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Exam 1 FIN370 Fall 2011 – Version B Key
 

1. You are analyzing a company that has cash of $2,000, accounts receivable of $3,700, fixed assets of $10,900, accounts payable of $6,600, and inventory of $4,100. What is the quick ratio?  a. 1.48

B. .86
c. 3.30
d. .67
e. .30

 

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #45
SECTION: 3.2
TOPIC: QUICK RATIO
TYPE: PROBLEMS
 

2. Solomon, Inc. has net sales of $745,100 and costs of $590,800. The depreciation expense is $82,600 and the interest paid is $15,500. What is the amount of the firm's operating cash flow if the tax rate is 35 percent?  a. $46,605

b. $52,030
c. $71,700
D. $134,630
e. $105,720

 

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 002 #83
SECTION: 2.4
TOPIC: OPERATING CASH FLOW
TYPE: PROBLEMS
 

3. Which one of the following statements is correct? 
A. The NYSE has the most stringent listing requirements.
b. The trading floor for NASDAQ is located in Chicago.
c. The majority of the publicly traded firms in the U.S. are listed on the NYSE. d. NASDAQ is an auction market.
e. The NYSE is a dealer market.

 

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #59
SECTION: 1.6
TOPIC: STOCK EXCHANGES
TYPE: CONCEPTS
 

4. The Laptop Company has sales of $874,000, a profit margin of 9 percent, a total asset turnover rate of .80, and an equity multiplier of 1.75. What is the return on equity?  a. 15.75 percent
B. 12.60 percent
c. 10.86 percent
d. 7.20 percent
e. 5.14 percent

 

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #81
SECTION: 3.3
TOPIC: DU PONT IDENTITY
TYPE: PROBLEMS
 

5. A sole proprietorship: 
a. is taxed as a separate legal entity.
b. involves significant legal costs during the formation process. c. can generally raise significant capital from non-owner sources. d. has an unlimited life.
E. is relatively easy to create.

 

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 001 #22
SECTION: 1.3
TOPIC: SOLE PROPRIETORSHIP
TYPE: CONCEPTS
 

6. Which of the following correctly describe a dealer market? I. Dealers match buyers with sellers.
II. Dealers buy and sell for themselves at their own risk.
III. Dealer trading occurs over-the-counter.
IV. Dealer transactions occur on a trading floor. 
a. I and III only
b. I and IV only
c. II and IV only
d. I, II, and III only
E. II and III only

 

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #57
SECTION: 1.6
TOPIC: DEALER MARKET
TYPE: CONCEPTS
 

7. Which one of the following will increase the future value of a lump sum invested today?  a. shortening the investment time period
b. decreasing the amount of the lump sum
C. increasing the rate of interest
d. paying interest only at the end of the investment period e. paying simple interest rather than compound interest

 

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #10
SECTION: 4.1
TOPIC: FUTURE VALUE
TYPE: CONCEPTS
 

8. Karen has $16,000 that she wants to invest for 1 year. She can invest this amount at The North Bank and earn 5.50 percent simple interest. Or, she can open an account at The South Bank and earn 5.39 percent interest, compounded monthly. If Karen decides to invest at The North Bank, she will:  a. have a total balance of $16,862.40 in her account after 1 year. b. have a total balance of $16,800 in her account after 1 year. c. earn the same amount as if she had invested with The South Bank. D. earn $4.03 less than if she had invested with The South Bank. e. earn $17.60 more than if...
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