# Net Working Capital Will Equal 50 Percent of Fixed - DOC by hji80317

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```									Exam1 FIN370 Fall 2009 Key Version A

1. Shareholders' equity is equal to:
A. total assets minus net working capital.
B. net working capital plus total assets.
C. total assets plus total liabilities.
D. net fixed assets minus total liabilities.
E. fixed assets minus long-term debt plus net working capital.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 002 #17
SECTION: 2.1
TOPIC: SHAREHOLDERS' EQUITY
TYPE: CONCEPTS

2. Kate wants to invest \$1,000 for five years. Which one of the following will provide her with the largest future
value?
A. 6 percent simple interest
B. 7 percent interest, compounded monthly
C. 6 percent interest, compounded monthly
D. 7 percent simple interest
E. 6 percent interest, compounded annually

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #11
SECTION: 4.1
TOPIC: COMPOUND INTEREST
TYPE: CONCEPTS

3. United Enterprises paid \$12,000 in dividends and \$21,300 in interest over the past year. Sales totaled
\$139,700 with costs of \$101,400. The depreciation expense was \$10,500. The applicable tax rate is 34 percent.
What is the amount of the operating cash flow?
A. \$36,090
B. \$27,072
C. \$25,590
D. \$38,300
E. \$32,928

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 002 #84
SECTION: 2.4
TOPIC: OPERATING CASH FLOW
TYPE: PROBLEMS
4. The primary market is:
A. a reference to any dealer market.
B. the market where all new issues of debt and equity securities are sold to the public.
C. any large stock exchange accessible to the general public for trading either debt or equity securities.
D. the NYSE.
E. a reference to any auction market.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 001 #56
SECTION: 1.6
TOPIC: PRIMARY MARKET
TYPE: CONCEPTS

5. Which one of the following statements is correct?
A. Bonds are included in net working capital.
B. The amount of retained earnings is found on the income statement.
C. Accounts payable is the amount due from customers.
D. Depreciation increases total assets.
E. Net working capital can be positive, negative, or zero.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 002 #19
SECTION: 2.1
TOPIC: NET WORKING CAPITAL
TYPE: CONCEPTS

6. Capital budgeting includes which of the following?
I. determining the amount of cash needed on a daily basis to operate a firm
II. identifying assets that produce value in excess of the cost to acquire those assets
III. evaluating the size and timing of future cash flows from a project
IV. evaluating the risks associated with a proposed project
A. II only
B. I only
C. II, III, and IV only
D. I, II, and IV only
E. I, II, III, and IV

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #16
SECTION: 1.2
TOPIC: CAPITAL BUDGETING
TYPE: CONCEPTS
7. The equity multiplier is equal to:
A. one plus the debt-equity ratio.
B. one divided by the total asset turnover.
C. total equity divided by total assets.
D. one plus the total asset turnover.
E. total debt divided by total equity.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #17
SECTION: 3.2
TOPIC: EQUITY MULTIPLIER
TYPE: CONCEPTS

8. A firm has adopted a policy whereby it will not seek any additional external financing. Given this, what is the
maximum growth rate of the firm if it has net income of \$4,500, total equity of \$40,000, total assets of \$80,000,
and a 70 percent dividend payout ratio?
A. 4.10 percent
B. 1.72 percent
C. 8.55 percent
D. 3.49 percent
E. 6.38 percent

BLOOMS TAXONOMY QUESTION TYPE: ANALYSIS
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 003 #99
SECTION: 3.4
TOPIC: INTERNAL GROWTH RATE
TYPE: PROBLEMS

9. Common-size financial statements present all account values:
A. as a percentage of sales.
B. in millions of dollars.
C. as a percentage of the budgeted value.
D. in growth terms.
E. in percentage terms.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #1
SECTION: 3.1
TOPIC: COMMON-SIZE STATEMENT
TYPE: DEFINITIONS
10. Highland, Inc. has total assets of \$16,200, net working capital of \$3,900, owner's equity of \$8,500, and
long-term debt of \$6,000. What is the value of the current assets?
A. \$10,200
B. \$6,300
C. \$2,500
D. \$9,900
E. \$5,600

