1

1. Which one of these best fits the description of an agency cost?
2. A.increasing the dividend payments per share
3. B.the payment of interest on a firm's debts
4. C.the payment of corporate income taxes
5. D.the payment required for an outside audit of the firm
6. E.the benefits received from reducing production costs per unit

1 points

QUESTION 2

1. Financial managers primarily create firm value by:
2. A.maximizing current dividends.
3. B.lowering the earnings per share.
4. C.increasing the firm's market share.
5. D.maximizing current sales.
6. E.investing in assets that generate cash in excess of their cost.

1 points

QUESTION 3

1. If a firm is currently profitable, then:
2. A.the timing of the cash flows on proposed projects is irrelevant.
3. B.it will always have sufficient cash to pay its bills in a timely manner.
4. C.its reported sales exceed its costs.
5. D.its cash flows are known with certainty.
6. E.its current cash inflows must exceed its current cash outflows.

1 points

QUESTION 4

1. The ultimate control of a corporation lies in the hands of the corporate:
2. A.chairman of the board.
3. B.board of directors.
4. C.stockholders.
5. D.chief executive officer.
6. E.president.

1 points

QUESTION 5

1. The process of planning and managing a firm's investment inlong-term assets is called:
2. A.capital structure.
3. B.financial depreciation.
4. C.working capital management.
5. D.agency cost analysis.
6. E.capital budgeting.

1 points

QUESTION 6

1. A business created as a distinct legal entity separate and apart from its owners is called a:
2. A.general partnership.
3. B.unlimited liability company.
4. C.corporation.
5. D.sole proprietorship.
6. E.limited partnership.

1 points

QUESTION 7

1. The primary goal of financial management is to:
2. A.maintain steady growth in both sales and net earnings.
3. B.maximize current dividends per share of the existing stock.
4. C.minimize operational costs and maximize firm efficiency.
5. D.maximize the value per share of the existing stock.
6. E.avoid financial distress.

1 points

QUESTION 8

1. Which one of the following is a capital budgeting decision?
2. A.deciding whether or not a new production facility should be built
3. B.determining how much inventory to keep on hand
4. C.deciding how much credit to grant to a particular customer
5. D.deciding when to repay a long-term debt
6. E.determining how much debt should be borrowed from a particular lender

1 points

QUESTION 9

1. One disadvantage of the corporate form of business ownership is the:
2. A.limited liability protection provided for all owners.
3. B.difficulties encountered when changing ownership.
4. C.firm's ability to raise cash.
5. D.double taxation of profits.
6. E.unlimited life of the firm.

1 points

QUESTION 10

1. Which one of the following business types is best suited to raising large amounts of capital?
2. A.corporation
3. B.limited liability company
4. C.general partnership
5. D.sole proprietorship
6. E.limited partnership

1 points

QUESTION 11

1. Which one of the following is least able to help convince managers to work in the best interest of the stockholders?
2. A.threat of a proxy fight
3. B.pay raises based on length of service
4. C.management compensation tied to the market value of the firm's stock
5. D.threat of a takeover of the firm by unsatisfied stockholders
6. E.implementation ofa stock option plan

1 points

QUESTION 12

1. Which one of these equations is an accurate expression of the balance sheet?
2. A.Assets Liabilities Stockholders' equity
3. B.Assets Stockholders' equity Liabilities
4. C.Stockholders' equity Assets Liabilities
5. D.Stockholders' equity Assets + Liabilities
6. E.Liabilities Stockholders' equity Assets

1 points

QUESTION 13

1. Which one of these accounts is classified as a current asset on the balance sheet?
2. A.preferred stock
3. B.net plant and equipment
4. C.accounts payable
5. D.intangible asset
6. E.inventory

1 points

QUESTION 14

1. Net working capital is defined as:
2. A.current assets minus current liabilities.
3. B.current assets plus fixed assets.
4. C.current assets plus stockholders' equity.
5. D.total assets minus total liabilities.
6. E.fixed assets minus long-term liabilities.

1 points

QUESTION 15

1. An asset that can be quickly converted into cash without significant loss in value is referred to as being:
2. A.liquid.
3. B.intangible.
4. C.marketable.
5. D.fixed.
6. E.tangible.

