Andre’s Dog House had current assets of $67,200 and current liabilities of $71,100 last
year. This year, the current assets are $82,600 and the current liabilities are $85,100.
The depreciation expense for the past year is $9,600 and the interest paid is $8,700.
What is the amount of the change in net working capital?
A. -$2,800
B. -$1,400
C. $1,400
D. $2,100
E. $2,800
Answer:
Which one of the following is a measure of long-term solvency?
A. Price-earnings ratio
B. Profit margin
C. Equity multiplier
D. Receivables turnover
E. Quick ratio
Answer:
Freedom Health Centers has total equity of $861,300, sales of $1.48 million, and a
profit margin of 5.2 percent. What is the return on equity?
A. 5.82 percent
B. 6.49 percent
C. 7.18 percent
D. 8.68 percent
E. 8.94 percent
Answer:
Suppose a U.S. firm builds a factory in China, staffs it with Chinese workers, uses
materials supplied by Chinese companies, and finances the entire operation with a loan
from a Chinese bank located in the same town as the factory. This firm is most likely
trying to greatly reduce, or eliminate, which one of the following?
A. Interest rate disparities
B. Short-run exposure to exchange rate risk
C. Long-run exposure to exchange rate risk
D. Political risk associated with the foreign operations
E. Translation exposure to exchange rate risk
Answer:
If a firm has a negative cash flow from assets every year for several years, the firm:
A. may be continually increasing in size.
B. must also have a negative cash flow from operations each year.
C. is operating at a high level of efficiency.
D. is repaying debt every year.
E. has annual net losses.
Answer:
Which one of the following is the best example of a raw material?
A. Set of tires for an automaker
B. Partially assembled airplane
C. Cabinets ready to be shipped
D. Can of paint waiting to be sold
E. Cell phone waiting to be encased
Answer:
Last year, Teresa’s Fashions earned net income of $68,400 and had 12,000 shares of
stock outstanding. The dividends per share were $1.20. What is the dividend payout
ratio?
A. 21.05 percent
B. 24.07 percent
C. 38.60 percent
D. 40.21 percent
E. 44.14 percent
Answer:
A stock has yielded returns of 6 percent, 11 percent, 14 percent, and -2 percent over the
past four years, respectively. What is the standard deviation of these returns?
A. 5.52 percent
B. 5.86 percent
C. 6.05 percent
D. 6.47 percent
E. 6.99 percent
Answer:
The level of financial risk to which a firm is exposed is dependent on the firm’s:
A. tax rate.
B. debt-equity ratio.
C. return on assets.
D. level of earnings before interest and taxes.
E. operational level of risk.
Answer:
Precision Engineering invested $110,000 at 6.5 percent interest, compounded annually
for 4 years. How much interest on interest did the company earn over this period of
time?
A. $2,481.25
B. $2,911.30
C. $3,014.14
D. $3,250.00
E. $3,333.33
Answer:
Peter’s 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
Answer:
Which one of the following best matches the primary goal of financial management?
A. Increasing the dollar amount of each sale
B. Increasing traffic flow within the firm’s stores
C. Transforming fixed costs into variable costs
D. Increasing the firm’s liquidity
E. Increasing the market value of the firm
Answer:
The stated interest rate is the interest rate expressed:
A. as if it were compounded one time per year.
B. as the quoted rate compounded by 12 periods per year.
C. in terms of the rate charged per day.
D. in terms of the interest payment made each period.
E. in terms of an effective rate.
Answer:
Which one of the following players on the floor of the NYSE is obligated to maintain a
fair, orderly market for a limited number of securities?
A. DMM
B. Floor trader
C. $2 broker
D. Commission broker
E. Floor broker
Answer:
Which of the following are advantages of the corporate form of organization?
I. Ability to raise large sums of equity capital
II. Ease of ownership transfer
III. Profits taxed at the corporate level
IV. 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
Answer:
Capital budgeting includes the evaluation of which of the following?
A. Size of future cash flows only
B. Size and timing of future cash flows only
C. Timing and risk of future cash flows only
D. Risk and size of future cash flows only
E. Size, timing, and risk of future cash flows
Answer:
Which one of the following characteristics applies to commercial paper?
A. Maturities of 270 days or more
B. Offerings registered with the SEC
C. Interest rates higher than comparable bank loans
D. Issued directly by large-sized firms
E. Issued primarily by low-rated firms
Answer:
Beginning in 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act
requires corporations with a market value over ________ to allow a nonbinding
shareholder vote on executive pay.
A. $25,000,000
B. $50,000,000
C. $75,000,000
D. $100,000
E. $750,000
Answer:
An agreement to exchange currencies sometime in the future is referred to as which one
of the following?
A. Forward trade
B. Hedge
C. Gilt
D. Forward exchange rate
E. Spot trade
Answer:
The common stock of Up-Towne Movers is selling for $33 a share and has a 10 percent
rate of return. The growth rate of the dividends is 2 percent annually. What is the
amount of the next annual dividend?
A. $2.58
B. $2.61
C. $2.64
D. $2.67
E. $2.70
Answer:
An unexpected decrease in market interest rates will cause a:
A. coupon bond’s current yield to increase.
B. zero coupon bond’s price to decrease.
C. fixed-rate bond’s coupon rate to decrease.
D. zero coupon bond’s current yield to decrease.
Answer:
A stock has had returns of 11 percent, -8 percent, 6 percent, 21 percent, 24 percent, and
16 percent over the last six years, respectively. What is the geometric return for this
stock?
A. 10.82 percent
B. 11.13 percent
C. 11.31 percent
D. 11.42 percent
E. 11.47 percent
Answer:
A six-year, semiannual coupon bond is selling for $991.38. The bond has a face value
of $1,000 and a yield to maturity of 9.19 percent. What is the coupon rate?
A. 4.50 percent
B. 4.60 percent
C. 6.00 percent
D. 9.00 percent
E. 9.19 percent
Answer:
