# Exam1 FIN370 A Key

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```					Exam1 FIN370-02 Winter 2011 Key                                                                Version   A

1. Limited liability companies are primarily designed to:
I. be taxed like a partnership.
II. be taxed like a corporation.
III. operate like a corporation.
IV. provide limited liability for the owners.
A. I and III only
B. II and III only
C. I and IV only
D. II and IV only
E. IV only

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #35
SECTION: 1.3
TOPIC: LIMITED LIABILITY COMPANY
TYPE: CONCEPTS

2. Hilltop, Inc. earns \$.12 in profit on every \$1 of sales. The firm pays out 55 percent of its profits to its
shareholders. The firm has \$.75 in assets for every \$1 of sales. What is the internal growth rate?
A. 8.80 percent
B. 9.12 percent
C. 6.37 percent
D. 9.65 percent
E. 7.76 percent

BLOOMS TAXONOMY QUESTION TYPE: ANALYSIS
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: CHALLENGE
Ross - Chapter 003 #100
SECTION: 3.4
TOPIC: INTERNAL GROWTH RATE
TYPE: PROBLEMS
3. An increase in which of the following will increase the future value of a lump sum investment made today
assuming that all interest is reinvested? Assume the interest rate is a positive value.
I. interest rate
II. amount of the lump sum
III. frequency of the interest payments
IV. length of the investment period
A. I and III only
B. I, II, and IV only
C. II and IV only
D. II, III, and IV only
E. I, II, III, and IV

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 004 #17
SECTION: 4.1
TOPIC: FUTURE VALUE
TYPE: CONCEPTS

4. Anderson Enterprises currently has \$400 in cash. The company owes \$1,200 to suppliers for merchandise and
\$4,500 to the bank for a long-term loan. Customers owe Anderson's \$1,900. The inventory has a book value of
\$3,700 and an estimated market value of \$4,400. If Anderson's compiled a financial statement today, how much
would it show as the value of the current assets?
A. \$6,000
B. \$6,700
C. \$6,300
D. \$5,600
E. \$5,200

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #55
SECTION: 2.1
TOPIC: CURRENT ASSETS
TYPE: PROBLEMS

5. The process of adding the interest earned on an investment to the original investment in order to earn more
interest is called:
A. discounting.
B. indexing.
C. compounding.
D. duplicating.
E. multiplying.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #2
SECTION: 4.1
TOPIC: COMPOUNDING
TYPE: DEFINITIONS
6. Which one of the following statements is correct concerning market and book values?
A. Market values must be greater than or equal to book values.
B. Market values are more predictable than book values.
C. The book value of an asset can increase over time.
D. Book values are affected by the depreciation method used.
E. Both the book value and the market value of land decrease over time.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 002 #27
SECTION: 2.1
TOPIC: MARKET AND BOOK VALUE
TYPE: CONCEPTS

7. Cecil, Inc. has sales of \$682,100. Earnings before interest and taxes is equal to 20 percent of sales. For the
period, the firm paid \$8,500 in interest. The tax rate is 34 percent. What is the profit margin?
A. 12.38 percent
B. 18.75 percent
C. 13.20 percent
D. 20.00 percent
E. 14.02 percent

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 003 #73
SECTION: 3.2
TOPIC: PROFIT MARGIN
TYPE: PROBLEMS

8. Southside, Inc. has beginning long-term debt of \$47,500, which is the principal balance of a loan payable to
The North Savings Bank. During the year, the company paid a total of \$19,000 to the bank, including \$3,800 of
interest. The company also borrowed \$7,000. What is the value of the ending long-term debt?
A. \$35,500
B. \$25,500
C. \$66,500
D. \$39,300
E. \$62,700

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #63
SECTION: 2.1
TOPIC: LONG-TERM DEBT
TYPE: PROBLEMS
9. 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. 7.94 percent
B. 5.20 percent
C. 10.40 percent
D. 6.83 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

10. Which one of the following will increase the net working capital of a firm?
A. obtaining a 5-year loan to buy equipment
B. making a payment on a long-term debt
C. paying a supplier for a recent purchase
D. collecting payment from a customer
E. obtaining a 3-year loan to purchase inventory

