Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1.0.
answer
Cash payment of an account payable
Refer to section 3.2
question
All else constant, which one of the following will decrease if a firm increases its net income?
answer
Price-earnings ratio
Refer to section 3.2.
question
Foreign Travel Services has net income of $48,400, total assets of $219,000, total equity of $154,800, and total sales of $311,700. What is the common-size percentage for the net income?
answer
15.53 percent
Net income common-size percent = $48,400/$311,700 = 15.53 percent
question
You are analyzing a company that has cash of $11,200, accounts receivable of $27,800, fixed assets of $124,600, accounts payable of $31,300, and inventory of $56,900. What is the quick ratio?
answer
1.25
Quick ratio = ($11,200 + $27,800)/$31,300 = 1.25
question
Which one of the following is the correct formula for the future value of $500 invested today at 7 percent interest for 8 years?
answer
FV = $500 (1 + 0.07)8
Refer to section 4.1.
question
You want to invest an amount of money today and receive back twice that amount in the future. You expect to earn 8 percent interest. Approximately how long must you wait for your investment to double in value?
answer
9 years
Approximate time period = 72/8 = 9 years
question
Thirteen years ago, you deposited $2,400 into an account. Eight years ago, you added an additional $1,000 to this account. You earned 8 percent, compounded annually, for the first 5 years and 5.5 percent, compounded annually, for the last 8 years. How much money do you have in your account today?
Which one of the following features distinguishes an ordinary annuity from an annuity due?
answer
Timing of the annuity payments
Refer to section 5.2.
question
Jodie's Fashions has just signed a $2.2 million contract. The contract calls for a payment of $0.6 million today, $0.8 million one year from today, and $0.8 million two years from today. What is this contract worth today if the firm can earn 7.2 percent on its money?
The manager of Gloria's Boutique has approved Carla's application for credit. The maximum payment that has been approved is $65 a month for 24 months. The APR is 15.7 percent. What is the maximum initial purchase that Carla can make given this credit approval?
