1) The accounts receivable turnover rate for Big Men’s Wear has gone from an average
of 10.8 times to 10.2 times per year. How has this change affected the firm’s accounts
receivable period?
A.Decrease of 1.98 days
B.Increase of 1.98 days
C.Decrease of 2.28 days
D.Increase of 2.28 days
E.Increase of 2.97 days
2) The common stock of The Burger Hut is selling for $16.25 a share. The company has
earnings per share of $0.42 and a book value per share of $9.28. What is the
market-to-book ratio?
A.1.58
B.1.69
C.1.75
D.1.87
E.1.92
3) Which one of the following is the best example of unsystematic risk?
A.Inflation exceeding market expectations
B.A warehouse fire
C.Decrease in corporate tax rates
D.Decrease in the value of the dollar
E.Increase in consumer spending
4) Great Lakes Packing has two bond issues outstanding. The first issue has a coupon
rate of 9 percent, matures in 3 years, has a total face value of $6 million, and is quoted
at 108 percent of face value. The second issue has a 7.5 percent coupon, matures in 16
years, has a total face value of $18 million, and is quoted at 97 percent of face value.
Both bonds pay interest semiannually. What is the firm’s weighted average aftertax cost
of debt if the tax rate is 35 percent?
A.4.78 percent
B.5.12 percent
C.5.63 percent
D.5.95 percent
E.6.08 percent
5) The Road Kill Restaurant has the following current account values for the year.
These accounts represent a net _____ of cash for the year in the amount of ____.
A.Source; $3,100
B.Source; $4,700
C.Use; $3,100
D.Use; $3,800
E.Use; $4,700
6) You are analyzing a project and have developed the following estimates: unit sales =
2,600, price per unit = $56, variable cost per unit = $39, fixed costs = $24,700. The
depreciation is $15,800 a year and the tax rate is 35 percent. What effect would a
decrease of $1 in the variable cost per unit have on the operating cash flow?
A.-$2,600
B.-$1,742
C.-$912
D.$1,690
E.$2,600
7) What is the goal of financial management for a sole proprietorship?
A.Maximize net income given the current resources of the firm
B.Decrease long-term debt to reduce the risk to the owner
C.Minimize the tax impact on the proprietor
D.Maximize the market value of the equity
E.Minimize the reliance on fixed costs
8) The Blackwell Group is unable to obtain financing for any new projects under any
circumstances. Which term best applies to this situation?
A.Contingency planning
B.Soft rationing
C.Hard rationing
D.Sensitivity analysis
E.Scenario analysis
9) The Cannon Ball has projected its first quarter sales at $11,200, second quarter sales
at $10,900, and third quarter sales at $13,300. The firm’s cost of goods sold is equal to
71 percent of the next quarter’s sales. The accounts receivable period is 30 days and the
accounts payable period is 60 days. At the beginning of the first quarter, the firm has an
accounts receivable balance of $2,800 and an accounts payable balance of $6,300. The
firm pays $1,500 a month in cash expenses and $200 a month in taxes. At the beginning
of the first quarter, the cash balance is $530 and the short-term loan balance is zero.
During the first quarter, the firm is planning on spending $2,600 for some new
equipment. The firm maintains a minimum cash balance of $20. Assume each month
has 30 days. What is the cumulative cash surplus (deficit) at the end of the first quarter,
prior to any short-term borrowing?
A.-$2,403
B.-$1,983
C.-$857
D.-$837
E.-$667
10) True Blue Transport has a current stock price of $27. For the past year, the company
had net income of $2,187,400, total equity of $13,892,300, sales of $26,511,000, and
2.5 million shares outstanding. What is the market-to-book ratio?
A.3.54
B.3.81
C.3.99
D.4.27
E.4.86
11) Use the following tax table to answer this question:
Bait and Tackle has taxable income of $411,562. How much does it owe in taxes?
A.$128,603.33
B.$134,611.27
C.$138,542.79
D.$139,931.08
E.$141,354.82
12) Which one of the following is specifically designed to compute the rate of return on
a project that has unconventional cash flows?
