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a.
b.
c.
d.
a.
b.
c.
d.
2.Consider the timing of the profits of the following certain investment projects:
Profit
L
S
Year 1
$
0
$ 3000
Year 2
$ 3000
$
0
Project S is preferred to Project L.
Project L is preferred to Project S.
Projects S and L are equally desirable.
A goal of profit maximization would favor Project S only.
3.
a.
b.
c.
d.
e.
a.
b.
c.
d.
a.
b.
c.
d.
e.
Which of the following is not a reason why financial analysts use ratio
analysis?
a. Ratios help to pinpoint a firm's strengths.
b.
Ratios restate accounting data in relative terms.
c. Ratios are ideal for smoothing out the differences that may exist when
comparing firms that use different accounting practices.
d. Some of a firms weaknesses can be identified through the usage of ratios.
7.
8.
Marshall Networks, Inc. has a total asset turnover of 2.5 and a net profit
margin of 3.5%. The firm has a return on equity of 17.5%. Calculate
Marshalls debt ratio.
a. 30%
b. 40%
c. 50%
d. 60%
9.
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.
10.
Which of the following is not a limitation related to the usage of ratios when
reviewing a firms performance?
a. Many firms experience seasonality in their operations.
b. Ratios cannot be used to compare firms that are in the same industry if
one firms sales are higher than another firms.
c. Some firms operate in a variety of business lines, which makes it difficult to
make comparisons.
d. Accounting practices differ widely among firms.
11.
The _______ is the federal agency primarily responsible for regulating the
securities industry.
a. FTC
b. SEC
c. FRB
d. SCC
12.
What is the role of the SEC as it relates to the issuance of new securities by
U.S. corporations?
a. To guaranty the sale of securities to the public
b. To ensure accurate and complete disclosure of information about the
issuing firm to the public
c. To reduce the cost of issuing securities to the public
d. To provide investment advice to the purchasing public
14.
15.
A company collects 60% of its sales during the month of the sale, 30% one
month after the sale, and 10% two months after the sale. The company expects sales
of $10,000 in August, $20,000 in September, $30,000 in October, and $40,000 in
November. How much money is expected to be collected in October?
a. $25,000
b. $15,000
c. $35,000
d. None of the above
16.
c.
d.
9 years
12 years
19.
20.
You have just purchased a share of preferred stock for $50.00. The preferred
stock pays an annual dividend of $5.50 per share forever. What is the rate of
return on your investment?
a.
.055
b.
.010
c.
.110
d.
.220
21.
A commercial bank will loan you $7,500 for two years to buy a car. The loan
must be repaid in 24 equal monthly payments. The annual interest rate on the
loan is 12% of the unpaid balance. What is the amount of the monthly
payments?
a.
$282.43
b.
$390.52
c.
$369.82
d.
$353.05
22.
23.
24.
25.
In general, as the level of sales rises above the break-even point, the degree of
operating leverage:
a. increases.
b. decreases.
c. remains constant.
d. none of the above.
26.
Due to a technical breakthrough, the fixed costs for a firm drop by 25%. Prior
to this breakthrough, fixed costs were $100,000 and unit contribution margin
was and remains at $5.00. The new amount of break-even units will be:
a. 25,000.
b. 20,000.
c. 15,000.
d. 10,000.
27.
28.
29.
ABC Service can purchase a new assembler for $15,052 that will provide an
annual net cash flow of $6,000 per year for five years. Calculate the NPV of the
assembler if the required rate of return is 12%. (Round your answer to the
nearest $1.)
a. $1,056
b. $4,568
c. $7,621
d. $6,577
30.
Given the following annual net cash flows, determine the IRR to the nearest
whole percent of a project with an initial outlay of $1,520.
Year Net Cash Flow
1
$1,000
2
3
a.
b.
c.
d.
$1,500
$ 500
48%
40%
32%
28%
31.
32.
33.
34.
In the basic model, the optimal inventory level is the point at which:
a. total cost is minimized.
b. total revenue is maximized.
c. carrying costs are minimized.
d. ordering costs are minimized.
35.
36.
37.
If a lease is extended for a length of time that is equal to the entire useful life of
the equipment, the lease:
a. is referred to as an operating lease.
b. carries no income tax deduction.
c. is a financial lease.
d. will be terminated by the IRS.
38. Which of the following would decrease free cash flows? A decrease in:
a. depreciation expense.
b. interest expense.
c. incremental sales.
d. both a & c.
e. all of the above.
39.
40.