1.

Bob is reviewing Turner Company's common-size financial statements. After reviewing the information provided, which one of the following statements best describes Bob's conclusion about Turner Company's activities from 20X3 to 20X4?

		Account		20X4		20X3
		Cash		5%		10%
		Accounts Receivable		5%		4%
		Inventory		25%		36%
		Property and Equipment		65%		50%
		Accounts Payable		15%		10%
		Long-Term Debt		20%		5%
		Paid-In Capital		5%		5%
		Retained Earnings		60%		80%

Available answer options

Select only one option

A

Retained earnings increased because Tower's cash balance decreased.

B

Inventory levels decreased because accounts payables decreased.

C

Towers paid for property and equipment purchases by assuming long-term debt.

D

The increase in accounts receivable indicates that Tower's sales increased.

2.

An insurer has $2,500,000 in total premiums for the year. It experiences and pays out in one year $1,000,000 in total losses and $500,000 in underwriting expenses. As a result, under statutory accounting, the insurer has a $1,000,000

Available answer options

Select only one option

A

Realized capital gain.

B

Unrealized capital gain.

C

Policyholder surplus loss.

D

Underwriting gain.

3.

Cook Company wants to invest in a new oven that costs $10,000. The cash inflows are expected to be as follows:

		Year 1	$10,000
		Year 2	$8,000
		Year 3	$7,000

If the companys discount rate is 12%, what is the net present value of the project? Disregard the effect of depreciation and taxes.

Available answer options

Select only one option

A

$10,289

B

$11,360

C

$15,307

D

$20,289