A.Average accounting return
B.Profitability index
C.Internal rate of return
D.Indexed rate of return
E.Modified internal rate of return
13) A.B. Securities assists issuers by pricing and selling new securities to the general
public. Which one of the following terms best fits the role that A. B. Securities is
playing?
A.Underwriter
B.Investment advisor
C.Specialist
D.Securities dealer
E.Venture capitalist
14) Which one of the following is a use of cash?
A.Issuing new shares of stock
B.Increasing accounts payable
C.Decreasing inventory
D.Decreasing fixed assts
E.Increasing accounts receivable
15) The Road House Diner is offering 10,000 shares of stock to the general public on a
cash basis. Which one of the following terms best applies to this offer?
A.Rights offer
B.General cash offer
C.Green Shoe
D.Red herring
E.Prospectus
16) Which of the following costs tend to rise when a firm switches to a flexible
financial policy from a restrictive financial policy?
I. restocking costs
II. lower prices to offset limited selection
III. storage costs
IV. current asset opportunity costs
A.I and II only
B.III and IV only
C.I, III, and IV only
D.I, II, and III only
E.II, III, and IV only
17) When are funds generally transferred into zero-balance accounts?
A.Monthly
B.Weekly
C.Daily
D.As needed
E.Never
18) Which one of the following statements is correct concerning both the dollar return
and the percentage return on a stock investment?
A.The dollar return is dependent on the size of the investment while the percentage
return is not
B.The dollar return is more accurate than the percentage return because the dollar return
includes dividend income while the percentage return does not
C.The dollar return considers the time value of money while the percentage return does
not
D.Dollar returns are based on capital gains while percentage returns are based on the
total rate of return
E.Dollar returns must either be zero or a positive value while percentage returns can be
negative, zero, or positive
19) Which one of the following will result from a stock repurchase?
A.Increase in the number of shares outstanding
B.Decrease in the earnings per share
C.Decrease in the market price per share
D.Increase in the market value of equity per share
E.Decrease in the PE ratio
20) Denbo’s, Inc. has total equity of $389,600, long-term debt of $116,400, net working
capital of $1,600, and total assets of $627,600. What is the total debt ratio?
A.0.19
B.0.38
C.0.67
D.1.49
E.3.85
21) A firm wants to create a WACC of 10.4 percent. The firm’s cost of equity is 14.5
percent and its pretax cost of debt is 8.5 percent. The tax rate is 34 percent. What does
the debt-equity ratio need to be for the firm to achieve its target WACC?
A.0.51
B.0.57
C.0.62
D.0.70
E.0.86
22) Westover Products has the following estimated monthly sales.
The accounts receivable period is 45 days. What is the amount of the collections in
May? Assume each month has 30 days.
A.$13,800
B.$11,700
C.$8,350
D.$9,050
E.$9,500
23) On any given day, Athens Florist receives numerous checks worth an average
combined total of $6,300. The funds from the deposited checks are generally available
in 1.5 days. Every day the firm mails out checks totaling $4,600 that generally take 2
days to clear the bank. What is the amount of the disbursement float?
A.$150
B.$6,900
C.$9,150
D.$9,200
E.$9,850
24) Jake owes $3,400 on his credit card. He is not charging any additional purchases
because he wants to get this debt paid in full. The card has an APR of 13.9 percent.
How much longer will it take him to pay off this balance if he makes monthly payments
of $50 rather than $60?
A.28.24 months
B.31.33 months
C.36.74 months
D.39.20 months
E.41.79 months
25) Marti had an unexpected surprise when she ate her Lotsa Good cereal this morning.
She found a piece of metal mixed in her cereal. The potential claim that Marti has
against this firm is that of a(n):
A.general creditor
B.debtholder
C.shareholder
D.stakeholder
E.agent
26) Granger Corp. stock currently sells for $48.29 per share. The market requires a 13
percent return on the firm’s stock. If the company maintains a constant 5.5 percent
growth rate in dividends, what was the most recent annual dividend per share paid on
the stock?
A.$3.43
B.$3.57
C.$3.90
D.$4.15
E.$4.36