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1. (TCO 1) Which one of the following actions best matches the primary goal of financial management? increasing the net working capital while lowering the long-term asset requirements improving the operating efficiency, thereby increasing the market value of the stock increasing the firm’s market share
reducing fixed costs and increasing variable costs increasing the liquidity of the firm by transferring short-term debt into long-term debt
2. (TCO 1) Which of the these activities is not a capital budgeting task? determining the amount of cash needed on a daily basis to operate a firm identifying assets that produce value in excess of the cost to acquire those assets evaluating the size and timing of future cash flows from a project evaluating the risks associated with a proposed project
3. (TCO 1) Market value reflects which of the following: The amount someone is willing to pay today for an asset. The value of the asset based on generally-accepted accounting principles. The asset’s historical cost.
A and B only
None of the above
4. (TCO 1) Which of the following is true regarding income statements? It reveals the net cash flows of a firm over a stated period of time. It reflects the financial position of a firm as of a particular date. It records revenue only when cash is received for the product or service provided. It records expenses based on the recognition principle. None of the above is a true statement.
5. (TCO 1) Tato’s Pizza has sales of $625,000. They paid $43,000 in interest during the year and depreciation was $79,000. Administrative costs were $100,000 and other costs were $160,000. Assuming a tax rate of 35 percent, what is Tato’s Pizza net income?
6. (TCO 1) Home Best Hardware had $315,000 in taxable income last year. Using the tax rates provided in Table 2.3, what is the approximate average tax rate? 35%
7. (TCO 1) Pizza A had earnings after taxes of $600,000 in the year 2008, and 300,000 shares outstanding. In year 2009, earnings after taxes increased to $750,000, and 25,000 new shares were issued for a total of 325,000 shares. What is the EPS figure for 2008? $2.0
8. (TCO 1) The financial statement that summarizes a firm's operations over a period of time is called a(n): income statement.
cash flow statement.
periodic operating statement.
9. (TCO 1) Best Electronics has EBIT of $450,000, interest of $30,000, taxes of $50,000, and depreciation of $80,000. What is the company’s operating cash flow? $497,200
10. (TCO 3) Linda invested $15,000 today, in an investment that pays 6.50 percent interest, compounded semi-annually. Which one of the following statements is correct concerning this investment? Linda will receive equal interest payments every six months over the life of the investment. Linda would have earned more interest if she had invested in an account paying 6.50 percent simple interest. Linda will earn more interest in year 5 than she will in year 4. Linda would have earned more interest if she had invested in an account paying annual interest. Linda will earn less and less interest each year over the life of the investment.
11. (TCO 3) Mr. Smith will receive $7,500 a year for the next 14 years from his trust. If the interest rate on this investment is eight percent, what is the approximate current value of these future payments? $61,800
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