The Assets are Becoming More Fully Depreciated

1. In general, what is changing as you read down the left-hand side of a balance sheet? The assets are becoming more fully depreciated The assets are increasing in value The assets are increasing in maturity The assets are becoming less liquid 2. A balance sheet portrays the value of a firm's assets and liabilities Over an annual period Over any stated period of time At any stated point in time Only at the end of the calendar year 3. Which of the following items should not be included in a listing of current assets? Marketable securities Accounts payable Accounts receivable Inventories 4. Which of the following assets is likely to be considered the most liquid? Marketable securities Net fixed assets Patent Inventories 5. If the balance sheet of a firm indicates that total assets exceed current liabilities plus shareholders' equity, then the firm has No retained earnings Long-term debt No accumulated depreciation Current assets 6. If a payment of principal is due in 13 months on a long-term liability, that payment will now appear on the balance sheet as: A current liability Long-term debt. Cash Interest expense 7. Net working capital is a measure of a company's Goodwill Short-term liabilities Estimated cash reservoir Shareholders' equity. 8. Net working capital is calculated by taking the difference between Total assets and total liabilities Inventory and accounts payable Current assets and current liabilities Cash and accounts payable 9. A balance sheet may be considered backward-looking from the perspective that it: Works backward, starting with net income Records historic, not current values. Cannot forecast the future. Records costs over many previous periods. 10. Depreciation expense is used to Allocate costs to all departments of the firm Determine when an asset is fully paid off Allocate historical cost over the life of an asset Equate the historical cost and market values of an asset. 11. Which one of the following expense categories is subtracted from total revenues to help arrive at a firm's EBIT? Cash dividends Depreciation expense Interest expense Tax liability 12. An increase in depreciation expense will (other things equal) Increase net income Decrease net income. Increase taxable income. Decrease the market value of assets. 13. Retained earnings result from The sale of additional shares of stock to investors. Income not paid to shareholders An excess of assets over liabilities. Market values that exceed book values. 14. The gathering of related revenues and expenses into the same period, regardless of when they were incurred, is Cash-basis accounting Market-value accounting Book-value accounting Accrual accounting. 15. Which of the firm's financial statements most clearly recognizes the payment for new equipment? Balance sheet Income statement Statement of cash flows Common-size balance sheet 16. Companies E and P each reported the same earnings per share (EPS), but Company E’s stock trades at a higher price. Which of the following statements is CORRECT? Company E probably has fewer growth opportunities Company E is probably judged by investors to be riskier. Company E must have a higher market-to-book ratio. Company E must pay a lower dividend. 17. Beranek Corp. has $410,000 of assets, and it uses no debt--it is financed only with common equity. The new CFO wants to employ enough debt to bring the debt/assets ratio to 40%, using the proceeds from the borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio? $155,800 $189,851 $164,000 $172,200 18. Orono Corp.'s sales last year were $435,000, its operating costs were $362,500, and its interest charges were $12,500. What was the firm's times interest earned (TIE) ratio? 4.72 4.97 5.81 5.51 19. Nikko Corp.'s total common equity at the end of last year was $305,000 and its net income after taxes was $60,000. What was its ROE? 19.67% 16.87% 17.75% 18.69% 20. Helmuth Inc.'s latest net income was $1,250,000, and it had 225,000 shares outstanding. The company wants to pay out 45% of its income. What dividend per share should it declare? $2.14 $2.26 $2.38 $2.50 Chapter 8 1. The two alternative expected returns are compared with the help of 2. 3. 4. 5. Coefficient of variation Coefficient of deviation Coefficient of standard Coefficient of return The dollar return is divided by invested amount which is used for calculating the Rate of return Return of amount Investment rate Received amount An expected rate of return is denoted by e-bar r-bar r-hat e-hat In expected future returns, the tighter probability distribution show risk on given investment which is Smaller Greater Less risky Highly risky The risk on a stock portfolio which cannot be eliminated or reduced by placing it in diversified portfolio is classified as Diversifiable risk Market risk Stock risk Portfolio risk 6. In the investment returns, a received amount is subtracted from an invested amount which is used to calculate Dollar receives Dollar return Dollar invested Return percentage 7. The past realized rate of retun in period t is denoted by t bar r t hat r r hat t r bar t 8. An amount invested is $1,500 and an amount received is $2,000, then the dollar return will be a. $500 b. -$500 c. $3,500 d. -$3,500 9. The type of risk in which beta is equal to one is classified as Multiple risk stock Varied risk stock Total risk stock Average risk stock 10. The beta coefficient is used to measure market risk which is an index of Coefficient risk volatility Market risk volatility Stock market volatility Portfolio market 11. An opposite of perfect positive correlation +1,0 is called Negative correlation Multiple correlation Divisor correlation None above 12. The risk which is caused by events such as strike, unsuccessful marketing program, lawsuit, etc is classified as Stock risk Portfolio risk Diversifiable risk Market risk 13. The risk on a stock portfolio which can be reduced by placing it in diversified portfolio is classified as Stock risk Portfolio risk Diversifiable risk Market risk 14. In the asset portfolio, the number of stocks are increased to Reduce return Reduce average Reduce risk Increase price 15. The standard deviation is divided by the expected rate of return is used to calculate Coefficient of variation Coefficient of deviation Coefficient of standard Coefficient of return Chapter 9 1. Other things held constant, if a bond indenture contains a call provision, the yield to maturity that would exist without such a call provision will generally be..... the YTM with a call provision Higher than Lower than The same as Unrelated to 2. Which of the following bonds will have the greatest percentage increase in value if all interest rates decrease by 1 percent? 20-year, zero coupon bond 10-year, zero coupon bond 20-year, 10 percent coupon bond 20-year, 5 percent coupon bond 3. All of the following may serve to reduce the coupon rate that would otherwise be required on a bond issued at par, except a Sinking fund Restrictive covenant Call provision Change in rating from Aa to Aaa 4. One of the basic relationships in interest rate theory is that, other things held constant, for a given change in the required rate of return, the ........ the time to maturity, the ....... the change in price. longer; smaller shorter; larger longer; greater shorter, shorter 5. Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds? A reduction in market interest rates The company’s bonds are downgraded An increase in the call premium All above correct