Present value of amount

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1. Financial management is concerned with which of the following?
a. Creating economic wealth
b. Making investment decisions that optimize economic value
c. Making business decisions that optimize economic wealth
d. Raising capital that is needed for growth
e. All of the above

e. All of the above

2. Purchasing a security of a company that is issuing their stock for the first time publicly would be considered:
a. a secondary market transaction.
b. an initial public offering.
c. a seasoned new issue.
d. both a and b.

b. an initial public offering.

3. Which of the following transactions does not affect the quick ratio?
a. Land held for investment is sold for cash.
b. Equipment is purchased and is financed by a long-term debt issue.
c. Inventories are sold for cash.
d. Inventories are sold on a credit basis.

b. Equipment is purchased and is financed by a long-term debt issue.

4. Smith Corporation has current assets of $11,400, inventories of $4,000, and a current ratio of 2.6. What is Smith's acid test ratio?
a. 1.69
b. 0.54
c. 0.74
d. 1.35
Current Liabilities= Current Assets /Current ratio
=11400/2.6
4384.615

Acid test ratio= (Current Assets -Inventory)/Current Liabilities 4.864865
=(11400-4000)/4384
=1.687956

a. 1.69

5. Smart and Smiley Incorporated has an average collection period of 74 days. What is the accounts receivable turnover ratio for Smart and Smiley? You may use a 360-day year.
a. 4.86
b. 2.47
c. 2.66
d. 1.68

Accounts receivable turnover ratio= Days in a year/ACP
=360/74
=4.86 times

a. 4.86

6. Organized security exchanges provide which of the following benefits?
a. A continuous market
b. Established and publicized fair security prices
c. Help businesses raise new capital
d. All of the above

d. All of the above

7. Which of the following is NOT a basic function of a budget?
a. Budgets indicate the need for future financing.
b. Budgets provide the basis for corrective action when actual figures differ from the budgeted figures.
c. Budgets compare historical costs of the firm with its current cost performance.
d. Budgets allow for performance evaluation.

c. Budgets compare historical costs of the firm with its current cost performance.

8. The preparation of a cash budget serves which of the following purposes?
a. To estimate the amount and timing of cash flows that are needed in order to optimize the price of the firm's common stock
b. To calculate the amount of future cash flows that would be needed in order to achieve the optimal level of financing during the forecast period
c. To determine the amount and timing of short-term financing that would be required for the operation of a business during the forecast period
d. To estimate the amount of sales volume that would be required in order to achieve the break-even point

b. To determine the amount and timing of short-term financing that would be required for the operation of a business during the forecast period

9. The first step involved in predicting financing needs is:
a. projecting the firm's sales revenues and expenses over the planning period.
b. estimating the levels of investment in current and fixed assets that are necessary to support the projected sales.
c. determining the firm's financing needs throughout the planning period.
d. none of the above.

a. projecting the firm's sales revenues and expenses over the planning period.

10. What is the present value of $1,000 to be received 10 years from today? Assume that the investment pays 8.5% and it is compounded monthly (round to the nearest $1).
a. $893
b. $3,106
c. $429
d. $833

=1000/(1+8.5%/12)^(10*12)
=$429
c. $429

11. The future value of $500 deposited into an account paying 8% annually for three years is:
a. $500.
b. $630.
c. $700.
d. $620.

=500*(1+8%)^3
=$630

b. $630.

12. Tom's Trashbins, Inc. has fixed costs of $225,000. Tom's trashbins sell for $45 and have a unit variable cost of $20. What is Tom's break-even point in units?
a. 8,500
b. 8,750
c. 9,000
d. 9,250

FIXED COST/CONTRIBUTION MARGIN PER UNIT
=225000/(45-20)
=9000
HENCE C.

13. Which of the following statements is ...