High Inc. has an accounts receivable turnover ratio of 7.3. Low Company has an accounts receivable turnover ratio of 5. Assuming that High and Low have the same sales level, which of the following statements is correct? A) Low Company has (on average) a lower accounts receivable balance than does High. B) High has a […]
Which of the following statements is TRUE? A) An advantage of a corporation is that there is less regulation of the business. B) An advantage of a corporation is that it is subject to double taxation. C) Unlike a partnership, a disadvantage of a corporation is that it has limited liability. D) Corporations face more […]
You just graduated and landed your first job in your new career. You remember that your favorite finance professor told you to begin the painless job of saving for retirement as soon as possible, so you decided to put away $2,000 at the end of each year in a Roth IRA. Your expected annual rate […]
The ________ is a two-edged sword in that as its value increases the ROE should increase, but the risk to shareholders also increases. A) profit margin B) ROA C) leverage ratio D) asset turnover ratio ANSWER C
Assume that you expect to hold a $40,000 investment for one year. It is forecasted to have a year end value of $42,000 with a 30% probability; a year end value of $48,000 with a 45% probability; and a year end value of $60,000 with a 25% probability. What is the expected holding period return […]
A “substitute check” is A) a digital picture of your original check formated for bank processing. B) any photocopy of an original check. C) meant to replace an original check that has been lost or stolen. D) issued by a credit card company to cover previous purchases. ANSWER A
Congratulations! You are the proud winner of the multi-state Sour Ball Lottery. You are to receive $2,000,000 at the end of each year for the next 20 years. While the Lottery Commission refers to this as a $40,000,000 jackpot, if you choose the “cash option” they will give you much less than that; you can […]
Plastic Products Inc. has a levered beta of 1.30, a debt-equity ratio of 0.50, and a tax rate of 40%. What is the value of the firm’s unlevered beta? A) 0.70 B) 1.00 C) 1.30 D) 1.60 ANSWER B Explanation: B) βU = βL / (1 + (D/E) (1-t)) = 1.30/(1 + .50(1-.40)) […]
Current liabilities are defined as past-due debt obligations. Indicate whether the statement is true or false ANSWER FALSE
Which of the following ratios would be the poorest indicator of how rapidly the firm’s credit accounts are being collected? A) cash conversion cycle B) accounts receivable turnover ratio C) average collection period D) times interest earned ANSWER D
