FIN 320 - TEST 1 QUESTIONS (FINAL
EXAM STUDY GUIDE) & ELABORATED
ANSWERS RATED 100% CORRECT
Which one of the following is a measure of long-term solvency? - Correct Answer ✔✔
EQUITY MULTIPLIER
Blooming Gardens has an inventory turnover of 16. This means the firm... - Correct
Answer ✔✔ SELLS ITS INVENTORY ON AVERAGE OF 16 TIMES EACH YEAR
Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total
assets. Which one of the following ratios would reflect this relationship? - Correct
Answer ✔✔ TOTAL ASSET TURNOVER
Tom earned $120 in interest on his savings account last year. Tom has decided to leave
the $120 in his account so that he can earn interest on the $120 this year. This process
of earning interest on prior interest earnings is called... - Correct Answer ✔✔
COMPOUNDING
Computing the present value of a future cash flow to determine what that cash flow is
worth today is called... - Correct Answer ✔✔ DISCOUNTED CASH FLOW VALUATION
Sara is investing $1,000,000 today. What one of the following will increase the future
value of that amount? - Correct Answer ✔✔ INCREASING THE INTEREST RATE
The relationship between the present value and the time period is best described as... -
Correct Answer ✔✔ INVERSE
A credit card has an annual percentage rate of 12.9% and charges interest monthly.
The effective annual rate on this account... - Correct Answer ✔✔ WILL BE GREATER
THAN 12.9%
The Jones Brothers recently established a trust fund that will provide annual
scholarships of $12,000 indefinitely. These annual scholarships can best be described
by which one of the following terms? - Correct Answer ✔✔ PERPETUITY
Which one of the following will decrease the present value of an annuity? - Correct
Answer ✔✔ DECREASE IN THE ANNUITY PAYMENT
Travis is buying a car and will finance it with a loan which requires monthly payments of
$265 for the next 4 years. His car payments can be described by which one of the
following terms? - Correct Answer ✔✔ ANNUITY
EXAM STUDY GUIDE) & ELABORATED
ANSWERS RATED 100% CORRECT
Which one of the following is a measure of long-term solvency? - Correct Answer ✔✔
EQUITY MULTIPLIER
Blooming Gardens has an inventory turnover of 16. This means the firm... - Correct
Answer ✔✔ SELLS ITS INVENTORY ON AVERAGE OF 16 TIMES EACH YEAR
Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total
assets. Which one of the following ratios would reflect this relationship? - Correct
Answer ✔✔ TOTAL ASSET TURNOVER
Tom earned $120 in interest on his savings account last year. Tom has decided to leave
the $120 in his account so that he can earn interest on the $120 this year. This process
of earning interest on prior interest earnings is called... - Correct Answer ✔✔
COMPOUNDING
Computing the present value of a future cash flow to determine what that cash flow is
worth today is called... - Correct Answer ✔✔ DISCOUNTED CASH FLOW VALUATION
Sara is investing $1,000,000 today. What one of the following will increase the future
value of that amount? - Correct Answer ✔✔ INCREASING THE INTEREST RATE
The relationship between the present value and the time period is best described as... -
Correct Answer ✔✔ INVERSE
A credit card has an annual percentage rate of 12.9% and charges interest monthly.
The effective annual rate on this account... - Correct Answer ✔✔ WILL BE GREATER
THAN 12.9%
The Jones Brothers recently established a trust fund that will provide annual
scholarships of $12,000 indefinitely. These annual scholarships can best be described
by which one of the following terms? - Correct Answer ✔✔ PERPETUITY
Which one of the following will decrease the present value of an annuity? - Correct
Answer ✔✔ DECREASE IN THE ANNUITY PAYMENT
Travis is buying a car and will finance it with a loan which requires monthly payments of
$265 for the next 4 years. His car payments can be described by which one of the
following terms? - Correct Answer ✔✔ ANNUITY
