1. A balance sheet shows   the financial position of a company
2. A dollar paid (or received) in the future is   not worth as much as a dollar paid (or received) today
3. A firm had EBIT of $1,000 paid taxes of $225 expensed depreciation at $13 and its gross fixed assets increased by $25. What was the firm’s operating cash flow?   $788
4. A firm has an average collection period of 13 days. The industry average ACP is 27 days. Which of the following statements is true given this information?   The firm could probably increase its sales by relaxing its strict accounts receivable policy.
5. A firm that is efficient in inventory management will have:   a high inventory turnover and a low days sales in inventory ratio
6. a perpetuity, a special form of annuity, pays cash flows:   periodically forever
7. ABC Inc. has $100 in cash on its balance sheet at the end of 2009. During 2010, the firm issued $450 in common stock, reduced its notes payable by $40, purchased fixed assets in the amount of $750, and had cash flows from operating activities of $315. How much cash did ABC Inc. have on its balance sheet at the end of 2010?   $75
8. All of the following are cash flows associated with financing activities EXCEPT  Increase in Accounts Payable
9. all of the following are correct except:  people that value future consumption less than most of the other people will most likely end up being net lenders in the market
10. All of the statements below are correct EXCEPT:   Market stock price is useful because it is used to adjust the value of equity on the balance sheet so that the correct market value is provided in the common stock account
11. An equity-financed firm will  Pay more in income taxes than an otherwise identical debt-financed firm
12. An income statement shows   The performance of a company over a period of time
13. An investor wanting large returns will be interested in companies that have:   High ROEs
14. As individual legal entities corporations assume liability for their own debts so the shareholders hold  only limited liability
15. assume $500 to be received in year 3 has a present value equal to $400. if we keep the same interest rate assumption but instead assume that the 500 is received in year 2 we know that the resulting present value is   larger than 500
16. Assume a company’s total asset turnover is equal to 4.75. What is the correct interpretation of this ratio?    Each dollar of total assets generates $4.75 of sales
17. Assume inventory turnover ratio is equal to 10. What is the days’ sales in inventory equal to?   36.5 days
18. Assume that companies A and B both have the same dollar value of total assets and both have return on assets equal to 16%. Further assume that company A has a return on equity also equal to 16%, which company B has a return on equity equal to 22%. Based on this information we would most likely conclude that   Company B has more debt than Company A
19. Assume that company X had accounts receivable turnover equal to 12 in 2014, and equal to 14 in 2015. Further assume that the relevant industry average for this ratio is 20. Based on this information we would most likely conclude that company X   should be more careful with awarding credit to its customers, or should improve its collecting of accounts receivable
20. Assume that for year 2015 company A has a current ratio equal to 1.5, while company B has a current ratio equal to 2.5. Based on this information we would most likely conclude that:   Company B has a better liquidity position than company A
21. assume we want to improve a cash flow from period 7 to period 5. the calculation of the new amount of the cash flow would be   adding the interest rate to number one and raising the result to the power of 2
22. assume you deposit 100 in an account today and that a friend of yours deposits 100 in an account of another bank. also today in one year you have 110 in your account and your friend has 108 in his account. we can conclude that   your friend earned a lower rate of interest than you
23. compounding interest means the following   interest is earned not only on the initial balance but also on previously received interest
24. Compounding monthly versus annually causes the interest rate to be effectively _______, and thus the future value   higher; is also higher
25. Decisions made by financial managers should primarily focus on increasing what?  Market value per share of outstanding stocks
26. Earnings per share is computed as   Net income available to common shareholders divided by the number of common shares outstanding
27. Example of aligning managers personal interests with those of the owners   offer managers shares of common stock of the firm
28. Financial management involves decisions about which of the following?   Which projects to fund, type of capita, and min tax
29. Financial statements of a corporation can be typically found in   The annual Report
30. Firm A and Firm B have the same total assets, ROA and profit margin (greater than 0). However, Firm B has a higher debt ratio and interest expense than firm A. Which of the following statements is correct?    Firm B must have higher ROE than Firm A
31. Firms with high PE ratios _____________   usually are expected to experience rapid increases in future dividends and/or earnings growth
32. Firms with high ROE ratios   usually are expected to experience rapid increases in future dividends and/or earnings growth
33. For publicly traded firms, which of these ratios measure what investors think of the company’s future performance and risk?  Market value ratios
34. For which of the following would one expect the book value of the asset to differ widely from its market value?   Fixed Assets
35. How are future values affected by changes in interest rates?   the higher the interest rates the larger the future values will be
36. How are present values affected by changes in interest rates?  the lower interest rate the larger the present value will be
37. If a company reports a large amount of net income on its income statement during a year, the firm will have   Any of these scenarios are possible (zero cash flow, negative cash flow, positive cash flow)
38. Items on the balance sheet are usually listed   In the order of liquidity
39. Lemmon Inc. lists fixed assets of $100 on its balance sheet. The firms fixed assets have recently been appraised at $140. The firm’s balance sheet also lists current assets at $15. Current assets were appraised at $16.50. Current liabilities book and market values stand at $12 and the firm’s long-term debt is $40. Calculate the market value of the firm’s stockholders’ equity  $104.50
40. Level sets of frequent, consistent cash flows are called   annuities
41. Net working capital is computed as  Current assets minus current liabilities
42. Not all cash a company generates will be returned to the investors. Which of the following will not reduce the amount of capital returned to the investors?   Dividends
43. people burrow Money because they expect:   their purchases to give them the satisfaction in the future that compensates them for the interest payments charged on the loan
44. Samantha opened a savings account this morning. Her money will earn 3.5 percent interest, compounded annually. After four years, her savings account will be worth $5,000. Assume she will not make any withdrawals. Given this, which one of the following statements is true?  Samantha could have deposited less money and still had 5,600 in five years if she could have earned 5.5 % interest
