1. Company X signs a long term contract and recognizes the full amount of the contract as revenue at signing. This is an example of which unethical behavior?

a	shift expenses to a later period

b	recording too much revenue

c	income smoothing

d	recording revenue too soon

e	boosting income with one-time gain

2. Which of the following is true regarding depreciation methods and deferred taxes?

The primary source of deferred taxes is companies use of straight line depreciation when reporting to shareholders

Using accelerated depreciation methods for fixed assets provides for higher reported net income than straight line depreciation

The primary source of deferred taxes is from companies use of accelerated depreciation in reporting net income to the Internal Revenue Service

Companies report higher depreciation and net income using straight line depreciation for fixed assets

Companies report lower depreciation and higher net income using accelerated depreciation for fixed assets

3. Given the following, calculate WACC for company XYZ:

Debt: $600 M

Equity: $700 M

Cost on Debt: 5.0%

Cost on Equity: 11.0%

Tax Rate: 40.0%

4.

Which of the following is true regarding capital budgeting?

An investment to build inventory is an example of a capital budgeting decision

A company should invest in new machinery if it will result in lower profit margins

A company should always invest in projects with positive ROI

The key metrics in evaluating capital budgeting decisions are ROI and cost of capital

Capital budgeting is related to the composition of the companys liabilities and equity

5.Based on the following, which is true?

Company 1 - Return on Assets: 13%, Net Profit Margin: 4.6%, Debt / Equity: 1.2x Company 2 - Return on Assets: 10%, Net Profit Margin: 6.2%, Debt / Equity: 2.0x Company 3 - Return on Assets: 12%, Net Profit Margin: 5.1%, Debt / Equity: 1.3x

a	Company 2 is the least leveraged firm

b	Company 3 is the most leveraged firm

c	Company 1 is the best at generating profits from its assets

d	Company 1 is better at generating profits from its sales than Company 3

e	Company 3 is the least efficient at generating sales on its assets

6. Based on the following information about Company X, which is true? A/P Turnover: 20 Total Asset Turnover: 3.10 Days Payable Outstanding: 19 Times Interest Earned: 12 Debt/Equity: 1.4

a	Company X pays bills in 19 days

b	Company X has more equity than debt

c	Company X pays bills in 20 days

d	Company X pays interest in 12 days

e	Company X generates $3.10 in profit per dollar invested in assets

7.Given the following information calculate Operating Cycle and Cash Conversion Cycle for MBA Inc.

Days Sales Outstanding: 20

Days Payable Outstanding: 30

Day Sales in Inventory: 80

a	Operating Cycle= 130, Cash Conversion Cycle = 90

b	Operating Cycle= 60, Cash Conversion Cycle = 105

c	Operating Cycle= 100, Cash Conversion Cycle = 70

d	Operating Cycle= 60, Cash Conversion Cycle = 110

e	Operating Cycle= 70, Cash Conversion Cycle = 60

8.Which of the following would result in a company having a HIGHER weighted average cost of capital (WACC)?

a	Lower financial risk of a default on debt

b	Higher cost of equity

c	Higher tax rate

d	Higher profit margins

e	Lower interest rate on debt

9.

Given the following information, calculate Woolridge Co.s P/E ratio.

Revenue: $8,000,000

EBIT: $6,000,000

Net Income: $2,000,000

Earnings Per Share: 5.6

Stock Price: $45

a

5.7

b

4.5

c

8.0

d

1.3

e

5.6