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 002 #54
SECTION: 2.1
TOPIC: CURRENT ASSETS
TYPE: PROBLEMS

11. Fallway, Inc. had current assets of \$121,800 and current liabilities of \$114,300 last year. This year, the
current assets are \$118,600 and the current liabilities are \$100,400. The depreciation expense for the past year is
\$13,500 and the interest paid is \$3,000. What is the amount of the change in net working capital?
A. \$10,700
B. \$7,700
C. \$18,200
D. \$21,200
E. \$5,800

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 002 #87
SECTION: 2.4
TOPIC: CHANGE IN NET WORKING CAPITAL
TYPE: PROBLEMS

12. The Mailbox Co. invested \$50,000 at 7.5 percent compounded annually for 2 years. How much interest on
interest did the company earn over this period of time?
A. \$3,750.00
B. \$7,500.00
C. \$4,614.83
D. \$281.25
E. \$7,781.25

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 004 #30
SECTION: 4.1
TOPIC: INTEREST ON INTEREST
TYPE: PROBLEMS
13. Auction markets:
II. have a physical location.
III. consist solely of electronic trades.
IV. are based on dealers.
A. I and II only
B. II only
C. III only
D. III and IV only
E. I, III, and IV only

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #58
SECTION: 1.6
TOPIC: AUCTION MARKET
TYPE: CONCEPTS

14. Which one of the following is included in net working capital?
A. depreciation on a fixed asset
B. equipment with a useful life of six years
C. mortgage on a building payable over the next thirty years
D. bill payable to a supplier for the purchase of inventory
E. five-year bonds issued to the general public

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #16
SECTION: 2.1
TOPIC: NET WORKING CAPITAL
TYPE: CONCEPTS

15. Cash flow to stockholders is defined as:
A. cash flow from assets plus cash flow to creditors.
B. net income minus the addition to retained earnings.
C. dividends paid plus the change in retained earnings.
D. operating cash flow minus cash flow to creditors.
E. dividends paid minus net new equity raised.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #11
SECTION: 2.4
TOPIC: CASH FLOW TO STOCKHOLDERS
TYPE: DEFINITIONS
16. A firm has a days' sales in inventory value of 46. This means the firm:
A. pays its suppliers in 46 days.
B. grants its customers 46 days to pay for their purchases.
C. sells its inventory an average of 46 times each year.
D. has sufficient inventory to support its sales for 46 weeks.
E. has sufficient inventory to support its sales for 46 days.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #19
SECTION: 3.2
TOPIC: DAYS' SALES IN INVENTORY
TYPE: CONCEPTS

17. The Sarbanes-Oxley Act of 2002 has:
I. increased the number of public firms that have opted to go private.
II. resulted in all firms providing increased accounting information to the public.
III. imposed minimal costs on firms with publicly traded shares.
IV. caused some U.S. firms to be listed on foreign exchanges rather than U.S. exchanges.
A. I, III, and IV only
B. I, II, III, and IV
C. II, III, and IV only
D. I and IV only
E. II only

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #41
SECTION: 1.4
TOPIC: SARBANES-OXLEY
TYPE: CONCEPTS

18. All else equal, which one of the following will increase owners' equity?
A. decrease in inventory
B. increase in accounts receivable
C. increase in notes payable
D. decrease in net working capital
E. increase in accounts payable

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #20
SECTION: 2.1
TOPIC: OWNERS' EQUITY
TYPE: CONCEPTS
19. Ragtop, Inc. has total assets of \$94,000, a debt-equity ratio of 1.0, and net income of \$3,700. What is the
return on equity?
A. 1.91 percent
B. 13.61 percent
C. 7.87 percent
D. 3.94 percent
E. 10.09 percent

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 003 #80
SECTION: 3.3
TOPIC: DU PONT IDENTITY
TYPE: PROBLEMS

20. Your firm has been told that it needs \$100,000 today to fund a \$150,000 expansion project 8 years from
now. What rate of interest was used in the present value computation?
A. 6.83 percent
B. 5.20 percent
C. 7.94 percent
D. 10.40 percent
E. 9.08 percent