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 002 #21
SECTION: 2.1
TOPIC: NET WORKING CAPITAL
TYPE: CONCEPTS

11. Which of the following will increase the sustainable rate of growth for a firm?
I. decreasing the profit margin
II. increasing the dividend payout ratio
III. decreasing the capital intensity ratio
IV. increasing the target debt-equity ratio
A. II and IV only
B. I and II only
C. I, II, III, and IV
D. III and IV only
E. I, III, and IV only

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 003 #33
SECTION: 3.4
TOPIC: SUSTAINABLE GROWTH RATE
TYPE: CONCEPTS
12. A firm has a days' sales in inventory value of 46. This means the firm:
A. grants its customers 46 days to pay for their purchases.
B. sells its inventory an average of 46 times each year.
C. has sufficient inventory to support its sales for 46 days.
D. has sufficient inventory to support its sales for 46 weeks.
E. pays its suppliers in 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

13. Which one of the following is classified as a current asset?
A. accounts payable
B. inventory
C. equipment
D. note payable
E. land

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #14
SECTION: 2.1
TOPIC: CURRENT ASSET
TYPE: CONCEPTS

14. Highly liquid assets:
I. increase the probability a firm will face financial distress.
II. decrease the probability a firm will face financial distress.
III. generally produce a high rate of return.
IV. generally produce a low, if any, rate of return.
A. I and III only
B. II and III only
C. I only
D. II only
E. II and IV only

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #23
SECTION: 2.1
TOPIC: LIQUIDITY
TYPE: CONCEPTS
15. Auction markets:
I. match sellers with buyers.
II. have a physical location.
III. consist solely of electronic trades.
IV. are based on dealers.
A. III only
B. III and IV only
C. I, III, and IV only
D. II only
E. I and II only

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

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

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

17. 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. \$12,464.28
B. \$8,141.40
C. \$14,213.25
D. \$7,858.11
E. \$9,803.58

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
18. 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. \$18,200
B. \$7,700
C. \$10,700
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

19. The interest rate used to compute the present value of a future cash flow is called the:
A. simple rate.
B. discount rate.
C. prime rate.
D. present value rate.
E. compound rate.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #8
SECTION: 4.2
TOPIC: DISCOUNT RATE
TYPE: DEFINITIONS

20. Kate wants to invest \$1,000 for five years. Which one of the following will provide her with the largest
future value?
A. 7 percent interest, compounded monthly
B. 6 percent simple interest
C. 7 percent simple interest
D. 6 percent interest, compounded monthly
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
21. The goal of financial management is to increase the:
A. book value of equity.
B. current market value per share.
C. number of shares outstanding, thereby increasing the market value of equity.
D. future value of the firm's total equity.
E. dividends paid per share.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #38
SECTION: 1.4
TOPIC: GOAL OF FINANCIAL MANAGEMENT
TYPE: CONCEPTS

22. 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. \$105,223.03
B. \$187,302.09
C. \$182,990.77
D. \$104,587.01
E. \$210,459.16

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
23. 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. \$69,800
B. \$49,100
C. \$120,400
D. \$107,200
E. \$200,300

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

24. Joe's Store has net working capital of \$1,800, total assets of \$12,600, and net fixed assets of \$9,700. What is
the value of the current liabilities?
A. \$4,700
B. \$1,100
C. \$7,900
D. \$2,900
E. \$10,800

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #60
SECTION: 2.1
TOPIC: CURRENT LIABILITIES
TYPE: PROBLEMS
25. Capital structure refers to the:
A. mixture of debt and equity a firm uses to finance its operations.
B. types of long-term assets a firm employs in its operations.
C. average amount of cash equivalents held by a firm.
D. combination of short-term and long-term assets held by a firm.
E. amount of cash versus other short-term assets held by a firm.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 001 #2
SECTION: 1.2
TOPIC: CAPITAL STRUCTURE
TYPE: DEFINITIONS

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

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

27. 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. \$126,000
B. \$155,000
C. \$187,000
D. \$40,000
E. \$94,000

