1. A business owned by a solitary individual who has unlimited liability for its debt is called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
2. A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:
A. generally partner.
B. sole proprietor.
C. limited partner.
D. corporate shareholder.
3. Which form of business structure is most associated with agency problems?
A. sole proprietorship
B. general partnership
C. limited partnership
D. corporation
4. Which of the following apply to a partnership that consists solely of general partners?
I. double taxation of partnership profits
II. limited partnership life
III. active involvement in the firm by all the partners
IV. unlimited personal liability for all partnership debts
A. I and II only
B. II and III only
C. I, II, and IV only
D. II, III, and IV only
5. Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date?
A. income statement
B. creditor's statement
C. balance sheet
D. statement of cash flows
6. Your firm has total assets of $5,900, fixed assets of $3,500, equity of $1,300, long-term debt of $2,900, and short-term debt of $1,700. What is the amount of net working capital?
A. -$100
B. $700
C. $900
D. $1,700
7. Which of the following ratios are measures of a firm's liquidity?
I. cash coverage ratio
II. Current ratio
III. debt-equity ratio
IV. quick ratio
A. I and III only
B. II and IV only
C. I, III, and IV only
D. I, II, and III only
8. Kaylor Equipment Rental reportsrevenue of $1,025,000 with costs of $357,000. Operating expense is 345,000 and depreciation is $121,000 andInterest expense is $118,000. The average tax rate is 40 percent. What is the net profit?
A. $32,750
B. $34,450
C. $42,500
D. $50,400
9. Given the tax rates as shown, what is the average tax rate for a firm with taxable income of $311,360?
A. 28.25 percent
B. 31.09 percent
C. 33.62 percent
D. 35.48 percent
10. Webster World has sales of $12,900, costs of $5,800, depreciation expense of $1,100, and interest expense of $700. What is the operating cash flow if the tax rate is 32 percent?
A. $4,704
B. $5,749
C. $5,404
D. $7,036
11.Nielsen Auto Parts had beginning net fixed assets of $218,470 and ending net fixed assets of $209,411. During the year, assets with a combined book value of $6,943 were sold. Depreciation for the year was $42,822. What is the amount of net capital spending?
A. $33,763
B. $40,706
C. $58,218
D. $65,161
12. At the beginning of the year, a firm had current assets of $121,306 and current liabilities of $124,509. At the end of the year, the current assets were $122,418 and the current liabilities were $103,718. What is the change in net working capital?
A. -$9,503
B. $3,387
C. $5,809
D. $21,903
13. At the beginning of the year, the long-term debt of a firm was $72,918 and total current liability was $138,407. At the end of the year, long-term debt was $68,219 and total current liability was $145,838. The interest paid was $6,430. What is the amount of the cash flow to creditors?
A. -$18,348
B. -$12,001
C. $11,129
D. $13,861
14. The Daily News had net income of $121,600 of which 40 percent was distributed to the shareholders as dividends. During the year, the company sold $75,000 worth of common stock. What is the cash flow to stockholders?
A. -$75,000
B. -$26,360
C. -$2,040
D. $123,640
15. Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.
A. asset management
B. long-term solvency
C. short-term solvency
D. profitability
16. R. N. C., Inc. wants to maintain a 40 percent dividend payout ratio and a 6 percent profit margin. The company has a total asset turnover ratio of 0.813 and a debt-equity ratio of 0.47. What is the sustainable rate of growth?
A. 2.6%
B. 3.8%
C. 4.5%
D. 5.8%
17. The Du Pont identity can be used to help managers answer which of the following questions related to a firm's operations?
