Ratio analysis involves financial statements in order to appraise a firm"s financial position and strength.A. TrueB. False
The current ratio and inventory turnover ratios both help us measure the firm"s liquidity. The current ratio measures the relationship of a firm"s current assets to its current liabilities, while the inventory turnover ratio gives us an indication of how long it takes the firm to convert its inventory to cash.A. TrueB. False
Considered alone, which of the following would increase a company"s current ratio?A. An increase in accounts payable.B. An increase in net fixed assets.C. An increase in accrued liabilities.D. An increase in notes payable.E. An increase in accounts receivable.

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Amram Company"s current ratio is 1.9. Considered alone, which of the following actions would reduce the company"s current ratio?A. Use cash to reduce accounts payable.B. Borrow using short-term notes payable and use the proceeds to reduce accruals.C. Borrow using short-term notes payable and use the proceeds to reduce long-term debt.D. Use cash to reduce accruals.E. Use cash to reduce short-term notes payable.
A decline in a firm"s inventory turnover ratio suggests that it is managing its inventory more efficiently and also that its liquidity position is improving, i.e., it is becoming more liquid. A. TrueB. False
The inventory turnover and current ratio are related. The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged. A. TrueB. False
You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would INCREASE the calculated value of the investment?A. The discount rate increases.B. The cash flows are in the form of a deferred annuity, and they total to $100,000. You learn that the annuity lasts for 10 years rather than 5 years, hence that each payment is for $10,000 rather than for $20,000.C. The discount rate decreases.D. The riskiness of the investment"s cash flows increases.E. The total amount of cash flows remains the same, but more of the cash flows are received in the later years and less are received in the earlier years.
Starting to invest early for retirement increases the benefits of compound interest. A. TrueB. False
All other things held constant, the present value of a given annual annuity decreases as the number of periods per year increases.A. True B. False
An investor requires a 3% increase to purchasing power in order to induce her to lend. She expects inflation to be 2% next year. The nominal rate she much charge is about:A. 1%B. 5%C. 2%D. 3%
To measure value, the concept of time value of money is usedA. to determine the interest rate paid on corporate debt.B. to bring the future benefits and costs of a project, measured by its expected profits, back to present.C. to bring the future benefits and costs of a project, measured by its cash flows, back to present.D. to ensure that expected future profits exceed profits today.
C. to bring the future benefits and costs of a project, measured by its cash flows, back to present.
From an investor perspective, the bid price displayed in most quote services represents:A. selling priceB. buying priceC. holding priceD. proft
From an investor perspective, the bid price displayed in most quote services represents:A. selling priceB. buying priceC. holding priceD. proft
You plan to buy a new Mercedes four years from now. Today, a comparable car costs $82,500. You expect the price of the car to increase by an average of 4.8% per year over the next four years. How much will your dream car cost by the time you are ready to buy it?A. $98,340.00B. $98,666.67C. $99, 571.41D. $99,818.02E. $100, 023.15
Ian is going to receive $20,000 six years from now. Sunny is going to receive $20,000 nine years from now. Which one of the following statements is correct if both Ian and Sunny apply a 7 percent discount rate to these amounts?A. the present values of Ian and Sunny"s monies are equal.B. in future dollars, Sunny"s money is worth more than Ian"s money.C. in today"s dollars, Ian"s money is worth more than Sunny"s.D. Sunny"s money is worth more than Ian"s money given the 7% discount rate.
Your grandmother invested a lump sum 26 years ago at 4.25% interest. Today, she gave you the proceeds of that investment which totaled $51,480.79. How much did she originally invest?A. $15,929.47B. $16,500.00C. $17,444.86D. $17,500.00
A pension fund manager invests $10 million in a debt obligation that promises to pay 8.3% per year for four years. What is the future value of this $10 million? Assumes annual compounding.A. $13,255,585B. $10,730,602C. $12,920,490D. $13,756,686
A pension fund manager has the opportunity to invest $500,000 for seven years in a debt obligation that promises to pay an annual interest rate of 7.1% compounded semiannually. What is the future value of this investment?A. $761,451B. $814,838C. $847,342D. $908,111
If you were a loan officer evaluating a small business credit application for a loan and you wanted to ensure that the applicant has more than sufficient cash flow to pay off its existing debt, the applicant"s cash flow to debt ratio would have to be greater thanA. one.B. zero.C. the TIE ratio.D. the interest rate of the debt.
On a common-size balance sheet all accounts are expressed as a percentage of:A. sales.B. profits.C. equity.D. total assets.E. none of the above.
When a firm improves (lowers) its average collection period it generally:A. requires additional cash investment in inventory.B. releases cash locked up in accounts receivables.C. does not alter its cash position.D. a firm cannot reduce its inventories.

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Which of the following is NOT a major category on the cash flow statement?A. cash flows from selling activities.B. cash flows from operating activities.C. cash flows from financing activities.D. cash flows from investing activities.
From an investor perspective, the ask price displayed in most quote services represents:A. selling priceB. buying priceC. holding priceD. proft
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