds to be received in the future in terms of their
A. present value.
B. future value.
C. cost factor.
D. time factor.
20. If annual interest rates are 10 percent, which of the following values will be the greatest?
A. The future value of an annuity after 4 years, if $100 is deposited annually
B. The future value of a $100 investment after 3 years
C. The present value of an investment that will be worth $100 after 2 years
D. The present value of an annuity that will pay $200 a year, at the end of each of the next 4 years.