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
28. 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. corporation.
C. general partnership.
D. public company.
E. sole proprietorship.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 001 #6
SECTION: 1.3
TOPIC: CORPORATION
TYPE: DEFINITIONS

29. In a general partnership, each partner is personally liable for:
A. all personal and partnership debts incurred by any partner, even if he or she was unaware of those debts.
B. the debts of the partnership up to the amount he or she invested in the firm.
C. his or her proportionate share of all partnership debts regardless of which partner incurred that debt.
D. the partnership debts that he or she personally obtained for the firm.
E. the total debts of the partnership, even if he or she was unaware of those debts.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 001 #27
SECTION: 1.3
TOPIC: GENERAL PARTNERSHIP
TYPE: CONCEPTS

30. The Corner Bank pays 4 percent interest, compounded monthly, on its savings accounts. The Uptown Bank
pays 4 percent interest, compounded quarterly, on its savings accounts. You want to deposit sufficient funds
today so that you will have \$2,400 in your account 3 years from today. The amount you must deposit today:
A. is the same regardless of which bank you choose because they both pay simple interest.
B. will be greater if you invest with The Corner Bank.
C. is the same regardless of which bank you choose because they both pay compound interest.
D. will be greater if you invest with The Uptown Bank.
E. is the same regardless of which bank you choose because they both pay 4 percent interest.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 004 #22
SECTION: 4.1
TOPIC: COMPOUND INTEREST
TYPE: CONCEPTS
31. A firm has sales for the year of \$286,000. The profit margin is 6 percent and the retention ratio is 70
percent. What is the common-size percentage for the dividends paid?
A. 1.80 percent
B. 3.60 percent
C. 2.10 percent
D. 4.20 percent
E. .90 percent

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #40
SECTION: 3.1
TOPIC: COMMON-SIZE STATEMENTS
TYPE: PROBLEMS

32. Which one of the following actions will increase the internal growth rate of a firm, all else held constant?
A. an increase in the dividend payout ratio
B. a decrease in the return on assets
C. an increase in the retention ratio
D. a decrease in the return on equity
E. a decrease in the net income

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #30
SECTION: 3.4
TOPIC: INTERNAL GROWTH
TYPE: CONCEPTS

33. The most widely used form of business entity in the U.S. is the:
A. general partnership.
B. limited partnership.
C. limited liability company.
D. corporation.
E. sole proprietorship.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 001 #23
SECTION: 1.3
TOPIC: SOLE PROPRIETORSHIP
TYPE: CONCEPTS
34. Larson, Inc. has total assets of \$248,000 and an equity multiplier of 2.5. What is the debt-equity ratio?
A. 1.5
B. 2.5
C. .67
D. 3.5
E. .40

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

35. An agency problem is prone to exist in public corporations because:
A. managers tend to be long-term employees.
B. some owners are also company employees.
C. of the size of the operations.
D. management is frequently separated from ownership.
E. operations are frequently spread over various geographic locations.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #44
SECTION: 1.5
TOPIC: AGENCY PROBLEM
TYPE: CONCEPTS

36. Kate is the owner of Kate's Sun Wear, which is a sole proprietorship. Kate unexpectedly suffered a fatal
heart attack. Which one of the following statements is correct given this situation?
A. The proprietorship ends when Kate passed on and all income to that date will be taxed as a separate legal
entity.
B. The proprietorship ends when Kate passed on and all income earned to that date will be taxed as Kate's
personal income.
C. The proprietorship ends when Kate passed on and all income to that date will be tax-free.
D. Kate's Sun Wear will continue on with Kate's beneficiary automatically replacing Kate as the sole proprietor.
E. The proprietorship ended when Kate passed away.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #25
SECTION: 1.3
TOPIC: SOLE PROPRIETORSHIP
TYPE: CONCEPTS
37. A common-size income statement:
I. expresses all values as a percent of total assets.
II. should reflect a relatively constant cost of goods sold unless a firm changed the percent that it uses to mark
up the wholesale price to get the retail price.
III. expresses net income as 100 percent.
IV. can be used to compare the performance of a firm both over time and against its industry.
A. II and IV only
B. II, III, and IV only
C. I and III only
D. I, II, and III only
E. III and IV only

