quiz 1

QUESTION 1

1. The primary goal of financial management is to

	1.	Maximize profits
	2.	Maximize shareholder’s wealth
	3.	Avoid financial distress
	4.	Minimize operational costs
	5.	Maintain steady earnings growth

5 points   

QUESTION 2

1. Examples of agency costs are

	1.	The total dividends paid to shareholders over the lifetime of the firm
	2.	The costs that result from default and bankruptcy of the firm
	3.	Corporate income subject to double taxation
	4.	The costs of the conflict of interest between stockholders and management
	5.	The total interest paid the creditors over the lifetime of the firm

5 points   

QUESTION 3

1. Which of the following is a false statement

	1.	Accounting income is rarely equal to a firm’s cash flow
	2.	Accounting statements are usually prepared to match the timing of income and expenses
	3.	All public companies are required to file timely, audited financial statements for purpose of public perusal.
	4.	The balance sheet tells investors exactly what the firm’s market value is.
	5.	Assets are usually recorded on the balance sheet at their acquisition value

5 points   

QUESTION 4

1. A firm has net working capital of $8,100 and current assets of $14,600. Total assets equal $32,900. What is the book value of the firm if long term debt is $7,500?

	1.	$2,700
	2.	$10,800
	3.	$17,300
	4.	$18,900
	5.	$22,500

5 points   

QUESTION 5

1. Redding Industrial Supply had common stock of $6,800 and retained earnings of $4,925 at the beginning of the year. At the end of the year, the common stock balance is $7,000 and the retained earnings account balance is $5,498. The net income for the year is $938. What is the retention ratio?

	1.	17.59%
	2.	38.91%
	3.	61.09%
	4.	82.41%
	5.	93.33%

5 points   

QUESTION 6

1. John Albertson purchases a plot of land for $15,000 exactly 3 years ago. If the land has appreciated 12% each year, what is its value now?

	1.	$20,400
	2.	$16,800
	3.	$21,074
	4.	$45,000
	5.	$25,200

5 points   

QUESTION 7

1. Annette Anderson has a choice of receiving either $5,000 in two years or a discounted sum today. If her opportunity cost is 8% what sum received today would be the equivalent to $5,000 in two years?

	1.	$4,629.63
	2.	$4,286.69
	3.	$4,310.34
	4.	$3,931.28
	5.	$3,876.92

5 points   

QUESTION 8

1. George Bennet wants to give his son $20,000 upon completion of his college education. If he invests $5,500 now in an account earning 9% annual interest, approximately how many years will it take for him to achieve his goal?

	1.	13 years
	2.	14 years
	3.	15 years
	4.	16 years
	5.	17 years

5 points   

QUESTION 9

1. Susan and Tom Houser believe that they will need payments of $4,460 at the beginning of each of their retirement. The payments will be made out of an account that is expected to earn 10% interest annually. If the payments are made over 20 years, what amount (approximately) must be deposited in the account at retirement?

	1.	$140,800
	2.	$1,718,249.98
	3.	$255,406.91
	4.	$280,947.60
	5.	$1,100,000

10 points   

QUESTION 10

1. If your credit card company charges 1.5% interest per month, what is the equivalent annual rate you are paying?

	1.	18%
	2.	1.5%
	3.	1.51%
	4.	19.56%
	5.	15%