Which one of the following is evidence of indebtedness?
A. Terms of sale
B. Credit cost curve
C. Credit instrument
D. Concentration policy
E. Credit policy
Which one of the following is a disbursement account into which funds are transferred
only as needed to cover the demands for payment?
A. Master account
B. Controlled disbursement account
C. Bank controlled account
D. Investment account
E. Safety stock account
Hughes Motors will sell you a $15,000 car for $380 a month for 48 months. What is the
interest rate?
A. 9.28 percent
B. 9.35 percent
C. 9.53 percent
D. 9.86 percent
E. 9.94 percent
Healthy Foods just paid its annual dividend of $1.45 a share. The firm recently
announced that all future dividends will be increased by 2.8 percent annually. What is
one share of this stock worth to you if you require a 14 percent rate of return?
A. $12.56
B. $12.95
C. $13.31
D. $13.68
E. $14.07
Which of the following are advantages of the corporate form of organization?I. Ability
to raise large sums of equity capitalII. Ease of ownership transferIII. Profits taxed at the
corporate levelIV. Limited liability for all owners
A. I and II only
B. III and IV only
C. II, III, and IV only
D. I, II, and IV only
E. I, II, III, and IV
What is the effective annual rate of 14.9 percent compounded quarterly?
A. 14.48 percent
B. 14.67 percent
C. 15.23 percent
D. 15.54 percent
E. 15.75 percent
Turner Industries started a new project three months ago. Sales arising from this project
are exceeding all expectations. Given this, which one of the following is management
most apt to implement?
A. Option to wait
B. Soft rationing
C. Strategic option
D. Option to abandon
E. Option to expand
If a project with conventional cash flows has a profitability index of 1.0, the project
will:
A. never pay back.
B. have a negative net present value.
C. have a negative internal rate of return.
D. produce more cash inflows than outflows in todays dollars.
E. have an internal rate of return that equals the required return.
Phils Dinor purchased some new equipment two years ago for $89,500. Today, it is
selling this equipment for $67,000. What is the aftertax cash flow from this sale if the
tax rate is 35 percent? The MACRS allowance percentages are as follows, commencing
with year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.
A. $58,586
B. $63,421
C. $67,000
D. $70,938
E. $74,875
An individual who executes buy and sell orders on the floor of an exchange for a fee is
called a:
A. floor broker.
B. DMM.
C. floor trader.
D. proxy.
E. flow specialist.
Farm Equipment, Inc. announced this morning that its next annual dividend will be
decreased to $1.80 a share and that all future dividends will be decreased by an
additional 1.5 percent annually. What is the current value per share of this stock if the
required return is 16.5 percent?
A. $8
B. $10
C. $12
D. $14
E. $16
Which one of the following statements is correct?
A. Bond markets have less daily trading volume than equity markets.
B. There are fewer bond issues than there are equity issues.
C. Municipal bond prices are highly transparent.
D. Bond markets are dealer based.
E. Most bond trades occur on the NYSE.
Phils Hardware sells its inventory in 75 days, on average. Costs of goods sold for the
year are $631,800. What is the average value of the firms inventory?
A. $119,706
B. $129,821
C. $147,132
D. $161,096
E. $182,513
Which one of the following is an aftermarket function performed by the underwriters of
a securities issue?
A. Distributing the registration statements
B. Distributing the red herrings
C. Filing a letter of comment with the SEC
D. Exercising the Green Shoe option
E. Setting the market price
Kennedys has the following estimated quarterly sales for next year.
The accounts receivable period is 70 days. What is the expected accounts receivable
balance at the end of the second quarter? Assume each month has 30 days.
A. $4,400
B. $5,600
C. $10,267
D. $12,000
E. $13,200
The Greenbriar is an all-equity firm with a total market value of $520,000 and 20,000
shares of stock outstanding. Management is considering issuing $120,000 of debt at an
interest rate of 10 percent and using the proceeds on a stock repurchase. Ignore taxes.
How many shares will the firm repurchase if it issues the debt securities?
A. 2,871 shares
B. 3,516 shares
C. 4,521 shares
D. 4,607 shares
E. 4,615 shares
Peters Motor Works has total assets of $689,400, long-term debt of $299,500, total
equity of $275,000, net fixed assets of $497,800, and sales of $721,500. The profit
margin is 4.6 percent. What is the current ratio?
A. 0.60
B. 0.91
C. 1.01
D. 1.67
E. 2.16
Tressler Dry Cleaners has inventory of $1,700, accounts payable of $4,200, cash of
$1,950, and accounts receivable of $3,680. What is the cash ratio?
A. 0.24
B. 0.46
C. 0.53
D. 0.98
E. 1.34