1.What is the starting point in doing a projected discounted cash flows analysis?

A. Start with the projected increase in assets.

B. Start with the required interest rate.

C. Start with the sale forecast.

D. Start with the expense forecast.

2.Which operating cash flow item is converted from the income statement by an adjustment that fully offsets the amount in the income statement?

A. depreciation expense

B. net income

C. sales

D. cost of goods sold

3.What is the correct way to look at a statement of cash flows?

A. A statement of cash flows replaces an income statement evaluating a business.

B. A statement of cash flows provides information that is not used in evaluating a business.

C. A statement of cash flows does not replace an income statement in evaluating business.

D. A statement of cash flows provides the same information as an income statement in evaluating business.

4.You are interested in a used specialty machine that would cost $110,000 new, would have a lifespan of ten years, and a $10,000 salvage value. If the machine is five years old, what is the fair value price?

A. 100000

B. 10000

C. 55000

D. 60000

5. After making all your forecasts for next year, you are left with accounts payable that will be $10,000 higher than this year. Which implication does this have for the next year?

A. Your sales must increase by $10,000 over your forecast.

B. Your retained earning will be reduced by $10,000.

C. You will need an additional $10,000 in paid-in-capital.

D. Your payable have been incorrectly forecasted.

6. Which ratio indicates the market expectations of the highest potential for future growth?

A. ABC inc., with a P/E ratio of 55

B. XYZ inc., with a P/E ratio of 25

C. JKL inc., with a debt ration of 75

D. EFG inc., with a current ration of 4

7. Why should a company prepare forecasted financial statements?

A. to satisfy the reporting requirements of the Securities and Exchange Commission.

B. to set a baseline against which to compare future results.

C. to present growth estimates to potential investors.

D. to try options out on paper before implementing them.

8. Why is the DuPont framework used in analyzing a company's performance?

A. to determine a company's profitability.

B. to understand why a company's ROE has changed.

C. to determine the return on investment for a company.

D. to understand changes in a company's efficiency.

9.Which company would have the lowest price-to-sales ratio?

A. LMN Corp. has a 6.5% return on sale, and 3.5% expected sales growth.

B. EFG Inc. has a 3.5% return on sales, and 4.5% expected sales growth.

C. RST Inc. has a 6.5% return on sales, and 5.0% expected sales growth.

D. ABC Corp. has a 3.5% return on sales, and 3.5% expected sales growth.

10.When you are analyzing your company's financial performance, which ratio shows you the company's liquidity?

A. price-eating ratio

B. debt ratio

C. return on equity ratio

D. current ratio