Test 1C Chapters 1 -5 - Exam:1A Chapters 1 5 Course...

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Exam:1A Chapters 1 - 5 Course: Principles of Finance Instructor: Jason Ahrenholtz TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 1) Finance is concerned with the process institutions, markets, and instruments involved in the transfer of money among and between individuals, businesses and government. 1) 2) Financing decisions deal with the left - hand side of the firm's balance sheet and involve the most appropriate mix of current and fixed assets. 2) 3) The MACRS depreciation method requires use of the half - year convention. Assets are assumed to be acquired in the middle of the year and only one - half of the first year's depreciation is recovered in the first year. 3) 4) The depreciable life of an asset can significantly affect the pattern of cash flows. The shorter the depreciable life of an asset, the more quickly the cash flow created by the depreciation write - off will be received. 4) 5) The liquidity of a business firm refers to the solvency of the firm's overall financial position. 5) 6) In the statement of cash flows, cash flows from operating activities are cash flows directly related to purchase and sale of fixed assets. 6) 7) Investment A guarantees its holder $100 return. Investment B earns $0 or $200 with equal chances (i.e., an average of $100) over the same period. Both investments have equal risk. 7) 8) GAAP is the accounting profession's rule - setting body. 8) 9) The annual percentage yield (APY) is the effective rate of interest that must be disclosed to customers by banks on their savings products as a result of "truth in savings laws." 9) 10) In partnerships, owners have unlimited liability and may have to cover debts of other less financially sound partners. 10) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 11) The ________ ratio may indicate that the firm will not be able to meet interest obligations due on outstanding debt. 11) A) net profit margin B) debt C) times interest earned D) return on total assets 1
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12) The stockholder's annual report must include 12) A) a statement of retained earnings. B) an income statement. C) a balance sheet. D) a statement of cash flows. E) all of the above. 13) Johnson, Inc. has just ended the calendar year making a sale in the amount of $10,000 of merchandise purchased during the year at a total cost of $7,000. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. The net profit and cash flow from this sale for the year are 13) A) $3,000 and $10,000, respectively. B) $3,000 and - $7,000, respectively. C) $3,000 and $7,000, respectively.
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Test 1C Chapters 1 -5 - Exam:1A Chapters 1 5 Course...

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