FIN 325 - Exam 1 NEWEST EXAM 2026-2027
COMPLETE 220 QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED ANSWERS)
ALREADY GRADED A+
A 30-year home mortgage is a classic example of: - CORRECT ANSWER: B. an ordinary
annuity.
A corporation: - CORRECT ANSWER: B. is a legal entity separate from its owners.
A cost that should be ignored when evaluating a project because that cost has already been
incurred and cannot be recouped is referred to as a(n): - CORRECT ANSWER: E. sunk cost.
A credit card has an annual percentage rate of 12.9 percent and charges interest monthly. The
effective annual rate on this account: - CORRECT ANSWER: E. will be greater than 12.9
percent.
A discontinued operation refers to: - CORRECT ANSWER: A. The sale or disposal of a
significant component of a company's operations.
A firm's liquidity level decreases when: - CORRECT ANSWER: A. inventory is purchased with
cash.
A limited liability company (LLC): - CORRECT ANSWER: B. prefers its profits be taxed as
personal income to its owners.
A partial balance sheet ($s in thousands) for Captain D's Seafood Inc. is shown below. The
current ratio is: - CORRECT ANSWER: B. 1.58.
$505/$320 = 1.58.
,A private placement is most apt to involve: - CORRECT ANSWER: C. a life-insurance
company.
A pro forma financial statement is a financial statement that: - CORRECT ANSWER: D. projects
future years' operating results.
A sole proprietorship: - CORRECT ANSWER: D. has its profits taxed as personal income.
All else held constant, the future value of a lump sum investment will decrease if the: -
CORRECT ANSWER: E. interest is changed to simple interest from compound interest.
All else held constant, the present value of an annuity will decrease if you: - CORRECT
ANSWER: E. decrease the annuity payment.
An agency issue is most apt to develop when: - CORRECT ANSWER: C. the control of a firm is
separated from the firm's ownership.
An employee has a claim on the cash flows of Martin's Machines. This claim is defined as a
claim by one of the firm's: - CORRECT ANSWER: E. stakeholders.
An extraordinary item must meet which of the following criteria? - CORRECT ANSWER: C.
Unusual in nature and infrequent in occurrence.
An income statement prepared according to GAAP: - CORRECT ANSWER: E. records
expenses based on the matching principle.
Anna pays .85 percent interest monthly on her credit card account. When the interest rate on that
debt is expressed as if it were compounded annually, the rate would be referred to as the: -
CORRECT ANSWER: E. effective annual rate.
, Any changes to a firm's projected future cash flows that are caused by adding a new project are
referred to as: - CORRECT ANSWER: C. incremental cash flows.
Assume all else is equal. When comparing savings accounts, you should select the account that
has the: - CORRECT ANSWER: E. highest effective annual rate.
Assuming a current ratio of 1.0, how will the purchase of inventory with cash affect the ratio? -
CORRECT ANSWER: B. No change to the current ratio.
At the end of fiscal year 2011, Crane Industries, Inc.'s stock price was $30.75. A year later it was
$34.88. Per share dividends over the year were $0.55, while earnings per share were $1.33. What
was the dividend yield in fiscal year 2012? - CORRECT ANSWER: A. 1.79%
Dividend yield = 0.55/30.75 = 1.79%
At the end of fiscal year 2011, Crane Industries, Inc.'s stock price was $30.75. A year later it was
$34.88. Per share dividends over the year were $0.55, while earnings per share were $1.33. What
was the percentage change in the share price in fiscal year 2012? - CORRECT ANSWER: C.
13.43%
Percentage change in share price = (34.88- 30.75)/30.75 = 4.13/30.75 = 13.43%.
Based on the most recent survey information presented in your textbook, CFOs tend to use which
two methods of investment analysis the most frequently? - CORRECT ANSWER: C. Internal
rate of return and net present value
Bill just financed a used car through his credit union. His loan requires payments of $275 a
month for five years. Assuming that all payments are paid on time, his last payment will pay off
the loan in full. What type of loan does Bill have? - CORRECT ANSWER: A. Amortized
COMPLETE 220 QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED ANSWERS)
ALREADY GRADED A+
A 30-year home mortgage is a classic example of: - CORRECT ANSWER: B. an ordinary
annuity.
