1. Which of the following is considered to be a current liability?
A. Short-term money market instruments
B. Accounts payable
C. Work-in-process
D. Raw materials
2. If you deposit $10,000 in an investment that yields 6 percent annually, how many years will it take for your investment to double in value?
A. 15 years
B. 20 years
C. 18 years
D. 12 years
3. Discounting determines the worth of funds to be received in the future in terms of their
A. cost factor.
B. present value.
C. time factor.
D. future value.
4. What is the future value of an ordinary annuity if you deposit $1,500 per year for the next 5 years into an account that earns an interest rate of 5 percent annually?
A. $1,914
B. $7,500
C. $8,288
D. $6,322
5. A beta coefficient for a risky stock is
A. greater than 1.0.
B. equal to 1.0.
C. less than 1.0.
D. negative.
6. Liabilities equal
A. assets minus equity.
B. equity.
C. equity minus assets.
D. assets.
7. What is the present value of an annuity due if you deposit $1,200 per year for the next 5 years into an account that earns an interest rate of 5 percent annually?
A. $5,195
B. $6,703
C. $8,288
D. $5,455
8. What is the future value of an annuity due if you deposit $1,500 per year for the next 5 years into an account that earns an interest rate of 5 percent annually?
A. $7,500
B. $11,914
C. $8,703
D. $8,288
9. Which of the following is calculated by subtracting the cost of goods sold and administrative expense from net sales?
A. Operating income
B. Total liabilities
C. Inventory cost
D. Accounts receivable
10. Accountants suggest that assets should be valued at
A. the higher of market or cost.
B. the lower of market or cost.
C. cost.
D. market.
11. Which of the following would be the most likely cause of an increase in inventory turnover?
A. The faster collection of accounts receivable
B. An increase in the inventory level
C. Lowered sales
D. A reduction in the price of the product
12. At an interest rate of 6.25% percent compounded annually, how many years will it take for an investment of $7,000 to grow to $10,000? (Round to the nearest year.)
A. 8 years
B. 6 years
C. 10 years
D. 4 years
13. To measure risk, the capital asset pricing model uses
A. the volatility of an asset's cash flows.
B. an asset's standard deviation.
C. the term during which the asset is held.
D. beta.
14. If an account currently has a value of $84,000 and earns an interest rate of 4 percent annually, for how many years can you withdraw $10,000 from the account?
A. 12
B. 20
C. 8
D. 10
15. If annual interest rates are 10 percent, which of the following values will be the greatest?
A. The future value of a $100 investment after 3 years
B. The future value of an annuity after 4 years, if $100 is deposited annually
C. The present value of an annuity that will pay $200 a year, at the end of each of the next 4 years
D. The present value of an investment that will be worth $100 after 2 years
16. What is the future value of an ordinary annuity if you deposit $500 per year for the next 10 years in an account that earns an interest rate of 4 percent annually?
A. $1,700
B. $5,000
C. $6,003
D. $5,263
17. What is the required return using the CAPM if the stock's beta is 1.2, and the individual, who expects the market to rise by 13.2%, can earn 6.4% invested in a risk-free Treasury bill?
A. 24.58%
B. 11.62%
C. 14.56%
D. 9.46%
18. Profitability ratios are used to measure
A. turnover.
B. liquidity.
C. leverage.
D. performance.
19. A current ratio is presently 2 : 1 for a corporation that sells sporting goods. Which of the following statements about the ratio is correct?
A. The current ratio is affected by exchanging bonds for stock.
B. The current ratio is increased by purchasing a store with cash, with potential to increase corporate sales.
C. The current ratio is unchanged by using cash to retire accounts payable.
D. The quick ratio is smaller than the current ratio.
20. The current ratio excludes
A. cash equivalents.
B. inventory.
C. accrued interest.
D. paid-in capital.