1 points

QUESTION 16

1. Which term defines the tax rate that applies to the next dollar of taxable income earned?
2. A.total
3. B.average
4. C.deductible
5. D.residual
6. E.marginal

1 points

QUESTION 17

1. Other things held constant,earnings per share will increase when:
2. A.the number of shares outstanding increase.
3. B.dividends per share decrease.
4. C.the average tax rate increases.
5. D.depreciation decreases.
6. E.operating income decreases.

1 points

QUESTION 18

1. Which one of these is a non-cash item?
2. A.dividends
3. B.current taxes
4. C.interest expense
5. D.depreciation
6. E.selling expenses

1 points

QUESTION 19

1. An increase in total assets:
2. A.can only occur when a firm has positive net income.
3. B.must be offset by an equal increase in liabilities and stockholders' equity.
4. C.means that stockholders' equity must also increase.
5. D.means that net working capital is also increasing.
6. E.requires an investment in fixed assets.

1 points

QUESTION 20

1. Book value:
2. A.is more of a financial than an accounting valuation.
3. B.is adjusted to market value whenever the market value exceeds the stated book value.
4. C.is equivalent to market value for firms with fixed assets.
5. D.generally tends to exceed market value when fixed assets are included.
6. E.is based on historical cost.

1 points

QUESTION 21

1. Earnings per share:
2. A.will increase if net income decreases and number of shares outstanding increases.
3. B.will increase if net income increases and number of shares outstanding decreases.
4. C.is defined as the addition to retained earnings divided by the number of shares outstanding.
5. D.is the total amount of dividends paid per year on a per share basis.
6. E.must increase at the same rate as the total operating revenue.

1 points

QUESTION 22

1. Depreciation for a profitable firm:
2. A.decreases net fixed assets, net income, and operating cash flows.
3. B.increases the net fixed assets as shown on the balance sheet.
4. C.decreases net income by less than $1 for every $1 of depreciation expense.
5. D.reduces both the net fixed assets and the costs of a firm.
6. E.is a non-cash expense which increases the net operating income.

2 points

QUESTION 23

1. When you are making a financial decision, the most relevant tax rate is the ____ rate.
2. A.fixed
3. B.average
4. C.variable
5. D.total
6. E.marginal

1 points

QUESTION 24

1. A firm starts its year with a positive net working capital. During the year, the firm acquires more short-term liabilities than it does short-term assets. This means that:
2. A.the ending net working capital will be negative.
3. B.the beginning current assets were less than the beginning current liabilities.
4. C.both accounts receivable and inventory decreased during the year.
5. D.accounts payable increased and inventory decreased during the year.
6. E.the ending net working capital can be positive, negative, or equal to zero.

1 points

QUESTION 25

1. A firm has $820 in inventory, $3,200 in fixed assets, $1,210 in accounts receivable, $890 in accounts payable, and $360 in cash. What is the amount of the net working capital?
2. A.$5,590
3. B.$3,600
4. C.$1,500
5. D.$4,700
6. E.$2,390

1 points

QUESTION 26

1. Martha's Enterprises spent $4,100 to purchase equipment three years ago. This equipment is currently valued at $2,700 on today's balance sheet but could actually be sold for $3,200. Net working capital is $400 and long-term debt is $2,300. Assuming the equipment is the firm's only fixed asset and the firm has no other liabilities or assets other than those stated earlier, what is the book value of shareholders' equity?
2. A.$800
3. B.$1,300
4. C.$1,600
5. D.$2,200
6. E.$1,900

1 points

QUESTION 27

1. At the beginning of the year, a firm has current assets of $16,200 and current liabilities of $13,280. At the end of the year, the current assets are $14,800 and the current liabilities are $14,210. What is the change in net working capital?
2. A.$50
3. B.$470
4. C.$470
5. D.$2,330
6. E.$2,330

1 points

QUESTION 28

1. Ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as:
2. A.liquidity measures.
3. B.asset management ratios.
4. C.long-term solvency measures.
5. D.profitability ratios.
6. E.market value ratios.

1 points

QUESTION 29

1. The current ratio is measured as:
2. A.cash on hand divided by current liabilities.
3. B.current assets minus current liabilities.
4. C.current liabilities minus inventory, divided by current assets.
5. D.current assets divided by current liabilities.
6. E.current liabilities divided by current assets.

