1. (TCO 1) Which one of the following actions best matches the primary goal of financial management? (Points : 3)

increasing the net working capital while lowering the long-term asset requirements improving the operating efficiency, thereby increasing the market value of the stock increasing the firm%u2019s market share reducing fixed costs and increasing variable costs increasing the liquidity of the firm by transferring short-term debt into long-term debt

2. (TCO 1) When analyzing alternative capital structures for a firm, a financial manager must consider which of the following? (Points : 3)

type of loan amount of funds needed cost of funds mix of debt and equity all of the above

3. (TCO 1) Market value is important to the financial manager because: (Points : 3)

It reflects the value of the asset, based on generally-accepted accounting principles. Is a crucial component of the balance sheet, and can impact the financial statements. Market value reflects the amount someone is willing to pay today for an asset. The market value of an asset reflects its historical cost. None of the above

4. (TCO 1) Which of the following is true regarding income statements? (Points : 3)

It reveals the net cash flows of a firm over a stated period of time. It reflects the financial position of a firm as of a particular date. It records revenue only when cash is received for the product or service provided. It records expenses based on the recognition principle. None of the above is a true statement.

5. (TCO1) Telemarket Inc. has sales of $625,000. They paid $43,000 in interest during the year and depreciation was $79,000. Administrative costs were $100,000 and other costs were $160,000. Assuming a tax rate of 35 percent, what is Telemarket%u2019s taxes figure? (Points : 3)

$100,100 $85,050 $112,700 $72,900

6. (TCO 1) Home Best Hardware had $315,000 in taxable income last year. Using the tax rates provided in Table 2.3, what is the approximate average tax rate? (Points : 3)

35% 39% 34% 32%

7. (TCO 1) Pizza A had earnings after taxes of $390,000 in the year 2008 and 300,000 shares outstanding. In year 2009, earnings after taxes increased by 20 percent to $468,000 and 25,000 new shares were issued for a total of 325,000 shares. What is the EPS figure for 2008? (Points : 3)

$1.30 $1.44 $0.77 $0.69

8. (TCO 1) The financial statement that summarizes a firm's operations over a period of time is called a(n): (Points : 3)

income statement. cash flow statement. production report. balance sheet. periodic operating statement.

9. (TCO 1) Best Electronics has EBIT of $450,000, interest of $30,000, taxes of $50,000, and depreciation of $80,000. What is the company%u2019s operating cash flow? (Points : 3)

$497,200 $480,000 $530,000 $470,000 $450,000

10. (TCO 3) Linda invested $15,000 today, in an investment that pays 6.50 percent interest, compounded semi-annually. Which one of the following statements is correct concerning this investment? (Points : 3)

Linda will receive equal interest payments every six months over the life of the investment. Linda would have earned more interest if she had invested in an account paying 6.50 percent simple interest. Linda will earn more interest in year 5 than she will in year 4. Linda would have earned more interest if she had invested in an account paying annual interest. Linda will earn less and less interest each year over the life of the investment.

11. (TCO 3) Mr. Smith will receive $8,500 a year for the next 14 years from a contract. If the interest rate on this investment is eight percent, what is the approximate current value of these future payments? (Points : 3)

$70,070 $53,500 $110,200 $96,700

12. (TCO 3) KED Engineering acquired an additional business unit for $310,000. The seller agreed to accept annual payments of $67,000 at an interest rate of 6.5 percent. How many years will it take KED Engineering to pay for this purchase? (Points : 3)

4.70 years 5.68 years 6.21 years 7.84 years 8.12 years

13. (TCO 3) Fine Oak Woodworks is considering a project that has cash flows of $5,000, $3,000, and $8,000 for the next three years. If the appropriate discount rate of this project is 10 percent, which of the following statements is true? (Points : 3)

The current value of the project%u2019s inflows is $16,000 The approximate current value of the project%u2019s inflows is $13,000 The current value of the project%u2019s inflows is somewhere in between $14,000 and $16,000 The project should be rejected because its present value is negative

14. (TCO 4) You are considering two investments. Investment I, is in a software company and Investment II, is an engineering company. The investments offer the following cash flows:

Year	Software Company	Engineering Company
1	$5,000	$15,000
2	$3,000	$8,000
3	$4,000	$9,000
4	$3,600	$11,000

If the appropriate discount rate is 10 percent, what is the approximate present value of the Software Company investment? (Points : 3)

$15,600 $12,500 $12,750 $15,000

15. (TCO 3) North Bank offers you an APR of 9.76 percent compounded semiannually, and South Bank offers you an effective rate of 9 percent on a business loan. Which bank should you choose and why? (Points : 3)

South Bank because its effective rate is higher. North Bank because the APR is lower. South Bank because its effective rate is lower. North Bank because its effective rate is lower.