1. Internal reports that
review the actual impact of decisions are prepared
by:
·
the controller
·
department
heads
·
factory
workers
·
management accountants
2. Horizontal analysis
is also known as:
·
trend analysis
·
vertical
analysis
·
linear
analysis
·
common size analysis
3. Which of the
following is an advantage of corporations relative to partnerships and sole
proprietorships?
·
most common form of
organization
·
reduced legal liability
for investors
·
lower
taxes
·
harder to transfer
ownership
4. Serox stock was
selling for $20 two years ago. The stock sold for $25 one year ago, and it is
currently selling for $28. Serox pays a $1.10 dividend per year.
What was the rate of return for owning Serox in the most recent year? (Round to
the nearest percent.)
·
32%
·
16%
·
12%
·
40%
5. External financing
needed: Jockey Company has total assets worth $4,417,665. At year-end it will
have net income of $2,771,342 and pay out 60 percent as dividends. If the firm
wants no external financing, what is the growth rate it can
support?
·
30.3%
·
27.3%
·
32.9%
·
25.1%
6. An unrealistic budget
is more likely to result when it:
·
has been developed by
all levels of
management.
·
has been developed in a
top down fashion.
·
has been developed in a
bottom up fashion.
·
is developed with
performance appraisal usages in mind.
7. Which of the following
financial statements is concerned with the company at a point in time?
·
balance
sheet
·
retained earnings
statement
·
statement of cash flows
·
income statement
8. Next year Jenkins
Traders will pay a dividend of $3.00. It expects to increase its dividend
by $0.25 in each of the following three years. If their required rate of
return if 14 percent, what is the present value of their dividends over the
next four years?
·
$12.50
·
$11.63
·
$9.72
·
$13.50
9. An activity that has
a direct cause-effect relationship with the resources consumed is a(n):
·
product
activity
·
cost
driver
·
cost
pool
·
overhead rate
10. The major element in
budgetary control is:
·
the approval of the
budget by the stockholders
·
the valuation of
inventories
·
the preparation of
long-term plans
·
the comparison of actual
results with planned objectives.
11. Tule Time Comics is
considering a new show that will generate annual cash flows of $100,000 into
the infinite future. If the initial outlay for such a production is $1,500,000
and the appropriate discount rate is 6 percent for the cash flows, then what is
the profitability index for the project?
·
0.11
·
1.11
·
0.90
·
1.90
12. How firms estimate
their cost of capital: The WACC for a firm is 13.00 percent. You know that the
firm’s cost of debt capital is 10 percent and the cost of equity capital is 20%
What proportion of the firm is financed with debt?
·
70%
·
50%
·
33%
·
30%
13. The most important
information needed to determine if companies can pay their current obligations
is the:
·
relationship between
current assets and current
liabilities
·
relationship between
short-term and long-term liabilities
·
projected net income for
next year
·
net income for this year
14. Process costing is
used when:
·
dissimilar products are
involved
·
production is aimed at
fulfilling a specific customer
order.
·
the production process
is continuous.
·
costs are to be assigned
to specific jobs.
15. A cost which remains
constant per unit at various levels of activity is a:
·
fixed
cost
·
mixed
cost
·
manufacturing
cost
·
variable cost
16.The group of users of
accounting information charged with achieving the goals of the business is
its:
·
investors
·
auditors
·
creditors
·
managers
17. Teakap, Inc. has
current assets of $1,456,312 and total assets of $4,812,369 for the year ending
September 30, 2006. It also has current liabilities of $1,041,012, common
equity of $1,500,000 and retained earnings of $1,468,347. How much long-term
debt does the firm have?
·
$803,010
·
$2,303,010
·
$1,844,022
·
$2,123,612
18. The cash conversion
cycle?
·
begins when the firm
invests cash to purchase the raw materials that would be used to produce the
goods that the firm
manufactures.
·
estimates how long it
takes on average for the firm to collect its outstanding accounts receivables
balance.
·
begins when the firm
uses its cash to purchase raw materials and ends when the firm collects cash
payments on its credit sales.
·
shows how long the firm
keeps its inventory before selling it.
19. Ajax Corp. is
expecting the following cash flows - $79,000, $112,000, $164,000, $84,000, and
$242,000 – over the next five years. If the company’s opportunity cost is
15 percent, what is the present value of these cash flows? (Round to the nearest
dollar.)
·
$480,906
·
$429,560
·
$414,322
·
$477,235
20. Jack Robbins is
saving for a new car. He needs to have $21,000 for the car in three years. How
much will he have to invest today in an account paying 8 percent annually to
achieve his target? (Round to nearest dollar)
·
$26,454
·
$19,444
·
$22,680
·
$16,670
21. Which of the
following presents a summary of changes in a firm’s balance sheet from the
beginning of an accounting period to the end of that accounting period?
