The common set of standards and procedures by which audited financial statements are prepared is known as the:matching principle. cash flow identity. Generally Accepted Accounting Principles. Financial Accounting Reporting Principles. Standard Accounting Value Guidelines.

Question 2

The percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate.mean residual total average marginal

Question 3

Which of the following are current assets?I. patentII. InventoryIII. accounts payableIV. cashI and III only II and IV only I, II, and IV only I, II and III only II, III, and IV only

Question 4

For a tax-paying firm, an increase in _____ will cause the cash flow from assets to increase.depreciation net capital spending change in net working capital taxes production costs

Question 5

An increase in the depreciation expense will do which of the following?I. increase net incomeII. decrease net incomeIII. increase the cash flow from assetsIV. decrease the cash flow from assetsI only II only I and III only II and III only II and IV only

Question 6

A firm has common stock of $6,200, paid-in surplus of $9,100, total liabilities of $8,400, current assets of $5,900, and fixed assets of $21,200. What is the amount of the shareholders' equity?$6,900 $15,300 $18,700 $23,700 $35,500

Question 7

At the beginning of the year, the long-term debt of a firm was $72,918 and total debt was $138,407. At the end of the year, long-term debt was $68,219 and total debt was $145,838. The interest paid was $6,430. What is the amount of the cash flow to creditors?-$18,348 -$1,001 $11,129 $13,861 $19,172

Question 8

Beach Front Industries has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000, and a tax rate of 32 percent. The firm paid $59,000 in cash dividends. What is the addition to retained earnings?$76,320 $81,700 $95,200 $103,460 $121,680

Question 9

Which one of the following is a source of cash?increase in accounts receivable decrease in common stock decrease in long-term debt decrease in accounts payable decrease in inventory

Question 10

An increase in current liabilities will have which one of the following effects, all else held constant? Assume all ratios have positive values.increase in the cash ratio increase in the net working capital to total assets ratio decrease in the quick ratio decrease in the cash coverage ratio increase in the current ratio

Question 11

If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the following?0.0 0.5 1.0 1.5 2.0

Question 12

Dee's has a fixed asset turnover rate of 1.12 and a total asset turnover rate of 0.91. Sam's has a fixed asset turnover rate of 1.15 and a total asset turnover rate of 0.88. Both companies have similar operations. Based on this information, Dee's must be doing which one of the following?utilizing its fixed assets more efficiently than Sam's utilizing its total assets more efficiently than Sam's generating $1 in sales for every $1.12 in net fixed assets generating $1.12 in net income for every $1 in net fixed assets maintaining the same level of current assets as Sam's

Question 13

The Du Pont identity can be used to help managers answer which of the following questions related to a firm's operations?I. How many sales dollars has the firm generated per each dollar of assets?II. How many dollars of assets has a firm acquired per each dollar in shareholders' equity?III. How much net profit is a firm generating per dollar of sales?IV. Does the firm have the ability to meet its debt obligations in a timely manner?I and III only II and IV only I, II, and III only II, III and IV only I, II, III, and IV

Question 14

A firm generated net income of $878. The depreciation expense was $47 and dividends were paid in the amount of $25. Accounts payables decreased by $13, accounts receivables increased by $22, inventory decreased by $14, and net fixed assets decreased by $8. There was no interest expense. What was the net cash flow from operating activity?

878 + 47 -13 -22 +14

$876 $902 $904 $922 $930

Question 15

The Meat Market has $747,000 in sales. The profit margin is 4.1 percent and the firm has 7,500 shares of stock outstanding. The market price per share is $27. What is the price-earnings ratio?6.61 8.98 11.42 13.15 14.27

Question 16

Which one of the following terms is defined as dividends paid expressed as a percentage of net income?dividend retention ratio dividend yield dividend payout ratio dividend portion dividend section

The internal growth rate of a firm is best described as the:

Answer

minimum growth rate achievable assuming a 100 percent retention ratio.

minimum growth rate achievable if the firm maintains a constant equity multiplier.

maximum growth rate achievable excluding external financing of any kind.

maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.

maximum growth rate achievable with unlimited debt financing.

