Question 1

Which of the following is NOT a correct way of calculating a liquidity ratio?

Question 1 options:

Current Ratio = Total Current Assets / Total Current Liabilities

Operating Cash Flow Ratio = Current Liabilities / Operating Cash Flow

Quick Ratio = (Current Asset - Inventories - Prepayments) / Current Liabilities

Liquidity Ratio = Liquid Assets / Short-term Liabilities

Question 2

Which of the following is NOT a way to calculate the debt to equity ratio?

Question 2 options:

Interest-Bearing Long-Term Debt / Equity

Debt / (Assets - Debt)

(Assets - Equity) / Debt

Debt / (Debt + Equity)

Question 3

Which of the following is NOT information used to calculate an asset's book value?

Question 3 options:

The costs associated with originally acquiring the asset, such as broker fees.

The total amount of depreciation, amortization, and impairment costs made against the asset.

The current market price of the asset.

The price of the asset when it was acquired.

Question 4

Which of the following is NOT an event that would be included in the investing section of a company's cash flow statement?

Question 4 options:

Receiving interest payments for debt owed to the company.

Purchasing a new subsidiary with cash.

Selling some of the company's land.

Paying interest to an investor who holds the company's debt.

Question 5

Which of the following transactions would be a financing activity on the statement of cash flows?

Question 5 options:

purchase of equipment financed by convertible bonds

interest received

purchase of treasury stock

interest paid on convertible bonds

Question 6

A company's retained earnings at the beginning of the year is $1 million. It paid $100,000 in dividends, had $250,000 in net income, and its goodwill increased by $10,000. What is its retained earnings as of the end of the year?

Question 6 options:

$1,250,000

$1,150,000

$1,160,00

$1,260,000

Question 7

A company has earnings before income tax of $2 million and a 15% tax rate. It had $250,000 in depreciation expenses with a $50,000 increase in working capital. It had another $100,00 in capital expenditures. What is its free cash flow.

Question 7 options:

$1,700,000

$1,950,000

$1,800,000

$1,850,000

Question 8

Assume a businesses's return on investment capital is 8%,its weighted average cost of capital is 4%, and its economic capital employed is $1,000,000. What is its EVA?

Question 8 options:

$400,000

$120,000

$40,000

$60,000

Question 9

A business has $1,250,000 in accounts receivable. Its annual sales for the fiscal year is $30,000,000. What is its days sales outstanding ratio?

Question 9 options:

15.208

0.041

8760

24

Question 10

A business begins its fiscal year with $10,000,000 in total assets. During the year it has net sales revenue of $45,000,000. At the end of the year it has $8,000,000 in total assets. What is its total assets turnover ratio?

Question 10 options:

4.5

5

2.5

5.62518

Question 11

Which of the following is NOT a benefit associated with using the DuPont Equation?

Question 11 options:

Analysts can use the DuPont equation to understand the fluctuations of a company's Return on Equity.

Analysts can determine which factor is dominant in determining a company's return on equity.

The DuPont equation can show whether a high level of leverage is risky or necessary for a company.

The DuPont equation is very useful in analyzing any business regardless of industry.

Question 12

A company wants to have $5 million in sales with $1 million in profit. It will have fixed costs of $3 million. Each unit of its product sells for $20. How much contribution per unit must the company have to meet its goals?

Question 12 options:

$0.79

$8

$16

$1.60

Question 13

Balance analysis is primarily based on ratios. Which of the following statements regarding ratio analysis associated with balance sheets is correct?

Question 13 options:

Liquidity analysis analyzes whether a firm can recover from a loss or losses.

Solvency analysis analyzes whether a firm can meet its financial obligations.

Profitability analysis concerns return on capital: risk analysis concerns credit risk.

All of these answers.

Question 14

What is the future value in 30 years of $100,000 invested today in a savings account earning a 1% compound interest rate every year (rounded up to the nearest dollar)?

Question 14 options:

130000

30000

134785

More than $134785

Question 15

An annuity pays $1500 at the beginning of every month for five years. The interest rate of the annuity is 4%. What is this annuity's future value?

Question 15 options:

$99,448

$99,780

$101,280

$97,948

Question 16

A security offers to pay the holder $1000 at the end of every month for five years. What type of annuity is this?

Question 16 options:

Ordinary annuity.

Perpetuity.

Annuity-due.

Regular annuity.

Question 17

A bond currently valued at $100,000 has a quarterly interest rate of 5%. The bond matures in 3 years. What is its future value?

Question 17 options:

$1,160,755

$1,050,945

$1,157,625

$1,219,391

Question 18

A sinking fund is used by firms to retire some of its outstanding debt every year. Which of the following is a way that a sinking fund may operate?

Question 18 options:

The firm may repurchase the bonds at the current market price or the call price, whichever is lower.

The firm may repurchase the bonds in the open market.

The firm may buy the bonds at a special call price stipulated in the bond's sinking fund provision.

All of these answers

Question 19

A company issues a bond with a coupon rate of 5%. Since the bond was issued, market interest rates have decreased. What effect will this decrease have on the bond's market price and its current yield?

Question 19 options:

The bond will trade above par and its current yield will decrease.

The bond will trade below par and its current yield will decrease.

The bond will trade below par and its current yield will increase.

The bond will trade above par and its current yield will increase.

Question 20

A zero-coupon bond has a face value of $1000 and a market value of $800. The bond will mature in 5 years. What is its yield to maturity?

Question 20 options:

205.17%

104.56%

-4.37%

4.56%

Question 21

An annuity has an interest rate of 7% and makes a quarterly payment of $2000. The annuity is to last for 5 years. What is the present value of the annuity.

Question 21 options:

$2,118.80

$8,200.40

$32,801.58

$21,188.03

Question 22

A company a constant growth rate of 3%. The company's risk adjusted discount rate is 5%. The company has a $2 dividend. What is the per share value of the stock?

Question 22 options:

$51.50

$105

$103

$52.50

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