·
the statement of net
worth
·
the statement of cash
flows
·
the statement of working
capital
·
the statement of
retained earnings
22. M&M Proposition
1: Dynamo Corp. produces annual cash flows of $150 and is expected to exist
forever. The company is currently financed with 75 percent equity and 25
percent debt. Your analysis tells you that the appropriate discount rates are
10 percent for the cash flows, and 7 percent for the debt. You currently own 10
percent of the stock.
If Dynamo wishes to
change its capital structure from 75 percent equity to 60 percent equity and
use the debt proceeds to pay a special dividend to shareholders, how much debt
should they use?
·
$225
·
$600
·
$375
·
$321
23. Horizontal analysis
is a technique for evaluating a series of financial statement data over a
period of time:
·
that has been arranged
from the highest number to the lowest
number.
·
to determine the amount
and/or percentage increase or decrease that has taken
place.
·
to determine which items
are in error.
·
that has been arranged
from the lowest number to the highest number.
24. Jayadev Athreya has
started his first job. He will invest $5,000 at the end of each year for the
next 45 years in a fund that will earn a return of 10 percent. How much
will Jayadev have at the end of 45 years?
·
$2,667,904
·
$5,233,442
·
$1,745,600
·
$3,594,524
25. Turnbull Corp. had
an EBIT of $247 million in the last fiscal year. Its depreciation and
amortization expenses amounted to $84 million. The firm has 135 million
shares outstanding and a share price of $12.80. A competing firm that is very
similar to Turnbull has an enterprise value/EBITDA multiple of 5.40.
What is the enterprise
value of Turnbull Corp.? Round to the nearest million dollars.
·
$1,344
million
·
$453.6
million
·
$1,315 million
·
$1,787 million
26. Firms that achieve
higher growth rates without seeking external financing:
·
Have a low plowback
ratio
·
are highly leveraged
·
have less equity and/or
are able to generate high net income leading to a high ROE.
·
None of these
27. In a process cost
system, product costs are summarized:
·
on job cost
sheets.
·
when the products are
sold.
·
after each unit is
produced.
·
on production cost
reports.
28. The convention of
consistency refers to consistent use of accounting principles:
·
within
industries
·
among accounting
periods
·
throughout the
accounting period
·
among firms
29. If a company’s
weighted average cost of capital is less than the required return on
equity, then the
firm:
·
is financed with more
than 50% debt
·
is perceived to be
safe
·
partnership
·
has debt in its capital
structure
30. Your firm has an
equity multiplier of 2.47. What is the debt-to-equity ratio?
·
0
·
1.74
·
0.60
·
1.47
31. The accumulation of
accounting data on the basis of the individual manager who has the authority to
make day-to-day decisions about activities in an area is called:
·
master
budgeting
·
static
reporting
·
responsibility
accounting
·
flexible accounting
32. Regatta, Inc., has
six-year bonds outstanding that pay a 8.25 percent coupon rate. Investors
buying the bond today can expect to earn a yield to maturity of 6.875 percent.
What should the company’s bonds be priced at today? Assume annual coupon
payments. (Round to the nearest dollar.)
·
$1014
·
$972
·
$923
·
$1,066
33. Variance reports
are:
·
internal reports for
management
·
SEC financial
reports
·
external financial
reports
·
all of these
34. The break-even point
is where:
·
contribution margin
equals total fixed costs.
·
total sales equal total
variable costs.
·
total sales equal total
fixed costs.
·
total variable costs
equal total fixed costs.
35. When a company
assigns the costs of direct materials, direct labor, and both variable and
fixed manufacturing overhead to products, that company is using:
·
operations
costing
·
product
costing
·
absorption
costing
·
variable costing
36. Which of the
following is considered a hybrid organizational form?
·
sole
proprietorship
·
partnership
·
limited liability
partnership
·
corporation
37. Gateway, Corp.
has an inventory turnover of 5.6. What is the firm’s days’s sales in
inventory?
·
57.9
·
61.7
·
65.2
·
64.3
38. The process of
evaluating financial data that change under alternative courses of action is
called:
·
incremental analysis
·
contribution margin
analysis
·
cost-benefit analysis
·
double entry analysis
39. What decision
criteria should managers use in selecting projects when there is not enough
capital to invest in all available positive NPV projects?
·
the modified internal
rate of return
·
the profitability index
·
the discounted
payback
·
the internal rate of
return
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