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Financial Business
Financial Business
Some Question, True or false answer and multiply choice. I want to make sure I have everything correct. Thank You! I have Attach the questions.
Name:
True/False – Please highlight the correct answer in yellow.
1. T/F The goal of the firm should be the maximization of profit.
2. T/F There are a significant number of legal requirements to follow when establishing a sole proprietorship
3. T/F When the present financial ratios of a firm are compared with similar ratios for another firm in the same industry it is called trend analysis.
4. T/F According to the DuPont Analysis, an increase in net profit margin will decrease return on assets.
5. T/F The money market is usually thought of as dealing with long-term debt instruments issued by firms with excellent credit ratings.
6. T/F As market interest rates increase, financial managers chose equity instruments over debt instruments when raising internal capital.
7. T/F The key ingredient in a firm’s financial planning is the sales forecast.
8. T/F Depreciation expense can be obtained from the cash budget
9. T/F If we invest money for 10 years at 8% interest, compounded semi-annually, we are really investing money for 20 six-month periods, during which we receive 4% interest each period
10. T/F The present value of an annuity increases as the discount rate increases
Multiple Choice
1. Which of the following statements best represents what finance is about?
a. How political, social, and economic forces affect corporations
b. Maximizing profits
c. Creation and maintenance of economic wealth
d. Reducing risk
2. The goal of the firm should be:
a. Maximization of profits.
b. Maximization of shareholder wealth.
c. Maximization of consumer satisfaction.
d. Maximization of sales.
3. Which of the following financial ratios is the best measure of the operating effectiveness of a firm’s management?
a. Current ratio
b. Gross profit margin
c. Quick ratio
d. Return on investment
4. Which of the following is included in the denominator of the times-interest-earned ratio?
a. Lease payments
b. Principal payments
c. Interest expense
d. Gross profit
5. Which of the following industries has the highest average inventory turnover ratio?
a. Retail clothing stores
b. Jewelry stores
c. Automobile dealerships
d. Supermarkets
6. The quick ratio is a better measure of liquidity than the current ratio if the firm has current assets composed primarily of:
a. cash.
b. work in process inventory.
c. marketable securities.
d. accruals.
7. If a company’s average collection period is higher than the industry average, then the company might be:
a. enforcing credit conditions upon its customers which are too stringent.
b. allowing its customers too much time to pay their bills.
c. too tough in collecting its accounts.
d. too liquid.
Table 3
Thompson Manufacturing Supplies’ projected sales for the first six months of 2004 are given below.
Jan. $250,000 April $400,000
Feb. $300,000 May $450,000
March $400,000 June $400,000
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40% of sales is collected in the month of the sale, 50% is collected in the month following the sale, and 10% is written off as uncollectible. Cost of goods sold is 70% of sales. Purchases are made the month prior to the sale and are paid during the month the purchases are made (i.e. goods sold in March are bought and paid for in February). Total other cash expenses are $50,000/month. The company’s cash balance as of February 1, 2004 will be $40,000. Excess cash will be used to retire short-term borrowing (if any). Thompson has no short-term borrowing as of February 28, 2004. Assume that the interest rate on short-term borrowing is 1% per month. The company must have a minimum cash balance of $25,000 at the beginning of each month. Round all Answers to the nearest $100.
8. Based on the above highlighted information Table 3, what are Thompson’s projected total disbursements for April?
a. $365,000
b. $315,000
c. $5,000
d. $96,607
9. Based on the above highlighted information Table 3, what is Thompson’s projected gross profit for April?
a. ($5,000)
b. $85,000
c. $120,000
d. None of the above
10. Based on the above highlighted information table 3, what are Thompson’s projected total receipts (collections) for March?
a. $400,000
b. $310,000
c. ($20,000)
d. None of the above
11. If you place $50 in a savings account with an interest rate of 7% compounded weekly, what will the investment be worth at the end of five years (round to the nearest dollar)?
a. $72
b. $70
c. $71
d. $57
12. If you put $700 in a savings account with a 10% nominal rate of interest compounded monthly, what will the investment be worth in 21 months (round to the nearest dollar)?
a. $827
b. $833
c. $828
d. $1,176
13. What is the annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years (round to the nearest .1%)?
a. 51.7%
b. 6.7%
c. 10.9%
d. 6.1%
14. You are considering two investments. Investment A yields 10% compounded quarterly. Investment B yields r% compounded semiannually. Both investments have equal annual yields. Find r.
a. 19.875%
b. 10%
c. 10.38%
d. 10.125%
15. If you put $600 in a savings account that yields an 8% rate of interest compounded weekly, what will the investment be worth in 37 weeks (round to the nearest dollar)?
a. $648
b. $635
c. $634
d. $645
16. An example of a semi-variable or semi-fixed cost is:
a. rent.
b. salaries paid to a production foremen.
c. energy costs associated with production.
d. direct labor.
17. Which of the following is a non-cash expense?
a. Depreciation expenses
b. Interest expense
c. Packaging costs
d. Administrative salaries
Use the following information to answer questions 18 through 20. Below are the expected after-tax cash flows for Projects Y and Z. Both projects have an initial cash outlay of $20,000 and a required rate of return of 17%.
Project Y Project Z
Year 1 $12,000 $10,000
Year 2 $8,000 $10,000
Year 3 $6,000 0
Year 4 $2,000 0
Year 5 $2,000 0
18. Payback for Project Y is:
a. two years.
b. one year.
c. three years.
d. four years.
19. Project Y’s NPV is:
a. less than zero.
b. $1,826.26.
c. $10,000.
d. $4,636.42.
20. Project Y’s IRR is:
a. less than zero.
b. less than 17%.
c. 22.51%.
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1. How much money will William have in five years if he places $2500 into a CD earning an annual interest rate of 7.5% compounded annually?
2. Janet and Dean want to make a down payment of $75,000 on a condominium when they retire in seven years. If they can earn 9% on their investments, how much money do they need to invest today to have enough for the down payment?
3.Your firm is planning to invest $350,000 per year in equal annual end-of-the-year cash flows to fund a capital improvement fund. If the investments are expected to earn 10% per year, how much will the account be worth in 7 years?
4. Your parents put equal annual beginning-of-the-year deposits of $1,200 into an account earning 8% per year from the day you were born until your 18th birthday (a total of 19 deposits). How much money is in that account today?
5. Tucker Binson put $5,000 into a three-year CD paying 7% interest compounded quarterly. How much interest will he have earned when the CD matures?
6. How large are the monthly payments of a recent college graduate with $35,000 in student loans, if the payments are to be made for 10 years and the annual interest rate on the loans is 6.0%?
7. What is the present value of $500 to be received at the end of each year for 10 years if your required rate of return is 10%?
8. Tom invested $3,000 twenty years ago and now has $20,182 in his account. What annual rate of return has Tom earned over the twenty-year period?
9. What is the future value in your pension fund if you invest $7,000 per year for 30 years, earning 9%. You make your first $7,000 payment today.
10. What amount would you have to invest at the end of each year for 20 years to accumulate $1 million dollars if your money was earning 12%?
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