Midterm 1, Practice Problems
1 out of 6
True/False
1.
Book value of shareholders’ equity can sometimes be negative.
True
False
2.
Earnings management
is when managers use their discretion to make
accounting choices that depict the true financial condition of the firm.
True
False
3.
Cash flow to shareholders must be less than or equal to net income.
True
False
4.
Retained Earnings
refers to how much cash the firm is keeping on hand.
True
False
5.
One assumption/constraint in deriving the
Sustainable Growth Rate
is that
the firm cannot issue any equity.
True
False
6.
Starting today (at time
t
= 0), you will make annual $10 deposits into your savings account. If
your bank offers you an effective annual rate of 5%, then how much money will you have in
your account at time
t
= 30?
Final Answer:
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View Full DocumentMidterm 1, Practice Problems
2 out of 6
7.
You just received $500 from your friend today. You will not be receiving any additional
money next year. Your bank pays you 5% annually on your savings deposits, and will lend you
money at a rate of 10% annually. You would like to maximize your spending such that you
spend the exact same amount, X, at both time
t
= 0 and
t
= 1. What is X?
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 Spring '08
 MATTHEWJAMESBARCASKEY
 Management, Balance Sheet, Financial Ratio, Generally Accepted Accounting Principles

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