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #51
SECTION: 4.3
TOPIC: INTEREST RATE
TYPE: PROBLEMS

21. Paul is the owner of Paul's Cabinets, which is a sole proprietorship. The firm cannot pay its bills because a
large customer defaulted on payment. Which one of the following statements is correct given this situation?
A. Paul is personally liable for the firm's debts but only to the extent of his investment in Paul's Cabinets.
B. The only course of action the creditors of Paul's Cabinets has is to sell the assets of Paul's Cabinets.
C. The creditors of Paul's Cabinets can only collect payment if Paul's Cabinets receives payment from its
customer.
D. Paul is personally liable for the entire debt of Paul's Cabinets.
E. The creditors of Paul's Cabinets can assume the assets of Paul's Cabinets but only in an amount that exceeds
Paul's investment in the firm.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 001 #24
SECTION: 1.3
TOPIC: SOLE PROPRIETORSHIP
TYPE: CONCEPTS
22. Which one of the following situations is most apt to create an agency problem?
A. A key employee is granted stock options on an annual basis.
B. Each employee is given a gift certificate for a free dinner for two whenever the firm remains accident-free
for one year.
C. The company president receives an annual bonus based on the market value of the firm's stock.
D. The production manager is granted an annual bonus based on the size of the firm's total operations.
E. A company researcher is paid a bonus whenever she develops a new method of production that increases the
shelf life of the firm's products.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #43
SECTION: 1.5
TOPIC: AGENCY PROBLEM
TYPE: CONCEPTS

23. A sole proprietorship is defined as a business:
A. that produces only one product.
B. owned by a single individual.
C. engaged in a single operation.
D. that employs a single employee.
E. that is unincorporated.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 001 #4
SECTION: 1.3
TOPIC: SOLE PROPRIETORSHIP
TYPE: DEFINITIONS

24. Which of the following will increase the profit margin of a firm, all else constant?
I. increasing depreciation
II. decreasing cost of goods sold
III. decreasing the tax rate
IV. increasing interest expense
A. I, II, and III only
B. I, II, III, and IV
C. II and IV only
D. I and III only
E. II and III only

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #22
SECTION: 3.2
TOPIC: PROFIT MARGIN
TYPE: CONCEPTS
25. What is the goal of financial management for a sole proprietorship?
A. maximize the market value of the equity
B. maximize net income given the resources of the firm
C. decrease long-term debt to reduce the risk to the owner
D. minimize the tax impact on the proprietor
E. minimize the reliance on fixed costs

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #39
SECTION: 1.4
TOPIC: GOAL OF FINANCIAL MANAGEMENT
TYPE: CONCEPTS

26. Morgan's Industrial Park has total assets of \$541,700, long-term debt of \$201,400, total equity of \$306,800,
fixed assets of \$469,200, and sales of \$600,500. The profit margin is 7 percent. What is the current ratio?
A. 2.16
B. 1.01
C. .91
D. .46
E. 1.59

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #41
SECTION: 3.2
TOPIC: CURRENT RATIO
TYPE: PROBLEMS

27. You have just won the lottery and received \$10,000. You deposited your winnings into an account that pays
7.5 percent interest compounded annually. How long will you have to wait until your winnings are worth
\$15,000?
A. 16.19 years
B. 5.61 years
C. 5.83 years
D. 5.46 years
E. 16.46 years

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 004 #39
SECTION: 4.3
TOPIC: TIME PERIOD
TYPE: PROBLEMS
28. Operating cash flow increases when:
A. period costs increase.
B. revenues decrease.
C. interest paid decreases.
D. the cost of goods sold increases.
E. depreciation increases.

BLOOMS TAXONOMY QUESTION TYPE: ANALYSIS
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 002 #45
SECTION: 2.4
TOPIC: OPERATING CASH FLOW
TYPE: CONCEPTS

29. Which one of the following actions will decrease the current ratio, all else constant? Assume the current
ratio is greater than 1.0.
A. paying an account payable
B. selling inventory at a profit in a charge sale
C. selling inventory at cost in a cash sale
E. collecting payment from a customer

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 003 #11
SECTION: 3.2
TOPIC: CURRENT RATIO
TYPE: CONCEPTS

30. A firm has a current ratio of 1.2 and a quick ratio of 0.5. This indicates that:
A. the firm has more current liabilities than it does current assets.
B. the firm buys inventory on credit.
C. current assets represent more than 50 percent of total assets.
D. cash is the largest component of current assets.
E. inventory represents more than 50 percent of the firm's current assets.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 003 #12
SECTION: 3.2
TOPIC: QUICK RATIO
TYPE: CONCEPTS
31. How long will it take to double your savings at 5 percent compounded semi-annually?
A. 7.10 years
B. 14.21 years
C. 28.32 years
D. 14.04 years
E. 28.10 years

