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What is the goal of financial management for a sole proprietorship?
a- Decrease long-term debt to reduce the risk of the owner
b- Maximize net income given the resource of the firm
c- Maximize the market value of the equity
d- Minimize the tax impact on the proprietor
e- Minimize costs and increase production
Working capital management includes which of the following?
a- Establishing the inventory level
b- Determining the amount of cash needed on a daily basis
c- Establishing credit terms for customer
d- All of the above
Market value is important to the financial manager because
a- It reflects the value of the asset, based on generally-accepted accounting principles
b- Is a crucial component of the balance sheet, and can impact the financial statements
c- Market value reflects the amount someone is willing to pay today for an asset
d- The market of an asset reflects its historical cost
e- None of the above
The income statement reflects
a- Income and expenses at the time when those items affect the cash flows of a firm
b- Income and expenses in accordance with GAAP
c- The cash flows in accordance with GAAP
d- The flow of cash into and out of a firm during a stated period of time
e- The flow of cash into and out of a firm as of a particular date
Telemarket inc. 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 telemarket’s taxes figure?
a- $100,000
b- $85,000
c- $112,000
d- $72,000
Home best hardware had $ 315,000 in taxable income last year. Using the tax rates provided in table 2.3 what are the company’s income taxes?
a- $122,850
b- $106,100
c- $94,500
d- None of the above
Pizza a had earnings after taxes of $600,000 in the year 2008, and 300,000 shares outstanding. In year 2009 , earning s 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?
a- $2.0
b- $2.21
c- $.50
d- $.47
An income statement
a- Reveals the net cash flows of a firm over a stated period of time
b- Reflects the financial position of a firm as of a particular date
c- Shows the revenue and expenses based upon selected accounting method
d- Records revenue only when cash is received for the product or service provided
e- Records expenses based on the recognition principle
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?
a- $120,000
b- $180,000
c- $170,000
d- $150,000
e- $120,000
You opened a new certificate of deposit with $13,000. Your broker indicated that this investment pays five percent interest, compound quarterly. Which one of the following statements is correct concerning this investments?
a- You will receive equal interest payments every three months over the life of the investment
b- You could earn more interest by investing in an account paying five percent simple interest
c- You would have earned more interest if you had invested in an account paying annual interest
d- You will earn less interest each year over the life of the investment
e- You will earn more interest in year 3, than you will in year 2.
Mr. smith will receive $6,500 a year for the next 14 years from his trust. If the interest rate on this inverstement is eight percent, what is the approximate current value of these furture payments?
a- $93,000
b- $53,500
c- $84,300
d- $52,000
KED engineering acquired an additional business unit for $310,000. The seller agreed to accept annual payment s of $ 67,000 at an interest rate of 6.5 percent. How many years will it take Ked engineering to pay for this purchase?
a- 4.70 yrs
b- 5.68yrs
c- 6.21yrs
d- 7.84yrs
e- 8.12yrs
Fine oak woodworks is considering a project that has cash flows of $5,000, $3,000 and $8,000 for next three years. If the appropriate discount rate of this project is 10 percent, which of the following statements is true?
a- The current value of the project’s inflows is $16,000
b- The approximate current value of the projects inflows is $13,000
c- The current value of the projects inflows is somewhere in between $14,000 and $16,000
d- The project should be rejected because its present value is negative
You are considering two investments. Investment I, is in a software company and investment II , is an engineering company. The investments offer the following cash flows:
Year software company engineering company
1 $5,000 15,000
2 $3,000 $8,000
3 $4,000 $9,000
4 $3,600 $11,000
If the appropriate discount rate is 10 percent, what is the approximate present value of the software company investment?
a- $15,600
b- $12,500
c- $12,750
d- $15,000
North bank offers you an APR of 8.62% compounded weekly, and south bank offers you an effective rate of 8.75$% on business loan. Which bank should you choose and why?
a- South bank because its effective rate is higher
b- North bank because the APR is lower
c- South bank because its effective rate is lower
d- North bank because its effective rate is lower
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