3.3 points

Question 18

The sustainable growth rate of a firm is best described as the:

Answer

minimum growth rate achievable assuming a 100 percent retention ratio.

minimum growth rate achievable if the firm maintains a constant equity multiplier.

maximum growth rate achievable excluding external financing of any kind.

maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.

maximum growth rate achievable with unlimited debt financing.

3.3 points

Question 19

1.

When constructing a pro forma statement, net working capital generally:

remains fixed.

varies only if the firm is currently producing at full capacity.

varies only if the firm maintains a fixed debt-equity ratio.

varies only if the firm is producing at less than full capacity.

varies proportionally with sales.

Question 20

Fresno Salads has current sales of $4,900 and a profit margin of 6.5 percent. The firm estimates that sales will increase by 5 percent next year and that all costs will vary in direct relationship to sales. What is the pro forma net income?

$303.33

$327.18

$334.43

$338.70

$341.10

Question 21

The Two Sisters has a 9 percent return on assets and a 75 percent retention ratio. What is the internal growth rate?

6.50 percent

6.75 percent

6.97 percent

7.24 percent

7.38 percent

Question 22

The most recent financial statements for Watchtower, Inc. are shown here (assuming no income taxes):

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Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year's sales are projected to be $5,002. What is the amount of the external financing need?

$197

$203

$211

$218

$223

Question 23

Which one of the following will decrease the net present value of a project?

increasing the value of each of the project's discounted cash inflows

moving each of the cash inflows back to a later time period

decreasing the required discount rate

increasing the project's initial cost at time zero

increasing the amount of the final cash inflow

3.3 points

Question 24

Which one of the following is a project acceptance indicator given an independent project with investing type cash flows?

profitability index less than 1.0

project's internal rate of return less than the required return

discounted payback period greater than requirement

average accounting return that is less than the internal rate of return

modified internal rate of return that exceeds the required return

Question 25

Samuelson Electronics has a required payback period of three years for all of its projects. Currently, the firm is analyzing two independent projects. Project A has an expected payback period of 2.8 years and a net present value of $6,800. Project B has an expected payback period of 3.1 years with a net present value of $28,400. Which projects should be accepted based on the payback decision rule?

Project A only

Project B only

Both A and B

Neither A nor B

Answer cannot be determined based on the information given.

Question 26

Mutually exclusive projects are best defined as competing projects which:

would commence on the same day.

have the same initial start-up costs.

both require the total use of the same limited resource.

both have negative cash outflows at time zero.

have the same life span.

Question 27

Isaac has analyzed two mutually exclusive projects of similar size and has compiled the following information based on his analysis. Both projects have 3- year lives.

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Isaac has been asked for his best recommendation given this information. His recommendation should be to accept:

Answer

both projects.

project B because it has the shortest payback period.

project B and reject project A based on their net present values.

project A and reject project B based on their average accounting returns.

neither project.

3.3 points

Question 28

1.

What is the net present value of a project with the following cash flows if the required rate of return is 12 percent?

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Answer

-$1,574.41

-$1,208.19

-$842.12

$729.09

$1,311.16

3.3 points

Question 29

1.

Blue Water Systems is analyzing a project with the following cash flows. Should this project be accepted based on the discounting approach to the modified internal rate of return if the discount rate is 14 percent? Why or why not?

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Answer

Yes; The MIRR is 13.48 percent.

Yes: The MIRR is 17.85 percent.

Yes; The MIRR is 21.23 percent.

No; The MIRR is 5.73 percent.

No; The MIRR is 17.85 percent.

3.3 points

Question 30

1.

What is the profitability index for an investment with the following cash flows given a 14.5 percent required return?

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Answer

0.94

0.98

1.02

1.06

1.11