A corporation: - CORRECT ANSWER: B. is a legal entity separate from its owners.
A cost that should be ignored when evaluating a project because that cost has already been
incurred and cannot be recouped is referred to as a(n): - CORRECT ANSWER: E. sunk cost.
A credit card has an annual percentage rate of 12.9 percent and charges interest monthly. The
effective annual rate on this account: - CORRECT ANSWER: E. will be greater than 12.9
percent.
A discontinued operation refers to: - CORRECT ANSWER: A. The sale or disposal of a
significant component of a company's operations.
A firm's liquidity level decreases when: - CORRECT ANSWER: A. inventory is purchased with
cash.
A limited liability company (LLC): - CORRECT ANSWER: B. prefers its profits be taxed as
personal income to its owners.
A partial balance sheet ($s in thousands) for Captain D's Seafood Inc. is shown below. The
current ratio is: - CORRECT ANSWER: B. 1.58.
$505/$320 = 1.58.
,A private placement is most apt to involve: - CORRECT ANSWER: C. a life-insurance
company.
A pro forma financial statement is a financial statement that: - CORRECT ANSWER: D. projects
future years' operating results.
A sole proprietorship: - CORRECT ANSWER: D. has its profits taxed as personal income.
All else held constant, the future value of a lump sum investment will decrease if the: -
CORRECT ANSWER: E. interest is changed to simple interest from compound interest.
All else held constant, the present value of an annuity will decrease if you: - CORRECT
ANSWER: E. decrease the annuity payment.
An agency issue is most apt to develop when: - CORRECT ANSWER: C. the control of a firm is
separated from the firm's ownership.
An employee has a claim on the cash flows of Martin's Machines. This claim is defined as a
claim by one of the firm's: - CORRECT ANSWER: E. stakeholders.
An extraordinary item must meet which of the following criteria? - CORRECT ANSWER: C.
Unusual in nature and infrequent in occurrence.
An income statement prepared according to GAAP: - CORRECT ANSWER: E. records
expenses based on the matching principle.
Anna pays .85 percent interest monthly on her credit card account. When the interest rate on that
debt is expressed as if it were compounded annually, the rate would be referred to as the: -
CORRECT ANSWER: E. effective annual rate.
, Any changes to a firm's projected future cash flows that are caused by adding a new project are
referred to as: - CORRECT ANSWER: C. incremental cash flows.
Assume all else is equal. When comparing savings accounts, you should select the account that
has the: - CORRECT ANSWER: E. highest effective annual rate.
Assuming a current ratio of 1.0, how will the purchase of inventory with cash affect the ratio? -
CORRECT ANSWER: B. No change to the current ratio.
At the end of fiscal year 2011, Crane Industries, Inc.'s stock price was $30.75. A year later it was
$34.88. Per share dividends over the year were $0.55, while earnings per share were $1.33. What
was the dividend yield in fiscal year 2012? - CORRECT ANSWER: A. 1.79%
Dividend yield = 0.55/30.75 = 1.79%
At the end of fiscal year 2011, Crane Industries, Inc.'s stock price was $30.75. A year later it was
$34.88. Per share dividends over the year were $0.55, while earnings per share were $1.33. What
was the percentage change in the share price in fiscal year 2012? - CORRECT ANSWER: C.
13.43%
Percentage change in share price = (34.88- 30.75)/30.75 = 4.13/30.75 = 13.43%.
Based on the most recent survey information presented in your textbook, CFOs tend to use which
two methods of investment analysis the most frequently? - CORRECT ANSWER: C. Internal
rate of return and net present value
Bill just financed a used car through his credit union. His loan requires payments of $275 a
month for five years. Assuming that all payments are paid on time, his last payment will pay off
the loan in full. What type of loan does Bill have? - CORRECT ANSWER: A. Amortized