I. How many sales dollars has the firm generated per each dollar of assets?
II. How many dollars of assets has a firm acquired per each dollar in shareholders' equity?
III. How much net profit is a firm generating per dollar of sales?
IV. Does the firm have the ability to meet its debt obligations in a timely manner?
A. I and III only
B. II and IV only
C. I, II, and III only
D. II, III and IV only
18. The sustainable growth rate:
A. assumes there is no external financing of any kind.
B. assumes no additional long-term debt is available.
C. assumes the debt-equity ratio is constant.
D. assumes all income is retained by the firm.
Use the following table for questions from 19 to 32
19. What is the amount of the net capital spending for 2012?
A. -$382
B. $32,000
C. $38,804
D. $40,375
20. What is the operating cash flow for 2012?
A. $32,900
B. $42,985
C. $53,536
D. $63,800
21. What is the additional investment in net working capital for 2012?
A. $6,700
B. $6,100
C. $-6.700
D. $-6,100
22. What is the cash flow from assets for 2012?
A. $38,500
B. $42,247
C. $42,961
D. $43,915
23. What is the cash flow to creditors in 2012?
A. $18,500
B. $22,100
C. $23,400
D. $24,150
24. What is the quick ratio for 2012?
A. 0.52
B. 0.54
C. 1.32
D. 1.67
25. How many days of sales are in receivables in year 2012?
A. 23.33 days
B. 26.49 days
C. 29.41 days
D. 33.70 days
26. What is debt-equity ratio for 2012?
A. 0.52
B. 0.87
C. 0.94
D. 0.99
27. What is the cash coverage ratio for 2012?
A. 8.43
B. 9.18
C. 11.64
D. 11.82
28. What is the return on equity for 2012?
A. 14.26 percent
B. 15.38 percent
C. 15.64 percent
D. 19.96 percent
29. What is the amount of the dividends paid for 2012?
A. $15,000
B. $22,600
C. $31,200
D. $31,400
30. What are the days' sales in inventory in 2012? That is, how many days on average does it take Precision Tool to sell its inventory in 2012?
A. 130.69 days
B. 159.63 days
C. 172.46 days
D. 183.31 days
31. What is total asset turnover for 2012? That is, how many dollars of sales are being generated from every dollar of assets in 2012 ?
A. $0.88
B. $0.95
C. $1.33
D. $2.59
32. What is the equity multiplier for 2012? That is, how many dollars of assets has a firm acquired per each dollar in shareholders' equity in 2012 (financial leverage risk)?
A. 1.67
B. 1.72
C. 1.99
D. 2.03
33. You are investing $100 today in a savings account at your local bank. Which one of the following terms refers to the value of this investment one year from now?
A. future value
B. present value
C. principal amounts
D. discounted value
34. Steve invested $100 two years ago at 10 percent interest. The first year, he earned $10 interest on his $100 investment. He reinvested the $10. The second year, he earned $11 interest on his $110 investment. The extra $1 he earned in interest the second year is referred to as:
A. free interest.
B. bonus income.
C. simple interest.
D. interest on interest.
35. Tracy invested $1,000 five years ago and earns 4 percent interest on her investment. 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 which one of the following?
A. simplifying
B. compounding
C. aggregation
D. discounting
36. You want to have $1 million in your savings account when you retire. You plan on investing a single lump sum today to fund this goal. You are planning on investing in an account which will pay 7.5 percent annual interest. Which of the following will reduce the amount that you must deposit today if you are to have your desired $1 million on the day you retire?
I. Invest in a different account paying a higher rate of interest.
II. Invest in a different account paying a lower rate of interest.
III. Retire later.
IV. Retire sooner.
A. I only
B. II only
C. I and III only
D. I and IV only
37. Alex invested $10,500 in an account that pays 6 percent simple interest. How much money will he have at the end of four years?
A. $12,967
B. $13,020
C. $13,256
D. $13,500
38. Today, you earn a salary of $36,000. What will be your annual salary twelve years from now if you earn annual raises of 3.6 percent?
A. $55,032.54
B. $57,414.06
C. $58,235.24
D. $59,122.08
39. You invested $1,400 in an account that pays 5 percent simple interest. How much more could you have earned over a 20-year period if the interest had compounded annually?
A. $749.22
B. $830.11
C. $882.19
D. $914.62
40. You are depositing $1,500 in a retirement account today and expect to earn an average return of 7.5 percent on this money. How much additional income will you earn if you leave the money invested for 45 years instead of just 40 years?
A. $10,723.08
B. $11,790.90
C. $12,441.56
D. $12,908.19
41. Your father invested a lump sum 26 years ago at 4.25 percent interest. Today, he gave you the proceeds of that investment which totaled $51,480.79. How much did your father originally invest?
A. $15,929.47
B. $16,500.00
C. $17,444.86
D. $17,500.00
42. Forty years ago, your mother invested $5,000. Today, that investment is worth $430,065.11. What is the average annual rate of return she earned on this investment?
A. 11.68 percent
B. 11.71 percent
C. 11.78 percent
D. 11.91 percent
43.On your ninth birthday, you received $300 which you invested at 4.5 percent interest, compounded annually. Your investment is now worth $756. How old are you today?
A. age 29
B. age 30
C. age 31
D. age 32
44. At 5 percent interest, how long does it take to double your money?
A. 9.82 years
B. 14.21 years
C. 16.42 years
D. 17.28 years
45. Which statement(s) are correct?
1),Present value is larger the shorter the time period
2), Present value is larger the smaller the interest rate
3), Future value increase with the time period
4), Future value decreases with the interest rate
A) 1 and 2
B) 1 and 3
C) 1,2 and 3
D) All of them.