1. A balance sheet shows   the financial position of a company
2. A firm has an ACP of 38 days and its annual sales are $5.3 million. What is its account receivable balance?  $551,781
3. A firm has EBIT of $300,000 and depreciation expense of $12,000. Fixed charges total $44,000. Interest expense totals $7,000. What is the firm’s cash coverage ratio?  7.09 times
4. A firm reported working capital of $5.5 million and fixed assets of $20 million. Its fixed asset turnover was 1.2 times. What was the firm’s sales to working capital ratio?   4.36 times
5. A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the expected magnitude of the loss.  Risk
6. An angel investor differs from a venture capitalist because of the  size of investment
7. An employee stock option plan is  a way to align the interests of employees with those of the owners.
8. An investor wanting large returns will be interested in companies that have  high ROES
9. Approximately how long will it take a $2,500 investment to grow to $5,000 at an interest rate of 6 percent?  12 years
10. Charity House has been promised $25,000 donation five years from today. How much would that gift be worth next year? Assume an interest rate of 8 percent.  PV = $25,000/(1 + 0.08)4
11. Earnings per share is computed as  Net income available to common shareholders divided by the number of common shares outstanding
12. Five years ago, Lewis Equipment purchased equipment costing $212,000. Two years ago, the firm paid $32,000 for updates to that equipment. This year, the firm sold the equipment for $189,000. Which of these cash flows is (are) cash inflows to Lewis Equipment?  $189,000 sale price
13. Five years ago, Lewis Equipment purchased equipment costing $212,000. Two years ago, the firm paid $32,000 for updates to that equipment. This year, the firm sold the equipment for $189,000. Which of these cash flows is (are) cash inflows to Lewis Equipment?  $189,000 sale price
14. For publicly traded firms, which of these ratios measure what investors think of the company’s future performance and risk?  market value ratios
15. From a taxation perspective, the form of business organization with the highest business level taxes is the   corporation
16. How is future value best defined?  Future value is the value of an investment after one or more periods.
17. How is the future value of $500 invested for one year at 6 percent annual interest computed?   FV = $500 × (1 + 0.06)1
18. How long will it take to double a $2,000 investment at 10% interest  7.27 years
19. If Apex, Inc. has an ROE = 10 percent, equity multiplier = 3, and profit margin of 5 percent, what is the total asset turnover ratio?  0.6667
20. Individuals who provide small amounts of capital and expert business advice to small firms in exchange for an ownership stake in the firm are referred to as  angel investors
21. Last year Poncho Villa Corporation had an ROA of 16 percent and a dividend payout ratio of 25 percent. What is the internal growth rate   13.64 percent
22. Last year Umbrellas Unlimited Corporation had an ROE of 16.5 percent and a dividend payout ratio of 40 percent. What is the sustainable growth rate?   10.99 percent
23. Louisa invested $12,000 in a business venture which returned $4,000, $6,000, and $8,000 over the past three years. Which of these amounts is (are) cash outflows to Louisa?  $12,000 investment
24. Sara invested $3,400 six years ago. Today, her investment is worth $4,200. Which formula will correctly compute her rate of return   i = ($4,200/$3,400)1/6 – 1
25. Ten years ago, you put $5,000 in a savings account. Today, your investment has the purchasing power of $4,800 What is your real rate of return?
    (just calculate like a normal interest rate)    -0.41%
26. The board of directors   are elected by shareholders.
27. The most commonly accepted groups of asset classes include all of the following except  Machinery and equipment
28. 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
29. These are cash inflows and outflows associated with buying and selling of fixed or other longer-term assets   Cash flows from investing activities
30. These individuals examine the firm’s accounting systems and comment on whether financial statements fairly represent the firm’s financial position.  Auditors
31. This group is elected by stockholders to oversee management in a corporation.  board of directors
32. This is a term to describe non-physical assets like stocks and bonds that get their value from future cash flows   Financial asset
33. This is a term to describe non-physical assets like stocks and bonds that get their value from future cash flows.  financial asset
34. This type of business organization is entirely legally independent from its owners.  Public corporations
35. This type of business organization is entirely legally independent from its owners.  Partnership
36. Tina’s Track Supply’s market-to-book ratio is currently 4.5 times and PE ratio is 10.5 times. If Tina’s Track Supply’s common stock is currently selling at $100 per share, what is the book value per share and earnings per share?   $22.2222, $9.5238, respectively
37. Twelve years ago, you invested $4,800. Today, your investment is worth $8,750. What is your rate of return?  5.13 percent
38. 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
39. When determining a form of business organization, all of the following are considered EXCEPT  the physical location of the business.
