20 MCQ's

1) A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 2/20, net 90. What change might be expected on the balance sheets of its customers?
A.-Increased receivables and increased bank loans
B.-Increased payables and increased bank loans
C.-Increased payables and decreased bank loans
D.-Decreased receivables and increased bank loans


2) Which method of controlling pledged inventory provides the greatest degree of security to the lender?
A.-Overall inventory liens
B.-Warehousing
C.-Trust receipts
D.-Blanket inventory liens


3) Firms exposed to the risk of interest rate changes may reduce that risk by
A.-hedging in the financial futures market.
B.-pledging or factoring accounts receivable.
C.-hedging in the commodities market.
D.-obtaining a Eurodollar loan.

 
4) As the interest rate increases, the present value of an amount to be received at the end of a fixed period
A.-decreases
B.-Not enough information to tell
C.-remains the same
D.-increases

1) In determining the future value of a single amount, one measures
A.-the present value of an amount discounted at a given interest rate.
B.-the present value of periodic payments at a given interest rate.
C.-the future value of an amount allowed to grow at a given interest rate.
D.-the future value of periodic payments at a given interest rate.


2) An annuity may be defined as
A.-a series of payments of unequal amount.
B.-a series of consecutive payments of equal amounts.
C.-a series of yearly payments.
D.-a payment at a fixed interest rate.

3) Mr. Blochirt is creating a college investment fund for his daughter. He will put in $850 per year for the next 15 years and expects to earn an 8% annual rate of return. How much money will his daughter have when she starts college?
A.-$12,263
B.-$23,079
C.-$24,003
D.-$11,250


4) If you were to put $1,000 in the bank at 6% interest each year for the next ten years, which table would you use to find the ending balance in your account?
A.-Future value of $1
B.-Future value of an annuity of $1
C.-Present value of an annuity of $1
D.-Present value of $1

1) If you invest $8,000 at 12% interest, how much will you have in 7 years?
A.-$17,688
B.-$80,712
C.-$3616
D.-$18,016

2) In determining the future value of a single amount, one measures
A. the present value of an amount discounted at a given interest rate.
B. the present value of periodic payments at a given interest rate.
C. the future value of an amount allowed to grow at a given interest rate.
D. the future value of periodic payments at a given interest rate.

3) The three primary policy variables to consider when extending credit include all of the following except
A. the level of inflation.
B. credit standards.
C. the terms of trade.
D. collection policy.
 
4) An aggressive working capital policy would have which of following characteristics?
A. A low ratio of short-term debt to fixed assets.
B. A high ratio of long-term debt to fixed assets.
C. A high ratio of short-term debt to long-term sources of funds.
D. A short average collection period.

1. The direct materials quantity standard should
A) exclude unavoidable waste.
B) exclude quality considerations.
C) allow for normal spoilage.
D) always be expressed as an ideal standard.

Use the following to answer questions 2-4:
Stiner Company has a materials price standard of $2.00 per pound. Five thousand pounds of materials were purchased at $2.20 a pound. The actual quantity of materials used was 5,000 pounds, although the standard quantity allowed for the output was 4,500 pounds.

2. Stiner Company’s materials price variance is
A) $100 U.
B) $1,000 U.
C) $900 U.
D) $1,000 F.

3. Stiner Company’s materials quantity variance is
A) $1,000 U.
B) $1,000 F.
C) $1,100 F.
D) $1,100 U.

4. Stiner Company’s total materials variance is
A) $2,000 U.
B) $2,000 F.
C) $2,100 U.
D) $2,100 F.

1. Which of the following will increase the net present value of a project?
A) An increase in the initial investment.
B) A decrease in annual cash inflows.
C) An increase in the discount rate.
D) A decrease in the discount rate.

2. Which of the following is true?
A) The form, content, and frequency of variance reports vary considerably among companies.
B) The form, content, and frequency of variance reports do not vary among      companies.
C) The form and content of variance reports vary considerably among companies, but the frequency is always weekly.
D) The form and content of variance reports are consistent among companies, but the frequency varies.

3. All of the following are involved in the capital budgeting evaluation process except a  company’s
A) board of directors.
B) capital budgeting committee.
C) Officers.
D) Stockholders.

4. The primary capital budgeting method that uses discounted cash flow techniques is the
A) net present value method.
B) cash payback technique.
C) annual rate of return method.
D) profitability index method.