The purpose of the Statement of Retained Earnings is to report: Select one: Accumulated profits or losses less dividends Changes in the market value of the business Profit or loss for the current period only The worth of the business on a given date Question 12 Flag question Straight line depreciation is used for all of the following reasons, except: Select one: Its relative simplicity for accounting purposes Its smoothing effect on income The amount that is expensed is the same each year The tax shield created is greater than other methods Question 13 Flag question When evaluating a company's financial statements, financial ratios are useful for appraising: Select one: A company's liquidity, leverage, and profitability The complete picture of company performance The probability of a company's future results Management's decision making Question 14 Flag question Accounts receivable days outstanding is one of the liquidity ratios. It reveals the: Select one: Number of days customers are in arrears with invoices Number of days customers take to pay invoices Number of days it takes to send invoices to customers Significance of accounts receivable as a portion of assets Question 15 Flag question A high degree of leverage: Select one: Decreases financial risk Increases financial risk Is disclosed in the Income Statement Maintains liquidity Which one of the following is NOT a profitability ratio? Select one: Debt to Equity Gross margin Net profit margin Return on sales Question 17 Not yet answered Points out of 1 Flag question Economic value added (EVA) measures a business unit's performance against the monetary cost required to support that unit. It is a more sophisticated version of return on assets and is increasingly becoming a popular measure of profitability. As a business unit manager, you could increase EVA by: Select one: Increasing profitability Increasing profitability above the cost of money Increasing profitability and reducing investment Reducing investment Question 18 Flag question The P/E ratio demonstrates the relationship between: Select one: Cash flow and shares outstanding Market price and dividends per share Market price of a share and earnings per share Net income and shares outstanding Question 19 Flag question Walter's company is investing $3,550 at an interest rate of six percent for the next three years. Using the formula for future value FV =PV(1+R) the investment will be worth: Select one: $4,228.05 $4,239.06 $4,750.61 $4,979.23 Question 20 Flag question The present value method seeks to determine the: Select one: Break even point(s) Difference between cash and accrual accounting Interest rate for debt Present value of a future cash flow An annuity is best defined as a: Select one: Level stream of cash flows for a fixed period of time Liability on a corporation's balance sheet Lump sum, one time payment Variable cash payout over time Question 22 Flag question Select the statement that most accurately describes features of a capital expenditure. Select one: Long-term and inexpensive Long-term and fixed Long-term, costly, and low risk Long-term, risky, and uncertain Question 23 Points out of 1 Flag question The term "cost of capital" refers to: Select one: Assets and liabilities Debt and equity Leverage and profits Operations and interest rates Question 24 Flag question Walter's firm has long-term debt of $500,000 at a cost of five percent and shareholder equity of $1,000,000 at a cost of 15 percent. What is his weighted average cost of capital? Select one: 11.0% 11.7% 12.1% 13.2% Question 25 Flag question Which of the following is not a capital expenditure? Select one: Acquisition of another company Purchase of land and/or building Purchase of machinery and/or equipment Purchase of operating supplies Payback is limited as a measure of evaluating capital expenditures because it does not: Select one: Account for the time value of money Allow for uncertain time periods Permit any fluctuation in market value Take the amount of the expenditure into account Question 27 Points out of 1 Flag question Which of the following is NOT typically a fixed cost? Select one: Distribution costs Insurance Raw materials Salaries Question 28 Points out of 1 Flag question A break-even point is achieved when revenues equal: Select one: Fixed costs Fixed costs + variable costs Variable costs + opportunity costs Variable costs - fixed costs Question 29 Points out of 1 Flag question Select one of the following formulae to determine break-even in units: Select one: Fixed costs/contribution margin per unit Fixed costs/revenues per unit Variable costs/contribution margin per unit Variable costs/revenues per unit Question 30 Points out of 1 Flag question If fixed costs are $100,000, variable costs are $4.00 per unit, and the selling price per unit is $12.00, what is the break-even point in units? Select one: 10,000 units 10,500 units 11,000 units 12,500 units Walter knows it is key that he determine his profit goal and then know how many units must be sold to achieve it. If his profit goal is $50,000, fixed costs $100,000, variable costs $4.00 per unit, and selling price $12.00, how many units must he sell to achieve his profit goal? Select one: 15,000 16,500 17,250 18,750 Question 32 Flag question From a managerial perspective, budgets tend to fall into two major types-operating budget and: Select one: Capital budget Production budget Salary budget Sales budget Question 33 Profit center is a term used in responsibility budgeting. How would you describe a profit center? Select one: Generates revenues from outside the organization Is an operating unit Provides services to other parts of the organization Referred to as a cost center Question 34 What factor does the rolling budget technique help to overcome? Select one: Financing factor Management guidance factor Resource allocation factor Time lag factor