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					       The statement of cash flows does NOT include which of the following sections? A. cash flows
       from operating activities B. cash flows from investing activities C. cash flows from financing
       activities D. cash flows from sales activities

   5) An increase in investments in long-term securities will: A. increase cash flow from investing
      activities. B. increase cash flow from financing activities. C. decrease cash flow from financing
      activities. D. decrease cash flow from investing activities.

6) Which of the following is not a primary source of capital to the firm? A. assets B. preferred stock C.
bonds D. common stock

7) In examining the liquidity ratios, the primary emphasis is the firm's A. ability to effectively employ
its resources. B. ability to pay short-term obligations on time. C. ability to earn an adequate return.
D. overall debt position

9) If a firm has both interest expense and lease payments, A. times interest earned will be smaller than
fixed charge coverage. B. times interest earned will be the same as fixed charge coverage. C. fixed
charge coverage cannot be computed. D. times interest earned will be greater than fixed charge
coverage

10) A firm's long term assets = $75,000, total assets = $200,000, inventory = $25,000 and current
liabilities = $50,000. A. current ratio = 0.5; quick ratio = 1.5 B. current ratio = 1.5; quick ratio = 2.0 C.
current ratio = 2.5; quick ratio = 2.0 D. current ratio = 1.0; quick ratio = 2.0

11) A firm has current assets of $75,000 and total assets of $375,000. The firm's sales are $900,000.
The firm's fixed asset turnover is A. 3.0x B. 2.4x C. 5.0x D. 12.0x

12) Refer to the figure above. The firm's inventory turnover ratio is A. 10x. B. 2.7x. C. 0.1x. D. 8x. (Is
some information missing and which question to use, only 11 or 11 &12)

14) In general, the larger the portion of a firm's sales that are on credit, the A. lower will be the firm's
need to borrow. B. more rapidly credit sales will be paid off. C. more the firm can buy raw materials on
credit. D. higher will be the firm's need to borrow

17) A firm utilizing LIFO inventory accounting would, in calculating gross profits, assume that A. all
sales were from current production. B. all sales were for cash. C. sales were from current production
until current production was depleted, and then use sales from beginning inventory. D. all sales
were from beginning inventory.

18) The key initial element in developing pro forma statements is A. a cash budget. B. a collections
schedule. C. a sales forecast. D. an income statement

19) The concept of operating leverage involves the use of __________ to magnify returns at high levels
of operation. A. fixed costs B. semi-variable costs C. marginal costs D. variable costs

22) The break-even point can be calculated as A. variable costs divided by contribution margin. B.
fixed cost divided by contribution margin. C. variable cost times contribution margin. D. total costs
divided by contribution margin
26) Kuznets Rental Center requires $1,000,000 in financing over the next two years. Kuznets can
borrow long-term at 9 percent interest per year for two years. Alternatively, Kuznets can borrow short-
term and pay 7 percent interest in the first year. Then, Kuznets projects paying 10 percent interest in the
second year. Assuming Kuznets pays off the accrued interest at the end of each year, which of the
following statements is true? A. Kuznets will definitely end up paying more under the long-term
financing plan. B. Kuznets will probably pay less under the short-term financing plan. C. Kuznets will
probably pay more under the short-term financing plan. D. Kuznets will definitely end up paying less
under the long-term financing plan

28) Which of the following is not a condition under which a prudent manager would accept some risk
in financing? A. Predictable cash-flow patterns B. Easy access to capital markets C. Price of inventory
is stable D. Inventory is highly perishable

30) Which of the following combinations of asset structures and financing patterns is likely to create
the least volatile earnings? A. Illiquid assets and heavy short-term borrowing B. Liquid assets and
heavy short-term borrowing C. Liquid assets and heavy long-term borrowing D. Illiquid assets and
heavy long-term borrowing

31) In managing cash and marketable securities, what should be the manager's primary concern? A.
Maximization of profit B. Liquidity and safety C. Acceptable return on investment D. Maximization
of liquid assets

32) Which of the following is not a valid reason for holding cash? A. to meet transaction requirements
B. to provide a compensating balance for a bank C. to satisfy emergency needs for funds D. to earn the
highest return possible

34) Dun & Bradstreet is known for providing A. interest rate information to cash managers. B. credit
scoring reports that rank a company's payment habits relative to its peer group. C. cash
management systems to corporate treasurers. D. consumer credit reports to credit card companies.

35) Variables important to credit scoring models include A. age of company in years. B. negative public
records. C. facility ownership. D. all of these variables apply

39) What is generally the largest source of short-term credit small firms? A. Bank loans B. Commercial
paper C. Installment loans D. Trade credit

40) 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.
Decreased receivables and increased bank loans B. Increased receivables and increased bank loans
C. Increased payables and decreased bank loans D. Increased payables and increased bank loans

43) As the compounding rate becomes lower and lower, the future value of inflows approaches A. 0 B.
the present value of the inflows C. infinity D. need more information

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

				
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