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 times-interest 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 activity-based costing systems are used to accumulate total product costs. |
|
Only activity-based costing can be used when applying a job-order costing system. |
|
An activity-based 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 long-term debt?
|
profitability index |
|
earnings per share |
|
times-interest earned |
|
working capital |
