1. Which of the following indicates that a company may be in a favorable position to pay its currentliabilities if they suddenly become due?
low timesinterest earned ratio 
high gross profit percentage 
high current ratio 
low current ratio 
2. What is the formula for the profitability index?
future value of net cash flows / present value of net cash flows 
present value of net cash flows / initial investment 
initial investment – present value of cash flows 
future value of net cash flows / initial investment 
3.
Which of the following is TRUE of disinvestment cash flows?
Cash flows occurring during the disinvestment phase do not need to be discounted to present value as part of the NPV calculation. 
Cash flows occurring during the disinvestment phase can be either positive or negative. 
Cash flows occurring during the disinvestment phase are always negative. 
Cash flows occurring during the disinvestment phase are always positive. 
4.

Which of the following most accurately describes the term annuity?
an installment loan with amortizing payments
a stream of equal and consecutive cash flows
a term life insurance policy
an investment which grows in value over time
5.
Which of the following best describes horizontal analysis?
comparing financial information from one year to the next 
comparing a company’s financial figures with other companies that are industry leaders 
calculating key ratios to evaluate performance 
showing each figure as a percentage of some other amount, such as total assets 
6.
Which of the following statements is true?
A traditional costing system can only be used when applying a process manufacturing system. 
Both traditional and activitybased costing systems are used to accumulate total product costs. 
Only activitybased costing can be used when applying a joborder costing system. 
An activitybased costing system is easier to use but less effective than a traditional system. 
7.
If a capital project has a net present value or NPV of $45,000, we could conclude that
The project must have a profitability index less than 1. 
The project is acceptable because the sum of the present value of all future cash flows must exceed the initial investment. 
The project is only acceptable if it will not last longer than 3 years. 
The project is NOT acceptable because the NPV is positive. 
8.
Under an ABC system, indirect manufacturing costs are categorized into which of the following?
activity pools 
batch orders 
none of the answers listed are correct 
overhead groupings 
9.

You have a project that will give you a net cash flow of $10,000 every year for 8 years; you have a discount rate of 14%. What is the sum of the present value of all future net cash flows?
$80,000
$46,390
$4,040
$397,440
10.
Which ratio would a company’s creditor’s (lenders) be most concerned with in evaluating the ability to repay longterm debt?
profitability index 
earnings per share 
timesinterest earned 
working capital 