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #49
SECTION: 4.3
TOPIC: TIME PERIOD
TYPE: PROBLEMS

32. Interest on interest refers to the interest earned on:
A. both principal and future interest payments.
B. the original principal invested.
C. prior interest payments that were reinvested.
D. simple interest loans.
E. both principal and prior interest payments.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #3
SECTION: 4.1
TOPIC: INTEREST ON INTEREST
TYPE: DEFINITIONS

33. An increase in which of the following will increase the present value of a lump sum future amount? Assume
the interest rate is a positive value and interest is compounded.
I. interest rate
II. amount of the lump sum
III. frequency of the interest payments
IV. length of the investment period
A. II and IV only
B. I, III, and IV only
C. II only
D. I and IV only
E. I only

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 004 #18
SECTION: 4.2
TOPIC: PRESENT VALUE
TYPE: CONCEPTS
34. The relationship between the present value and the interest rate is best described as:
A. uncorrelated.
B. direct.
C. inverse.
D. vertical.
E. unrelated.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #24
SECTION: 4.2
TOPIC: PRESENT VALUE
TYPE: CONCEPTS

35. Net capital spending is equal to:
A. beginning net fixed assets minus ending net fixed assets plus depreciation.
B. ending total assets minus beginning total assets minus depreciation.
C. ending net fixed assets minus beginning net fixed assets plus depreciation.
D. ending total assets minus beginning total assets plus depreciation.
E. ending net fixed assets minus beginning net fixed assets minus depreciation.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #47
SECTION: 2.4
TOPIC: NET CAPITAL SPENDING
TYPE: CONCEPTS

36. When you discount money you are:
A. calculating the future value of a present amount.
B. stating the rate of interest you require to invest your funds.
C. computing the present value of a future amount.
D. agreeing to invest funds at a lower than normal rate of interest.
E. offering to accept less value than that to which you are entitled.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #7
SECTION: 4.2
TOPIC: DISCOUNT
TYPE: DEFINITIONS
37. You want to have \$15,000 for a down payment on a house 5 years from now. If you can earn 13 percent,
compounded annually, on your savings, how much do you need to deposit today to reach your goal?
A. \$7,858.11
B. \$14,213.25
C. \$9,803.58
D. \$8,141.40
E. \$12,464.28

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #44
SECTION: 4.2
TOPIC: PRESENT VALUE
TYPE: PROBLEMS

38. When analyzing alternative capital structures for a firm, a financial manager must consider which of the
following?
I. type of loan
II. amount of funds needed
III. cost of funds
IV. mix of debt and equity
A. II, III, and IV only
B. I, II, III, and IV
C. II and IV only
D. I and III only
E. I, III, and IV only

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #17
SECTION: 1.2
TOPIC: CAPITAL STRUCTURE
TYPE: CONCEPTS

39. Which one of the following statements is true concerning the price-earnings ratio?
A. Price-earnings ratios are unaffected by the accounting methods employed by a firm.
B. A firm with minimal earnings will have a very low price-earnings ratio.
C. A price-earnings ratio of 16 means investors are willing to pay \$1 for every \$16 of current earnings.
D. A firm with high earnings per share will also have a high price-earnings ratio.
E. A high price-earnings ratio is often taken to mean that a firm is expected to grow significantly.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #25
SECTION: 3.2
TOPIC: PRICE-EARNINGS RATIO
TYPE: CONCEPTS
40. Denton, Inc. has total equity of \$83,000 and total assets of \$255,000. What is the total debt ratio?
A. 1.48
B. .67
C. 1.12
D. .33
E. .25

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #50
SECTION: 3.2
TOPIC: TOTAL DEBT RATIO
TYPE: PROBLEMS

41. Larson, Inc. has total assets of \$248,000 and an equity multiplier of 2.5. What is the debt-equity ratio?
A. .67
B. .40
C. 1.5
D. 2.5
E. 3.5

