Assume you can currently exchange one U.S. dollar for one hundred Japanese yen. Also
assume the inflation rate will be 2.5 percent annually in the U.S. and 2 percent in Japan.
Given these assumptions, how many yen should you expect in exchange for one U.S.
dollar next year?
A. More than 100
B. Either 100 or more than 100
C. Exactly 100
D. Either 100 or less than 100
E. Less than 100
Which of the following characteristics are most commonly associated with corporate
bonds issued in the U.S.?I. Registered formII. Bearer formIII. Quarterly coupon
paymentsIV. Semiannual coupon payments
A. I and III only
B. I and IV only
C. II and III only
D. II and IV only
E. III only
Derek’s is a brick-and-mortar toy store. The firm is considering expanding its operations
to include Internet sales. Which one of the following would be the best firm to use in a
pure play approach to analyzing this proposed expansion?
A. Another brick-and-mortar store that also sells online
B. A wholesale toy distributor
C. A toy store that sells online only
D. The oldest online retailer of any product
E. Derek’s own store
A firm has a current ratio of 1.4 and a quick ratio of 0.9. Given this, you know for
certain that the firm:
A. pays cash for its inventory.
B. has more than half its current assets invested in inventory.
C. has more cash than inventory.
D. has more current liabilities than it does current assets.
E. has positive net working capital.
A firm has sales of $311,000 and net income of $31,600. Currently, there are 28,000
shares outstanding at a market price of $36 per share. What is the price-sales ratio?
A. 2.08
B. 3.24
C. 4.26
D. 5.15
E. 11.11
The one-year forward rate for the British pound is £0.6781 = $1. The spot rate is
£0.6789 = $1. The interest rate on a risk-free asset in the UK is 4.6 percent. If interest
rate parity exists, what is the one-year risk-free rate in the U.S.?
A. 4.68 percent
B. 4.72 percent
C. 4.77 percent
D. 4.83 percent
E. 4.87 percent
A pro forma financial statement is a financial statement that:
A. expresses all values as a percentage of either total assets or total sales.
B. compares actual results to the budgeted amounts.
C. compares the performance of a firm to its industry.
D. projects future years’ operations.
E. values all assets based on their current market values.
Hi-As-A-Kite is considering making and selling custom kites in two sizes. The small
kites would be priced at $10 and the large kites would be $24. The variable cost per unit
is $5 and $11, respectively. Jill, the owner, feels that she can sell 2,600 of the small
kites and 1,700 of the large kites each year. The fixed costs would be only $2,100 a year
and the tax rate is 34 percent. What is the annual operating cash flow if the annual
depreciation expense is $900?
A. $20,064
B. $22,086
C. $22,848
D. $23,309
E. $23,604
Over the past five years, a stock returned 8.3 percent, -32.5 percent, -2.2 percent, 46.9
percent, and 11.8 percent, respectively. What is the variance of these returns?
A. 0.071188
B. 0.076290
C. 0.081504
D. 0.082547
E. 0.091306
Which one of the following statements about the operating cycle is correct?
A. The operating cycle illustrates the sources and uses of cash.
B. The operating cycle is equal to the cash cycle plus the accounts receivable period.
C. The operating cycle begins when a product is sold to a customer.
D. The operating cycle is based on a 360-day year.
E. The operating cycle describes how a product moves through the current asset
accounts.
Which one of the following is most indicative of a flexible short-term financial policy?
A. High ratio of short-term debt to long-term debt
B. Relatively small investment in current assets
C. High ratio of current assets to sales
D. Low level of net working capital
E. Relatively low level of liquidity
Faith wrote a check for $22 on Friday, May 6. The check cleared the bank on
Wednesday, May 11. There were no other checks or deposits outstanding during the
month. Given this, which one of the following statements is correct?
A. On May 6, the available balance decreased by $22.
B. On May 11, the available balance was $22 less than the ledger balance.
C. On May 12, the ledger balance was $22 less than the available balance.
D. On May 14, the available balance increased by $22.
E. On May 10, the ledger balance was $22 less than the available balance.
An increase in which one of the following will increase net income?
A. Fixed costs
B. Depreciation
C. Marginal tax rate
D. Revenue
E. Dividends