Final exam review Finance 3312
questions well answered to pass A+
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HUD, Co. had a beginning retained earnings of $27,875. For the year, the company
had net income of $4,790 and paid dividends of $1,600. The company also issued
$3,000 in new stock during the year. What is the ending retained earnings
balance? - correct answer ✔✔Retained earnings = $27,875 + (4,790 − 1,600) =
$31,065
Which of the following are included in current liabilities? I. Note payable to a
supplier in eighteen months II. Debt payable to a mortgage company in nine
months III. Accounts payable to suppliers IV. Loan payable to the bank in fourteen
months - correct answer ✔✔II and III only
An increase in which one of the following will cause the operating cash flow to
increase? - correct answer ✔✔Depreciation
Which of the following would be sources of cash to a firm? - correct answer
✔✔Increase in inventory
Decrease in long-term debt
Sources = increase in liabilities or equity (borrowing money or selling stock) and
decreases in assets (selling stuff)
,Which of the following would be uses of cash? - correct answer ✔✔Decrease in
inventory
Increase in Retained Earnings
Uses of cash = increase in assets (buying stuff) or decreases in liabilities or equity
(paying financers)
A banker considering loaning a firm money for ten years would most likely prefer
the firm have a debt ratio of _______ and a times interest earned ratio of
_______. - correct answer ✔✔.40;5.50
The higher the inventory turnover measure, the: - correct answer ✔✔faster a firm
sells its inventory.
Puffy's Pastries generates five cents of net income for every $1 in sales. Thus,
Puffy's has a _______ of 5%. - correct answer ✔✔Profit margin
iPhone, Inc., has an equity multiplier of 1.40, total asset turnover of 1.69, and a
profit margin of 7 percent. What is the company's ROE? - correct answer ✔✔ROE
= (Profit margin)(Total asset turnover)(Equity multiplier)
ROE = (.07)(1.69)(1.40)
ROE = .1656, or 16.56%
Mario's Home Systems has sales of $2,870, costs of goods sold of $2,210,
inventory of $514, and accounts receivable of $435. How many days, on average,
does it take Mario's to sell its inventory? - correct answer ✔✔Inventory turnover =
$2,210/$514 = 4.2996
, Days' sales in inventory = 365 days/4.2996 = 84.89 days
What is the future value of $3,038 invested for 9 years at 5.6 percent
compounded annually? - correct answer ✔✔FV = $3,038 × 1.0569 = $4,960.93
N=9
I/Y=5.6%
PV= -$3,038
FV= $4,960.93
Retirement Investment Advisors, Inc., has just offered you an annual interest rate
of 5.7 percent until you retire in 45 years. You believe that interest rates will
increase over the next year and you would be offered 6.3 percent per year one
year from today. If you plan to deposit $16,500 into the account either this year or
next year, how much more will you have when you retire if you wait one year to
make your deposit? - correct answer ✔✔FV = $16,500 × 1.05745 = $199,920.98
FV = $16,500 × 1.06344 = $242,631.72
Difference = $242,631.72 − 199,920.98 = $42,710.74
N=45 I/Y=5.7% PV= -$16,500 FV= $199,920.98
N=44 I/Y=6.3% PV= -$16,500 FV= $242,631.72
You want to have $88,000 in 17 years to help your child attend college. If you can
earn an annual interest rate of 4.4 percent, how much will you have to deposit
today? - correct answer ✔✔PV = $88,000/1.04417 = $42,322.78
N= 17 I/Y= 4.4% PV= $42,322.78 FV= -$88,000
questions well answered to pass A+
rated
HUD, Co. had a beginning retained earnings of $27,875. For the year, the company
had net income of $4,790 and paid dividends of $1,600. The company also issued
$3,000 in new stock during the year. What is the ending retained earnings
balance? - correct answer ✔✔Retained earnings = $27,875 + (4,790 − 1,600) =
$31,065
Which of the following are included in current liabilities? I. Note payable to a
supplier in eighteen months II. Debt payable to a mortgage company in nine
months III. Accounts payable to suppliers IV. Loan payable to the bank in fourteen
months - correct answer ✔✔II and III only
An increase in which one of the following will cause the operating cash flow to
increase? - correct answer ✔✔Depreciation
Which of the following would be sources of cash to a firm? - correct answer
✔✔Increase in inventory
Decrease in long-term debt
Sources = increase in liabilities or equity (borrowing money or selling stock) and
decreases in assets (selling stuff)
,Which of the following would be uses of cash? - correct answer ✔✔Decrease in
inventory
Increase in Retained Earnings
Uses of cash = increase in assets (buying stuff) or decreases in liabilities or equity
(paying financers)
A banker considering loaning a firm money for ten years would most likely prefer
the firm have a debt ratio of _______ and a times interest earned ratio of
_______. - correct answer ✔✔.40;5.50
The higher the inventory turnover measure, the: - correct answer ✔✔faster a firm
sells its inventory.
Puffy's Pastries generates five cents of net income for every $1 in sales. Thus,
Puffy's has a _______ of 5%. - correct answer ✔✔Profit margin
iPhone, Inc., has an equity multiplier of 1.40, total asset turnover of 1.69, and a
profit margin of 7 percent. What is the company's ROE? - correct answer ✔✔ROE
= (Profit margin)(Total asset turnover)(Equity multiplier)
ROE = (.07)(1.69)(1.40)
ROE = .1656, or 16.56%
Mario's Home Systems has sales of $2,870, costs of goods sold of $2,210,
inventory of $514, and accounts receivable of $435. How many days, on average,
does it take Mario's to sell its inventory? - correct answer ✔✔Inventory turnover =
$2,210/$514 = 4.2996
, Days' sales in inventory = 365 days/4.2996 = 84.89 days
What is the future value of $3,038 invested for 9 years at 5.6 percent
compounded annually? - correct answer ✔✔FV = $3,038 × 1.0569 = $4,960.93
N=9
I/Y=5.6%
PV= -$3,038
FV= $4,960.93
Retirement Investment Advisors, Inc., has just offered you an annual interest rate
of 5.7 percent until you retire in 45 years. You believe that interest rates will
increase over the next year and you would be offered 6.3 percent per year one
year from today. If you plan to deposit $16,500 into the account either this year or
next year, how much more will you have when you retire if you wait one year to
make your deposit? - correct answer ✔✔FV = $16,500 × 1.05745 = $199,920.98
FV = $16,500 × 1.06344 = $242,631.72
Difference = $242,631.72 − 199,920.98 = $42,710.74
N=45 I/Y=5.7% PV= -$16,500 FV= $199,920.98
N=44 I/Y=6.3% PV= -$16,500 FV= $242,631.72
You want to have $88,000 in 17 years to help your child attend college. If you can
earn an annual interest rate of 4.4 percent, how much will you have to deposit
today? - correct answer ✔✔PV = $88,000/1.04417 = $42,322.78
N= 17 I/Y= 4.4% PV= $42,322.78 FV= -$88,000