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 003 #8
SECTION: 3.1
TOPIC: COMMON-SIZE STATEMENT
TYPE: CONCEPTS

38. It takes Ryan's Drug Store an average of 40 days to sell its inventory and 24 days to collect its accounts
receivable. The firm has sales of \$491,600 and costs of goods sold of \$407,300. What is the accounts receivable
turnover rate?
A. 9.13
B. 11.06
C. 22.82
D. 19.94
E. 15.21

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #65
SECTION: 3.2
TOPIC: ACCOUNTS RECEIVABLE TURNOVER
TYPE: PROBLEMS

39. How long will it take to double your savings at 5 percent compounded semi-annually?
A. 7.10 years
B. 28.32 years
C. 28.10 years
D. 14.04 years
E. 14.21 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
40. Theresa sold 300 shares of MNO stock on the NYSE today. This transaction occurred in:
A. a private placement.
B. the secondary market.
C. a dealer market.
D. the primary market.
E. the over-the-counter market.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 001 #53
SECTION: 1.6
TOPIC: SECONDARY MARKET
TYPE: CONCEPTS

41. Today, you deposit \$10,750 in a bank account that pays 3 percent simple interest. How much interest will
you earn over the next 7 years?
A. \$2,086.06
B. \$2,580.00
C. \$1,935.00
D. \$2,471.14
E. \$2,257.50

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #28
SECTION: 4.1
TOPIC: SIMPLE INTEREST
TYPE: PROBLEMS

42. Denton, Inc. has total equity of \$83,000 and total assets of \$255,000. What is the total debt ratio?
A. .33
B. 1.12
C. 1.48
D. .67
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
43. The Sarbanes-Oxley Act was enacted:
A. to help protect investors and others from financial malpractice.
B. to make stockholders personally responsible for the actions of the firm's managers.
C. to force all companies to fully comply with all disclosure laws.
D. in response to the problem of double taxation.
E. in 2001 and was effective in November of 2004.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 001 #47
SECTION: 1.4
TOPIC: SARBANES-OXLEY
TYPE: CONCEPTS

44. Teri's Photography has total assets of \$50,800, fixed assets of \$47,400, long-term debt of \$36,300, and total
debt of \$42,900. If inventory is \$1,200, what is the current ratio?
A. .84
B. .33
C. .52
D. 1.18
E. 1.94

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 003 #42
SECTION: 3.2
TOPIC: CURRENT RATIO
TYPE: PROBLEMS

45. Your parents spent \$4,500 to buy 300 shares of stock in a new company 20 years ago. The stock has
appreciated 11 percent per year on average. What is the current value of those 300 shares?
A. \$9,900.00
B. \$5,400.95
C. \$33,435.38
D. \$14,400.00
E. \$36,280.40

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #38
SECTION: 4.1
TOPIC: FUTURE VALUE
TYPE: PROBLEMS
46. It takes Ted's Trucks 85 days, on average, to sell its inventory. Costs of goods sold for the year are
\$1,250,000. What is the average value of the firm's inventory?
A. \$155,706
B. \$87,904
C. \$14,706
D. \$291,096
E. \$261,096

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 003 #63
SECTION: 3.2
TOPIC: INVENTORY LEVEL
TYPE: PROBLEMS

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

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

48. The current value of future cash flows discounted at the appropriate discount rate is called the:
A. complex value.
B. present value.
C. simple value.
D. principal value.
E. future value.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 004 #6
SECTION: 4.2
TOPIC: PRESENT VALUE
TYPE: DEFINITIONS
49. A corporation:
I. is a separate legal entity.
II. becomes a "resident" of the state in which it is incorporated.
III. can own property and borrow money.
IV. has its business purpose and intended life spelled out in its bylaws.
A. III and IV only
B. I and II only
C. I, III, and IV only
D. I, II, III, and IV
E. I, II, and III only

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 001 #30
SECTION: 1.3
TOPIC: CORPORATION
TYPE: CONCEPTS