1 points

QUESTION 30

1. The total asset turnover ratio measures the amount of:
2. A.fixed assets required for every $1 of sales.
3. B.total assets needed for every $1 of sales.
4. C.net income than can be generated by every $1 of fixed assets.
5. D.sales generated by every $1 in total assets.
6. E.net income generated by every $1 in total assets.

1 points

QUESTION 31

1. Which one of the following statements is correct if a firm has a receivables turnover of 10?
2. A.The firm collects on its sales in an average of 36.5 days.
3. B.It takes the firm an average of 36.5 days to sell its items.
4. C.It takes the firm 10 days to collect payment from its customers.
5. D.The firm has ten times more in accounts receivable than it does in cash.
6. E.It takes the firm 36.5 days to sell its inventory and collect the payment from the sale.

1 points

QUESTION 32

1. The most effective method of directly evaluating the financial performance of a firm is to compare the financial ratios of the firm to:
2. A.the firm's ratios from prior time periods and to the ratios of firms with similar operations.
3. B.the average ratios of the firm's international peer group.
4. C.the average ratios of all firms within the same country over a period of time.
5. D.those of the largest conglomerate that has operations in the same industry as the firm.
6. E.those of other firms located in the same geographic area that are similarly sized.

1 points

QUESTION 33

1. Wybro's Markets has sales of $684,000, costs of $437,000, interest paid of $13,800, total assets of $712,000, and depreciation of $109,400. The tax rate is 35 percent and the equity multiplier is 1.6. What is the return on equity?
2. A.11.30%
3. B.18.08%
4. C.13.92%
5. D.7.06%
6. E.15.48%

2 points

QUESTION 34

1. Home Systems has sales of $312,800, cost of goods sold of $218,400, inventory of $46,300, and accounts receivable of $62,700. How many days, on average, does it take the firm to both sell its inventory and collect payment on the sale?
2. A.96.37
3. B.178.21
4. C.124.03
5. D.142.10
6. E.150.54

2 points

QUESTION 35

1. Uptowne Restaurant has sales of $418,000, total equity of $224,400, a tax rate of 34 percent, a debt-equity ratio of 0.37, and a profit margin of 5.1 percent. What is the return on assets?
2. A.13.1%
3. B.6.9%
4. C.7.1%
5. D.11.0%
6. E.9.5%

2 points

QUESTION 36

6. What is the current ratio for 2015?
7. A.1.98
8. B.1.95
9. C.0.95
10. D.0.98
11. E.2.06

1 points

QUESTION 37

6. What are the days' sales in inventory for 2015? (Use ending inventory)
7. A.61.84 days
8. B.62.79 days
9. C.40.08 days
10. D.67.51 days
11. E.42.97 days

2 points

QUESTION 38

6. What are the values of the three components of the DuPont identity for 2015, in the following order: profit margin, total asset turnover, and equity multiplier?
7. A.7.91%; 0.98; 1.48
8. B.11.43%; 1.02; 1.48
9. C.8.57%; 1.02; 0.68
10. D.11.43%; 0.98; 0.68
11. E.7.91%; 1.02; 1.48

2 points

QUESTION 39

6. Deep Falls Timber stock sold for $6.50 a share as of 2015.What was the price-earnings ratio at that time?
7. A.28.14
8. B.19.64
9. C.17.12
10. D.12.82
11. E.29.94

2 points

QUESTION 40

6. Deep Falls Timber stock sold for $6.50 a share as of 2015. What was the market-to-book ratio at that time?
7. A.2.22
8. B.2.78
9. C.3.03
10. D.3.22
11. E.1.78

2 points

QUESTION 41

1. Discount Mart has $876,400 in sales. The profit margin is 3.8 percent. There are 32,500 shares of stock outstanding. The market price per share is $21.60. What is the price-earnings ratio?
2. A.22.60
3. B.21.07
4. C.23.40
5. D.18.47
6. E.19.21

1 points

QUESTION 42

1. Sun Shade's has sales of $363,000, total assets of $323,500, and a profit margin of 14.6 percent. The firm has a total debt ratio of 54 percent. What is the return on equity?
2. A.35.61%
3. B.7.88%
4. C.23.29%
5. D.28.45%
6. E.31.74%