1. Which of the following statements is correct?

a. different firms might follow different rules under GAAP

b.firms might window dress in order to make their statements look better

c. some firms might use Off Balance Sheet forms of financing

d. balance sheets report market values of assets

e. all of the above statements are true

2. Which Statement is False?

a. Default Risk is the likelihood that the company will go bankrupt prior to the bond's maturity date.

b. AAA rated bonds pay the highest interest rates

c. The cost of Debt is just the Yield to Maturity on the firm's bonds

d. Discount bonds have a yield to maturity that is higher than its coupon rate.

Suppose that Sales for the entire year were $500,000 and COGS was 80%of sales. The inventory conversion period is 30 days, the Accounts Payable Balance is $16000 and the operating cycle is 50 days. What is the accounts recievable balance?

a. 15,450

b. 19,180

c. 23,820

d. 27,397

e. 31,220

4. What is the effective cost of trade credit if the terms are 3/10, net 40 assuming that customers forego the discount and pay on the 40th day?

a. 26.3%

b. 28.1%

c. 34.6%

d. 37.7%

e. 44.9%

5. I recently received an offer for a 0% credit card for 1 year with $500 fee paid up front, a $10,000 credit limit and a minimum monthly payment of $200. Basically, I was able to borrow $9,500 today, paid $200 per month for 11 months and paid $200 plus the remaining balance of $7600 in the 12th month. What is the nominal cost of this offer?

a. 3.1%

b. 4.3%

c. 5.2%

d. 5.8%

e. 6.4%