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #52
SECTION: 3.2
TOPIC: DEBT-EQUITY RATIO
TYPE: PROBLEMS
42. Crabtree, Inc. has an operating cash flow of \$164,900, depreciation expense of \$93,100, and taxes paid of
\$80,400. A partial listing of its balance sheet accounts is as follows:

What is the amount of Crabtree's cash flow from assets?
A. \$200,300
B. \$120,400
C. \$49,100
D. \$69,800
E. \$107,200

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 002 #81
SECTION: 2.4
TOPIC: CASH FLOW FROM ASSETS
TYPE: PROBLEMS

43. Fifty years ago, your grandparents opened two savings accounts and deposited \$400 in each account. The
first account was with The Uptown Bank at 3 percent, compounded daily. The second account was with The
Downtown Bank at 3.5 percent, compounded semi-annually. Which one of the following statements is true
concerning these accounts?
A. The Downtown Bank account is currently valued at \$1,792.57.
B. The Uptown Bank has paid \$474.69 less in interest than The Downtown Bank.
C. The Uptown Bank account is currently valued at \$1,789.32.
D. The Uptown Bank and The Downtown Bank have both paid the same total amount of interest.
E. The Downtown Bank has paid \$441.40 less in interest than The Uptown Bank.

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 004 #42
SECTION: 4.1
TOPIC: INTEREST COMPOUNDING
TYPE: PROBLEMS
44. Cash flow from assets can be defined as:
A. cash flow to shareholders minus net capital spending minus the change in net working capital.
B. net capital spending plus the change in net working capital.
C. operating cash flow minus the change in net working capital minus net capital spending.
D. cash flow to shareholders minus the cash flow to creditors.
E. operating cash flow plus the cash flow to creditors plus the cash flow to shareholders.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #7
SECTION: 2.4
TOPIC: CASH FLOW FROM ASSETS
TYPE: DEFINITIONS

45. Taylor has just received an insurance settlement of \$58,400. She wants to save this money until her oldest
daughter goes to college. Taylor can earn an average of 8.5 percent, compounded annually, on this money. How
much will she have saved for her daughter's college education if her daughter enters college 14 years from
now?
A. \$187,302.09
B. \$182,990.77
C. \$104,587.01
D. \$210,459.16
E. \$105,223.03

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #35
SECTION: 4.1
TOPIC: FUTURE VALUE
TYPE: PROBLEMS

46. A firm created as a separate and distinct legal entity that may be owned by one or more individuals or
entities is called a:
A. limited partnership.
B. sole proprietorship.
C. public company.
D. general partnership.
E. corporation.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 001 #6
SECTION: 1.3
TOPIC: CORPORATION
TYPE: DEFINITIONS
47. Juanita invested \$1,000 today in an investment that pays 7.25 percent interest, compounded semi-annually.
Which one of the following statements is correct concerning this investment?
A. Juanita will receive equal interest payments every 6 months over the life of the investment.
B. Juanita will earn more interest in year 4 than she will in year 3.
C. Juanita will earn less and less interest each year over the life of the investment.
D. Juanita would have earned more interest if she had invested in an account paying annual interest.
E. Juanita would have earned more interest if she had invested in an account paying 7.25 percent simple
interest.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 004 #16
SECTION: 4.1
TOPIC: COMPOUND INTEREST
TYPE: CONCEPTS

48. The Book & Magazine Co. has inventory of \$193,000, equity of \$395,100, total assets of \$578,800, and
sales of \$612,300. What is the common-size percentage for the inventory account?
A. 48.85 percent
B. 31.52 percent
C. 19.82 percent
D. 33.34 percent
E. 16.20 percent

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #36
SECTION: 3.1
TOPIC: COMMON-SIZE STATEMENTS
TYPE: PROBLEMS

49. Alfonzo's Pizzeria purchased its building 8 years ago at a cost of \$76,000. The building is currently valued
at \$212,000. Alfonzo's has other fixed assets that cost \$58,000 and are currently valued at \$69,000. To date,
Alfonzo's has recorded a total of \$83,000 in depreciation on the various assets. The company has current
liabilities of \$43,000 and net working capital of \$32,000. What is the total book value of the assets of Alfonzo's
Pizzeria?
A. \$94,000
B. \$126,000
C. \$40,000
D. \$155,000
E. \$187,000

