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. When analyzing alternative capital structures for a firm, a financial manager must consider which of the following?
- type of loan
- amount of funds needed
- cost of funds
- mix of debt and equity
- all of the above
3. 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. Which of the following is true regarding income statements?
- It shows the revenue and expenses, based upon selected accounting methods.
- 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.
5. 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?
- $157,950
- $322,000
- $243,000
- $200,000
6. Home Best Hardware had $315,000 in taxable income last year. Using the tax rates provided in Table 2.3, what is the marginal tax rate?
7. 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?
8. The income statement reflects:
- income and expenses at the time when those items affect the cash flows of a firm.
- income and expenses in accordance with GAAP.
- the cash flows in accordance with GAAP.
- the flow of cash into and out of a firm during a stated period of time.
- the flow of cash into and out of a firm as of a particular date.
9. Print Imaging has EBIT of $150,000, interest of $30,000, taxes of $50,000, and depreciation of $50,000. What is the company's operating cash flow?
- $120,000
- $180,000
- $170,000
- $150,000
- $120,000
10. You opened a new certificate of feposit with $13,000. Your broker indicated that this investment pays five percent interest, compounded quarterly. Which one of the following statements is correct concerning this investment?
- You will receive equal interest payments every three months over the life of the investment.
- You could earn more interest by investing in an account paying five percent simple interest.
- You would have earned more interest if you had invested in an account paying annual interest.
- You will earn less and less interest each year over the life of the investment.
- You will earn more interest in year 3, than you will in year 2.
11. Mr. Smith will receive $8,500 a year for the next 14 years from a contract. If the interest rate on this investment is eight percent, what is the approximate current value of these future payments?
- $70,070
- $53,500
- $110,200
- $96,700
12. Paper Pro recently purchased a printing machine costing $97,000. The company financed this purchase at 8.25 percent interest, with monthly payments of $2,379.45. How many years will it take the firm to pay off this debt?
- 4.0 years
- 4.25 years
- 4.5 years
- 5.0 years
13. Fine Oak Woodworks is considering a project that has cash flows of $6,000, $4,000, and $3,000 for the next three years. If the appropriate discount rate of this project is 10 percent, which of the following statements is false?
- The current value of the project's inflows is $13,000
- The approximate current value of the project's inflows is $11,000
- The project's inflows are higher than zero
- The project should be accepted because its present value is positive