CURRENT ASSETSc 1 A current asset is:a. an item currently owned by the firm.b. an item that the firm expects to own within the next year.c. an item currently owned by the firm that will convert to cash within the next 12months.d. the amount of cash on hand the firm currently shows on its balance sheet.e. the market value of all items currently owned by the firm.LONG-TERM DEBTb 2 The long-term debts of a firm are liabilities:a. that come due within the next 12 months.b. that do not come due for at least 12 months.c. owed to the firm’s suppliers.d. owed to the firm’s shareholders.e. the firm expects to incur within the next 12 months.NET WORKING CAPITALe 3 Net working capital is defined as:a. total liabilities minus shareholders’ equity.b. current liabilities minus shareholders’ equity.c. fixed assets minus long-term liabilities.d. total assets minus total liabilities.e. current assets minus current liabilities.OPERATING CASH FLOWa 4 _____ refers to the cash flow that re sults from the firm’s ongoing, normal businessactivities.a. Operating cash flowb. Capital spendingc. Net working capitald. Cash flow from assetse. Cash flow to creditorsEARNINGS PER SHAREa 5. The earnings per share will:a. increase as net income increases.b.increase as the number of shares outstanding increase.c.decrease as the total revenue of the firm increases.d.increase as the tax rate increases.e.decrease as the costs decrease.QUICK RATIOd 6 The quick ratio is measured as:a. current assets divided by current liabilities.b. cash on hand plus current liabilities, divided by current assets.c. current liabilities divided by current assets, plus inventory.d. current assets minus inventory, divided by current liabilities.e. current assets minus inventory minus current liabilities.DEBT-EQUITY RATIOc 7 The debt-equity ratio is measured as total:a. equity minus total debt.b. equity divided by total debt.c. debt divided by total equity.d. debt plus total equity.e. debt minus total assets, divided by total equity.EQUITY MULTIPLIERe 8. The equity multiplier ratio is measured as total:a. equity divided by total assets.b. equity plus total debt.c. assets minus total equity, divided by total assets.d. assets plus total equity, divided by total debt.e. assets divided by total equity.TOTAL CAPITALIZATIONb 9. The total long-term debt and equity of the firm is frequently called:a. total assets.b. total capitalization.c. total financing.d. debt-equity consolidation.e. debt-equity reconciliation.INVENTORY TURNOVERc 10 The inventory turnover ratio is measured as:a. total sales minus inventory.b. inventory times total sales.c. cost of goods sold divided by inventory.d. inventory times cost of goods sold.e. inventory plus cost of goods sold.RECEIVABLES TURNOVERb 11 The receivables turnover ratio is measured as:a. sales plus accounts receivable.b. sales divided by accounts receivable.c. sales minus accounts receivable, divided by sales.d. accounts receivable times sales.e. accounts receivable divided by sales.COMPOUNDINGb 12. The process of accumulating interest on an investment over time to earn moreinterest is called:a. growth.b. compounding.c. aggregation.d. accumulation.e. discounting.INTEREST ON INTERESTd 13. Interest earned on the reinvestment of previous interest payments is called _____interest.a. freeb. annualc. simpled. interest one. compoundCOMPOUND INTERESTe 14. Interest earned on both the initial principal and the interest reinvested from priorperiods is called _____ interest.a. freeb. annualc. simpled. interest one. compoundSIMPLE INTERESTc 15. Interest earned only on the original principal amount invested is called _____interest.a. freeb. annualc. simpled. interest one. compoundFUTURE VALUE AND RATE CHANGESe 16 Alpo, Inc. invested $500,000 to help fund a company expansion project scheduled foreight years from now. How much additional money will they have eight years fromnow if they can earn 9 percent rather than 7 percent on this money?a. $58,829.69b. $86,991.91c. $118,009.42d. $126,745.19e. $137,188.23FUTURE VALUE AND RATE CHANGESa 17 You will be receiving $5,000 from your family as a graduation present. You havedecided to save this money for your retirement. You plan to retire thirty-five yearsafter graduating. How much additional money will you have at that time if you canearn an average of 8.5 percent on your investment instead of just 8 percent?a. $12,971.49b. $13,008.47c. $13,123.93d. $13,234.44e. $13,309.85FUTURE VALUE AND TIME CHANGESb 18. You collect model cars. One particular model increases in value at a rate of 5 percent per year. Today, the model is worth $29.50. How much additional money can you make if you wait ten years to sell the model rather than selling it five years from now?a. $9.98b. $10.40c. $10.86d. $11.03e. $11.24VARIABLE COSTSa 19 Variable costs:a. change in direct relationship to the quantity of output produced.b. are constant in the short-run regardless of the quantity of output produced.c. reflect the change in a variable when one more unit of output is produced.d. are subtracted from fixed costs to compute the contribution margin.e. form the basis that is used to determine the degree of operating leverage employedby a firm.COST OF CAPITALa 20 The opportunity cost associated with the firm’s capital investment in a project is called its:a. cost of capital.b. beta coefficient.c. capital gains yield.d. sunk cost.e. internal rate of return.COST OF EQUITYb 21. The return that shareholders require on their investment in the firm is called the:a. dividend yield.b. cost of equity.c. capital gains yield.d. cost of capital.e. income return.WACCe 22 The weighted average of the firm’s costs of equity, preferred stock, and aftertax debt is the:a. reward to risk ratio for the firm.b. expected capital gains yield for the stock.c. expected capital gains yield for the firm.d. portfolio beta for the firm.e. weighted average cost of capital (WACC).。