45. Subarea of finance helps facilitate the capital flows between investors and companies  financial institutions and markets
46. Subarea of finance involves methods and techniques to make appropriate decision about what kind of securities to own, which firs securities to buy and how to be paid back in the form the investor wishes   Investments
47. The calculation of free cash flow attempts to estimate  The amount of cash generated by the company that could be distributed to investors without jeopardizing future operations of the company
48. The cash paid in capital expenditures to improve fixed assets, listed on the cash flow statement, can be computed as  Gross fixed assets from this year minus gross fixed assets from last year
49. The difference between ROE and ROA is that   ROE takes into account the impact of financial leverage
50. The effective annual rate   Will always be at least as large as the annual periodic rate
51. The portion of a company’s profits that are kept by the company rather than distributed to the stockholders as cash dividends is referred to as   Retained earnings
52. The practice generally known as double taxation is due to   Corporate incomes being taxed as the corporate level, then again at the shareholder level when corporate profits are paid out as dividends
53. The present value of annuity payments made far into the future is   worth very little today
54. The process of figuring out how much an amount that you expect to receive in the future is worth today is called   discounting
55. The simple form of an annualized interest rate is called the annual percentage rate (APR). The effective annual rate (EAR) is a   more accurate measure of the interest rate paid for monthly compounding
56. These are cash inflows and outflows associated with buying and selling of fixed or other longer-term assets   Cash flows from investing activities
57. This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow  financial asset
58. time value of money concepts can be used by   all of these of time value concepts
59. times value of money concepts can be used by  all of these are users of time value of money concepts
60. to move a cash flow in time from period 4 to period 6 we need to   multiply the cash flow by a number greater than one
61. 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?   Compounding
62. Trend analysis   is used to evaluate changes in a company’s performance over time
63. We call the process of earning interest on both the original deposit and on the earlier interest payments:   compounding
64. We should expect all of these to be true EXCEPT   higher future value with a lower rate of interest
65. What are the consequences of paying additional dividends?    The firm will have a lower amount of internally generated cash to support firm growth.
66. What would be the most likely result of a company’s decision to use accelerated (as opposed to straight line) depreciation?     It would shift some of the current and near future tax burden into later years
67. when computing the rate of return from selling an investment, the number of years between the present and future cash flows is an important factor in determining   the annual rate earned
68. When saving for future expenditures, we can add the _______ of contributions over time to see what the total will be worth at some point in time   future value
69. when you get your credit card bill, if you make a payment larger than the minimum payment:  you will reduce the payoff time
70. Which financial statement reports a firm’s assets, liabilities, and equity at a particular point in time?   balance sheet
71. Which financial statement shows the total revenues that a firm earns and the total expenses the firm incurs to generate those revenues over a specific period of time-generally one year?   Income statement
72. Which is correct?   Sole proprietorship gets sued, owner is liable
73. Which of the activities below is the most likely to result in a series of depreciation expenses over time?   Acquisition of an office computer
74. Which of the assets below is typically the most liquid?    Accounts Receivable
75. Which of the below IS NOT included in the calculation of operating income?   Interest Expense
76. Which of the below is the LEAST LIKELY to be a user of a company’s financial ratios?  The Internal Revenue Service (IRS) of the federal government
77. Which of the below represents a cash outflow?   A decline in accounts payable
78. Which of the below represents a cash outflow?  A decline in accounts payable
79. Which of the below should be the most alarming to a company’s CEO looking at the company’s cash flow statement?   A negative total for the operating activities section
80. Which of the below would be the LEAST LIKELY to lead to a higher times interest earned ratio?  A lower tax rate
81. Which of the following activities will increase a firm’s current ratio?  None of these statements will increase a firm’s current ratio.
82. Which of the following is a use of cash?   The firm decreases its accrued wages and taxes
83. which of the following is not true when developing a time line   cash outflows are designated with a positive number
84. Which of the following refer to ratios that measure the relationship between a firm’s liquid (or current) assets and its current liabilities   Liquidity
85. Which of the following statements is correct?   A high average payment period and a low accounts payable turnover are a sign of good management
86. which of the following statements is incorrect with respect to time lines? interest rates are not included on our time lines
87. Which of the following will increase a firm’s quick ratio assuming no other accounts change?  All of these statements will increase a firm’s quick ratio
88. Which of the following will increase the present value of an annuity?   The discount rate decreases
89. which of the following will not increase a present value?  increase the interest rate
90. Which of the statements below is correct?  Having a higher debt ratio is neither good nor bad
91. Which of these statements is true?  A high inventory turnover ratio or a low days’ sales in inventory is a sign of good inventory management
92. Which ratio assesses how efficiently a firm uses its fixed assets   Fixed asset turnover
93. Which ratio measures how many days inventory is held before the final product is sold?  Days’ sales in inventory
94. Which ratio measures the number of dollars of operating earnings available to meet each dollar of interest obligations on the firm’s debt?   Times interest earned
95. Which ratio measures the number of dollars of sales produced per dollar of inventory?  Inventory turnover
96. Which statement is true?   Extremely high levels of liquidity guard against liquidity liquidity crises, but at the cost of lower return on assets
97. Which type of ratio measures a firm’s ability to pay off short-term obligations without relying on inventory sales?   Quick or acid test
98. Which type of ratio measures the dollars of current assets available to pay each dollar of current liabilities?   Current

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