FIN 320|75 Yearly Exam Review Questions Well Answered|16 Pages
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Module
FIN 320
Institution
FIN 320
60 years ago your grandparents opened two savings accounts and deposited $250 in each account. The first account was with City Bank at 3.6% compounded annually. The second account was with Country Bank at 3.65% compounded annually. Which one of the following statements is true concerning these two ...
FIN 320|75 Yearly Exam Review
60 years ago your grandparents opened two savings accounts and deposited $250 in each account. The
first account was with City Bank at 3.6% compounded annually. The second account was with Country
Bank at 3.65% compounded annually. Which one of the following statements is true concerning these
two accounts? - ✔ ✔ E. The country bank account has paid $61.30 more in interest than the city
bank
A corporation:
A. is ultimately controlled by its board of directors
B. is a legal entity separate from its owners
C. is prohibited from entering into contractual agreements
D. has its identity defined by its bylaws
E. has its existence regulated by the rules set forth in its charter - ✔ ✔ B. is a legal entity separate
from its owners
A firm has a current ratio of 1.4 and a quick ratio of 0.9. Given this, you know for certain that the firm:
A. pays cash for its inventory
B. has more than half its current assets invested in inventory
C. has more cash than inventory
D. has more current liabilities than it does current assets
E. has positive net working capital - ✔ ✔ E. has positive net working capital
A firm's liquidity level decreases when:
A. inventory is purchased with cash
B. inventory is sold on credit
C. inventory is sold for cash
D. an account receivable is collected
E. proceeds from a long-term loan are received - ✔ ✔ A. inventory is purchased with cash
A sole proprietorship:
,A. provides limited financial liability for its owner
B. involves significant legal costs during the formation process
C. has an unlimited life
D. has its profits taxed as personal income
E. can generally raise significant capital from non-owner sources - ✔ ✔ D. has its profits taxed as
personal income
According to the capital asset pricing model, the expected return on a security will be affected by all of
the following except the: - ✔ ✔ D. security's standard deviation
All else held constant, the future value of an annuity will increase if you:
A. decrease both the interest rate and the time period
B. increase the time period
C. decrease the present value
D. decrease the payment amount
E. decrease the interest rate - ✔ ✔ B. increase the time period
An efficient capital market is best defined as a market in which security prices reflect which one of the
following?
A. current inflation
B. a risk premium
C. all available information
D. the historical arithmetic rate of return
E. the historical geometric rate of return - ✔ ✔ C. all available information
Bill just financed a used car through his credit union. His loan requires payments of $275 a month for
five years. Assuming that all payments are paid on time, his last payment will pay off the loan in full.
What type of loan does Bill have?
A. amortized
B. complex
C. pure discount
, D. lump sum
E. interest only - ✔ ✔ A. amortized
Cash flow to creditors is defined as:
A. interest paid minus net new borrowing
B. interest paid plus net new borrowing
C. operating cash flow minus net capital spending minus the change is net working capital
D. dividends paid plus net new borrowing
E. cash flow from assets plus net new equity - ✔ ✔ A. interest paid minus net new borrowing
computing the present value of a future cash flow to determine what that cash flow is worth today is
called:
A. compounding
B. factoring
C. time valuation
D. simple cash flow valuation
E. discounted cash flow valuations - ✔ ✔ E. discounted cash flow valuations
Dicks Sporting Goods reduced its general and administrative costs this year. This cost improvement will
increase which of the following ratios?
I. Profit margin
II. return on assets
III. total asset turnover
IV. return on equity
A. I and II only
B. I and III only
C. II, III, and IV only
D. I, II, and IV only
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