50. The tax rate applicable to the next dollar of taxable income is called the _____ tax rate.
A. average
B. next
C. marginal
D. absolute
E. total

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 002 #6
SECTION: 2.3
TOPIC: MARGINAL TAX RATE
TYPE: DEFINITIONS
Exam1 FIN370-02 Winter 2011 Summary

Category                # of Questions
BLOOMS TAXONOMY QUESTION TYPE: ANALYSIS              1
BLOOMS TAXONOMY QUESTION TYPE: APPLICATION          22
BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION        11
BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE            16
LEARNING OBJECTIVE NUMBER: 1                        10
LEARNING OBJECTIVE NUMBER: 2                        12
LEARNING OBJECTIVE NUMBER: 3                        11
LEARNING OBJECTIVE NUMBER: 4                         4
LEVEL OF DIFFICULTY: BASIC                          31
LEVEL OF DIFFICULTY: CHALLENGE                       1
LEVEL OF DIFFICULTY: INTERMEDIATE                   18
Ross - Chapter 001                                  12
Ross - Chapter 002                                  12
Ross - Chapter 003                                  14
Ross - Chapter 004                                  12
SECTION: 1.2                                         1
SECTION: 1.3                                         6
SECTION: 1.4                                         2
SECTION: 1.5                                         1
SECTION: 1.6                                         2
SECTION: 2.1                                         9
SECTION: 2.3                                         1
SECTION: 2.4                                         2
SECTION: 3.1                                         2
SECTION: 3.2                                         9
SECTION: 3.4                                         3
SECTION: 4.1                                         7
SECTION: 4.2                                         3
SECTION: 4.3                                         2
TOPIC: ACCOUNTS RECEIVABLE TURNOVER                  1
TOPIC: AGENCY PROBLEM                                1
TOPIC: AUCTION MARKET                                1
TOPIC: BOOK VALUE                                    1
TOPIC: CAPITAL STRUCTURE                             1
TOPIC: CASH FLOW FROM ASSETS                         1
TOPIC: CHANGE IN NET WORKING CAPITAL                 1
TOPIC: COMMON-SIZE STATEMENT                         1
TOPIC: COMMON-SIZE STATEMENTS                        1
TOPIC: COMPOUND INTEREST                             2
TOPIC: COMPOUNDING                                   1
TOPIC: CORPORATION                                   2
TOPIC: CURRENT ASSET                                 1
TOPIC: CURRENT ASSETS                                1
TOPIC: CURRENT LIABILITIES            1
TOPIC: CURRENT RATIO                  2
TOPIC: DAYS' SALES IN INVENTORY       1
TOPIC: DEBT-EQUITY RATIO              1
TOPIC: DISCOUNT RATE                  1
TOPIC: FUTURE VALUE                   3
TOPIC: GENERAL PARTNERSHIP            1
TOPIC: GOAL OF FINANCIAL MANAGEMENT   1
TOPIC: INTEREST RATE                  1
TOPIC: INTERNAL GROWTH                1
TOPIC: INTERNAL GROWTH RATE           1
TOPIC: INVENTORY LEVEL                1
TOPIC: LIMITED LIABILITY COMPANY      1
TOPIC: LIQUIDITY                      1
TOPIC: LONG-TERM DEBT                 1
TOPIC: MARGINAL TAX RATE              1
TOPIC: MARKET AND BOOK VALUE          1
TOPIC: NET WORKING CAPITAL            2
TOPIC: PRESENT VALUE                  2
TOPIC: PRICE-EARNINGS RATIO           1
TOPIC: PROFIT MARGIN                  1
TOPIC: SARBANES-OXLEY                 1
TOPIC: SECONDARY MARKET               1
TOPIC: SIMPLE INTEREST                1
TOPIC: SOLE PROPRIETORSHIP            2
TOPIC: SUSTAINABLE GROWTH RATE        1
TOPIC: TIME PERIOD                    1
TOPIC: TOTAL DEBT RATIO               1
TYPE: CONCEPTS                        24
TYPE: DEFINITIONS                     6
TYPE: PROBLEMS                        20

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