QUESTION 1 A decline in the net fixed assets account between year-end 2013 and year-end 2014 is a clear indication that fixed assets were sold during 2014. True False

QUESTION 2 The goal of maximizing profits in the short run may conflict with maximization of owners' wealth. True False

QUESTION 3 Current liabilities are defined as liabilities with a maturity of more than a year. True False

QUESTION 4 The accrual principle requires that revenue not be recognized until payment from a sale is received. True False

QUESTION 5 Which of the following statements concerning the cash flow-production cycle is True?

The profits reported in a given time period equal the cash flows generated.

The movement of cash to inventory, to accounts receivable, and back to cash is known as the firms working capital cycle.

A companys operations and finances are independent of each other.

QUESTION 6 Company XYZ has Income before taxes of $100,000 which includes dividend income of $30,000 Dividend income tax exemption is 70%. Use a tax rate of 25% for any tax calculation. The Net Income after Tax is: (Hint: do an income statement) $59,250 $39,000 $65,250

QUESTION 7 Return on assets can be calculated as profit margin times asset turnover. True False

QUESTION 8 Only ratio analysis can give you the true and precise financial picture of a firm: True False

QUESTION 13 The most popular yardstick of financial performance among investors and senior managers is the:

return on equity.

profit margin.

earnings yield.

QUESTION 14 Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as _____ ratios.

asset turnover and control

financial leverage

coverage

QUESTION 15 The Limited collects 25 percent of sales in the month of sale, 60 percent of sales in the month following the month of sale, and 15 percent of sales in the second month following the month of sale. During the month of April, the firm will collect:

60 percent of February sales.

15 percent of April sales.

60 percent of March sales.

15 percent of March sales.

QUESTION 16 Annual Figures: A firm has Gross Sales $120,000 Less Discounts and Allowances 20,000 Net Sales $100,000 Its cash sales are $10,000. The Average Collection Period is 60 days Calculate: Receivables.

$20,000

$15,000

$12,000

QUESTION 17 Which one of the following policies most directly affects the projection of the retained earnings balance to be used on a pro forma statement?

Net working capital policy

Dividend policy

Capital structure policy

Capital budgeting policy

QUESTION 18 The sustainable growth rate of a firm is best described as the:

minimum growth rate achievable assuming a 100 percent retention ratio.

minimum growth rate achievable if the firm maintains a constant equity multiplier.

maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.

maximum growth rate achievable with unlimited debt financing.

QUESTION 19 Zack owns a bond that will pay him $35 each year in interest plus a $1,000 principal payment at maturity. The $1,000 principal payment is called the:

coupon.

par value.

discount.

yield.

call premium.

QUESTION 20 You bought a yen-denominated corporate bond at the beginning of the year for 100,000. The bond paid 3 percent annual interest and was trading for 110,000 at year-end. What holding period return, measured in yen, did you earn on the bond?

3%

7%

13%

30%