FIN 3113 Carter Exam 1

A current asset is:

An item currently owned by the firm that will convert to cash within the next 12 months.

Puffy's Pastries generates five cents of net income for every $1 in sales. Thus, Puffy's has a _______ of 5%

Profit margin

All items on a common-size income statement are shown as a percentage of _____.

Total sales

Agency costs refer to:

The costs of any conflicts of interest between stockholders and management.

You decide to save for your dream vacation to Europe (London, Paris, and Rome). You want to be able to travel in 5 years. If you believe your trip will cost $8,000 and you can earn 6 percent annual interest on your savings, how much must you deposit today so you can afford your trip in 5 years?

$5,978

Depreciation:

Is a noncash expense that is recorded on the income statement.

An increase in which one of the following accounts increases a firm's current ratio without affecting its quick ratio?

Inventory

Which one of the following is a source of cash?

Borrowing $1 million from a bank.

On the last trading day in December 2000, the value of Apple (AAPL) stock, adjusted for stock splits, was $0.72 per share. The value of Apple stock at the end of 2017 was $168.54 per share. What was the annual growth rate in the value of Apple stock over the period of December 2000 - December 2017?

37.8%

An annuity due is one in which:

Payments occur at the beginning of each period.

An annuity makes 5 equal annual payments of $2,000. The first payment begins in exactly 12 years. If the relevant discount (interest) rate is 12%, what is the present value (today) of the annuity?

$2,073

You borrow $149,000 to buy a house. The mortgage rate is 4.0% and the loan period is 30 years. Payments are made monthly. If you pay for the house according to the loan agreement, how much total interest will you pay?

$107,086

The interest rate charged per period multiplied by the number of periods per year is called the _____ rate.

Annual percentage

Travis invested $2,500 in an account that pays 10.3 percent simple interest. How much more could he have earned over a 11-year period if the interest had compounded annually? DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ROUND ANSWER TO THE NEAREST DOLLAR.

2017

The primary goal of financial management is to:

Maximize the current value per share of the existing stock.

OK Energy had net fixed assets of $1,530 at the end of 2016 and net fixed assets of $1,778 at the end of 2017. Depreciation expense for 2017 was $279. What is the amount of net capital spending? DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ROUND ANSWER TO THE NEAREST DOLLAR.

527

Calculate net income based on the following information. Sales are $250, cost of goods sold is $100, depreciation expense is $35, interest paid is $40, and the tax rate is 34%. DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ENTER YOUR ANSWER TO TWO DECIMAL PLACES (e.g. 25.75).

49.50

A major disadvantage of a sole proprietorship is the fact that:

The owner has unlimited personal liability.

Your Aunt Brooke has promised to leave you an annuity that will make its first payment of $85 in exactly one year. Thereafter, the payments will grow at an annual rate of 3.00%. The payments are expected to go on indefinitely. Your relevant interest rate is 9%. What is the value of the growing perpetuity? DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ROUND ANSWER TO THE NEAREST DOLLAR.

1,417

Braden deposited $7,000 in a guaranteed investment account with a promised rate of 6% compounded annually. He plans to leave it there for 5 full years when he will make a down payment on a car after graduation. How much of a down payment will he be able to make? DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ROUND ANSWER TO THE NEAREST DOLLAR.

9,368

The DuPont identity breaks down return on equity (ROE) into the following components:

Profit margin, total asset turnover, and equity multiplier

The financial statement showing a firm's accounting value on a particular date is the:

Balance sheet.

Which of the following are items reported on a firm's balance sheet?

Current Assets.

Burns Industries has total sales of $290,000 and costs of $110,000 (Note: costs do not include depreciation expense). Depreciation expense is $40,000 and the tax rate is 30 percent. The firm does not have any interest expense. What is the operating cash flow (OCF)? DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ROUND ANSWER TO THE NEAREST DOLLAR.

138,000

How much money will you have in 5 years if you save $450 per year? Assume you make 5 annual payments at the end of each year and that you can earn 10.5 percent annual interest. DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ROUND ANSWER TO THE NEAREST DOLLAR.

2,775

All else equal, which of the following actions will increase the amount of cash on a company's balance sheet?

The company issues new common stock.

Professor Severus Snape deposited 500 Galleons into an account at Gringotts Bank, that pays 4% nominal annual interest, compounded monthly. How much will he have in his account 10 years from now?

745.42 Galleons

The mixture of debt and equity used by a firm to finance its operations is called:

Capital Structure.

The current ratio is measured as:

Current assets divided by current liabilities.

Kurt won a lottery and will receive $1,000 a year for the next 50 years. The value of his winnings today discounted at his discount rate is called which one of the following?

Present Value.

For a given constant payment, number of periods, and positive interest rate, which of the following is worth more?

The future value of an annuity due.

An insurance company offers you an end of year annuity of $48,000 per year for the next 20 years. They claim your return on the annuity is 9 percent. What should you be willing to pay today for this annuity?

$438,170