40. When determining a form of business organization, all of the following are considered EXCEPT   The physical location of the business
41. Which formula computes the value in year 9 of a $10,000 investment in year 2 if the interest rate is 6 percent?  FV = $10,000 × (1 + 0.06)7
42. Which formula illustrates the value of $100 invested for one year at 5 percent interest?  FV = $100 × (1 + 0.05)
43. Which formula moves a cash flow of $800 ahead six years in time at an interest rate of 5 percent?   FV = $800 × (1 + 0.05)6
44. Which of the assets below is typically the most liquid?  Accounts Receivable
45. Which of the below represents a cash outflow?   A decline in accounts payable
46. Which of the following can use financial concepts to improve their decisions?  financial and nonfinance professionals
47. Which of the following is the maximum growth rate that can be achieved by financing asset growth with new debt and retained earnings?  sustainable growth rate
48. Which of the following managers would NOT use finance?  All of these would use finance.
49. Which of the following measures the number of dollars of sales produced per dollar of fixed assets?  fixed asset turnover ratio
50. Which of the following personal decisions is impacted by finance?  all of these choices are correct.
51. Which of these can be used by interested parties to identify changes in corporate performance?  common-size financial statements
52. Which of these does NOT act as a monitor of how the firm is being run outside the firm  Members of the board of directors
53. Which of these is the correct formula for computing the interest rate on an investment?  i = (FVN/PV)1/N – 1
54. Which one of the following is the correct application of the present value formula for this problem: Maria expects to receive $5,000 from her grandmother upon her graduation in three years.
    
    What is the current value of this gift if the interest rate is 4 percent?   PV = $5,000/(1 + 0.04)3
55. Which one of these correctly defines the future value of a $1,000 investment?  Future value is the value of the investment at any date after the initial investment date.
56. Which one of these is the definition of the compounding of interest?   Compounding is the process of earning interest both on the original investment and on the interest payments received earlier.
57. Which one of these statements is correct concerning the relationship of PV, FV, i, and N? Assume the interest rate is constant and positive.  All else held constant, the longer the time period, the lower the present value.
58. Which ratio measures the number of dollars of operating cash available to meet each dollar of interest and other fixed charges that the firm owes? cash coverage ratio
59. Which statement is incorrect regarding hybrid organizations?  they offer the same type of control as a sole proprietorship
60. Which statement is true of ratio analysis  can provide useful information on a firm’s current position and hint at future performance.
61. Which term is defined as the process of finding a present value by reducing a future value using the applicable rates of interest?   Discounting
62. You are considering a stock investment in one of two firms (Lots of Debt, Inc. and Lots of Equity, Inc.), both of which operate in the same industry. Lots of Debt, Inc. finances its $100 million in assets with $90 million in debt and $10 million in equity. Lots of Equity, Inc. finances its $100 million in assets with $10 million in debt and $90 million in equity.  LotsofDebt: 90 percent, 10 times, 9 times, respectively; and LotsofEquity: 10 percent, 1.11 times, 0.1111 times, respectively
63. You expect to receive a gift of $5,000 six years from today. Which formula provides the value of this gift two years from today if the discount rate is 9 percent?  PV = $5,000/(1 + 0.09)4
64. You invested $1,000 and lost 21 percent of that value during the first year. Which formula computes the rate needed to increase your investment back to $1,000 by the end of the second year?   i=$1,0000/[$1,000 x (1*0.21)]^1/1- 1

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