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 002 #69
SECTION: 2.1
TOPIC: BOOK VALUE
TYPE: PROBLEMS
50. Use the following tax table to answer this question:

Andrew's Pro Shop has taxable income of \$389,745. How much does Andrew's owe in taxes?
A. \$132,251
B. \$132,513
C. \$152,001
D. \$113,900
E. \$132,013

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #79
SECTION: 2.3
TOPIC: TOTAL TAX
TYPE: PROBLEMS
Exam1 FIN370 Summer 2008 Summary

Category                # of Questions
BLOOMS TAXONOMY QUESTION TYPE: ANALYSIS              2
BLOOMS TAXONOMY QUESTION TYPE: APPLICATION          19
BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION        14
BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE            15
LEARNING OBJECTIVE NUMBER: 1                        10
LEARNING OBJECTIVE NUMBER: 2                        14
LEARNING OBJECTIVE NUMBER: 3                         7
LEARNING OBJECTIVE NUMBER: 4                         9
LEVEL OF DIFFICULTY: BASIC                          27
LEVEL OF DIFFICULTY: INTERMEDIATE                   23
Ross - Chapter 001                                  10
Ross - Chapter 002                                  14
Ross - Chapter 003                                  13
Ross - Chapter 004                                  13
SECTION: 1.2                                         2
SECTION: 1.3                                         3
SECTION: 1.4                                         2
SECTION: 1.5                                         1
SECTION: 1.6                                         2
SECTION: 2.1                                         6
SECTION: 2.3                                         1
SECTION: 2.4                                         7
SECTION: 3.1                                         2
SECTION: 3.2                                         9
SECTION: 3.3                                         1
SECTION: 3.4                                         1
SECTION: 4.1                                         6
SECTION: 4.2                                         4
SECTION: 4.3                                         3
TOPIC: AGENCY PROBLEM                                1
TOPIC: AUCTION MARKET                                1
TOPIC: BOOK VALUE                                    1
TOPIC: CAPITAL BUDGETING                             1
TOPIC: CAPITAL STRUCTURE                             1
TOPIC: CASH FLOW FROM ASSETS                         2
TOPIC: CASH FLOW TO STOCKHOLDERS                     1
TOPIC: CHANGE IN NET WORKING CAPITAL                 1
TOPIC: COMMON-SIZE STATEMENT                         1
TOPIC: COMMON-SIZE STATEMENTS                        1
TOPIC: COMPOUND INTEREST                             2
TOPIC: CORPORATION                                   1
TOPIC: CURRENT ASSETS                                1
TOPIC: CURRENT RATIO                                 2
TOPIC: DAYS' SALES IN INVENTORY                      1
TOPIC: DEBT-EQUITY RATIO                             1
TOPIC: DISCOUNT                       1
TOPIC: DU PONT IDENTITY               1
TOPIC: EQUITY MULTIPLIER              1
TOPIC: FUTURE VALUE                   1
TOPIC: GOAL OF FINANCIAL MANAGEMENT   1
TOPIC: INTEREST COMPOUNDING           1
TOPIC: INTEREST ON INTEREST           2
TOPIC: INTEREST RATE                  1
TOPIC: INTERNAL GROWTH RATE           1
TOPIC: NET CAPITAL SPENDING           1
TOPIC: NET WORKING CAPITAL            2
TOPIC: OPERATING CASH FLOW            2
TOPIC: OWNERS' EQUITY                 1
TOPIC: PRESENT VALUE                  3
TOPIC: PRICE-EARNINGS RATIO           1
TOPIC: PRIMARY MARKET                 1
TOPIC: PROFIT MARGIN                  1
TOPIC: QUICK RATIO                    1
TOPIC: SARBANES-OXLEY                 1
TOPIC: SHAREHOLDERS' EQUITY           1
TOPIC: SOLE PROPRIETORSHIP            2
TOPIC: TIME PERIOD                    2
TOPIC: TOTAL DEBT RATIO               1
TOPIC: TOTAL TAX                      1
TYPE: CONCEPTS                        24
TYPE: DEFINITIONS                     7
TYPE: PROBLEMS                        19

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