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Falak Naz, Accountant

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45) In determining the future value of a single amount, one

Customer Question

45) In determining the future value of a single amount, one measures
A.

the future value of an amount allowed to grow at a given interest rate.
B.

the present value of an amount discounted at a given interest rate.
C.

the present value of periodic payments at a given interest rate.
D.

the future value of periodic payments at a given interest rate.

46) If you were to put $1,000 in the bank at 6% interest each year for the next ten years, which table would you use to find the ending balance in your account?
A.

Present value of an annuity of $1
B.

Future value of $1
C.

Future value of an annuity of $1
D.

Present value of $1

47) The future value of a $1000 investment today at 8 percent annual interest compounded semiannually for 5 years is
A.

$1,520
B.

$1,480
C.

$1,555
D.

$1,469

42) Which method of controlling pledged inventory provides the greatest degree of security to the lender?
A.

Trust receipts
B.

Overall inventory liens
C.

Warehousing
D.

Blanket inventory liens

37) Which of the following is not a method for lenders to control pledged inventory?
A.

Warehousing
B.

Factoring
C.

Trust receipts
D.

Blanket inventory liens

36) Variables important to credit scoring models include
A.

facility ownership.
B.

all of these variables apply.
C.

negative public records.
D.

age of company in years.

30) An aggressive working capital policy would have which of following characteristics?
A.

A high ratio of short-term debt to long-term sources of funds.
B.

A short average collection period.
C.

A low ratio of short-term debt to fixed assets.
D.

A high ratio of long-term debt to fixed assets.

25) Kuznets Rental Center requires $1,000,000 in financing over the next two years. Kuznets can borrow long-term at 9 percent interest per year for two years. Alternatively, Kuznets can borrow short-term and pay 7 percent interest in the first year. Then, Kuznets projects paying 10 percent interest in the second year. Assuming Kuznets pays off the accrued interest at the end of each year, which of the following statements is true?
A.

Kuznets will probably pay more under the short-term financing plan.
B.

Kuznets will definitely end up paying more under the long-term financing plan.
C.

Kuznets will probably pay less under the short-term financing plan.
D.

Kuznets will definitely end up paying less under the long-term financing plan.

27) The theory of the term structure of interest rates which suggests that long-term rates are determined by the average of short-term rates expected over the time that a long-term bond is outstanding is the
A.

liquidity premium theory.
B.

expectations hypothesis.
C.

market average rate theory.
D.

segmentation theory.

23) The break-even point can be calculated as
A.

variable cost times contribution margin.
B.

variable costs divided by contribution margin.
C.

fixed cost divided by contribution margin.
D.

total costs divided by contribution margin.

24) Refer to the figure above. This firm's break-even point is
A.

7,142 units
B.

4,800 units
C.

18,000 units
D.

14,634 units

19) Under which of the following conditions could the overuse of financial leverage be detrimental to the firm?
A.

Upswing of business cycle.
B.

Stable industry
C.

Low interest cost compared to return on assets
D.

Cyclical demand for the firm's products.

21) The concept of operating leverage involves the use of __________ to magnify returns at high levels of operation.
A.

marginal costs
B.

fixed costs
C.

semi-variable costs
D.

variable costs

17) A firm utilizing LIFO inventory accounting would, in calculating gross profits, assume that
A.

sales were from current production until current production was depleted, and then use sales from beginning inventory.
B.

all sales were from beginning inventory.
C.

all sales were from current production.
D.

all sales were for cash.

15) The need for an increase or decrease in short-term borrowing can be predicted by
A.

a cash budget.
B.

trend analysis.
C.

ratio analysis.
D.

an income statement.

9) If a firm has both interest expense and lease payments,
A.

times interest earned will be the same as fixed charge coverage.
B.

times interest earned will be greater than fixed charge coverage.
C.

times interest earned will be smaller than fixed charge coverage.
D.

fixed charge coverage cannot be computed.

5) An increase in investments in long-term securities will:
A.

45) In determining the future value of a single amount, one measures A.

the future value of an amount allowed to grow at a given interest rate.

46) If you were to put $1,000 in the bank at 6% interest each year for the next ten years, which table would you use to find the ending balance in your account?

C.

Future value of an annuity of $1

47) The future value of a $1000 investment today at 8 percent annual interest compounded semiannually for 5 years is

B.

$1,480

42) Which method of controlling pledged inventory provides the greatest degree of security to the lender?

D.

Blanket inventory liens

37) Which of the following is not a method for lenders to control pledged inventory? B.

Factoring

36) Variables important to credit scoring models include B.

all of these variables apply.

30) An aggressive working capital policy would have which of following characteristics? A.

A high ratio of short-term debt to long-term sources of funds.

25) Kuznets Rental Center requires $1,000,000 in financing over the next two years. Kuznets can borrow long-term at 9 percent interest per year for two years. Alternatively, Kuznets can borrow short-term and pay 7 percent interest in the first year. Then, Kuznets projects paying 10 percent interest in the second year. Assuming Kuznets pays off the accrued interest at the end of each year, which of the following statements is true? B.

Kuznets will definitely end up paying more under the long-term financing plan.

27) The theory of the term structure of interest rates which suggests that long-term rates are determined by the average of short-term rates expected over the time that a long-term bond is outstanding is the A.

liquidity premium theory. 23) The break-even point can be calculated as C.

fixed cost divided by contribution margin.

24) Refer to the figure above. This firm's break-even point is A.

7,142 units B.

4,800 units C.

18,000 units D.

14,634 units

DATA MISSING

19) Under which of the following conditions could the overuse of financial leverage be detrimental to the firm?

D.

Cyclical demand for the firm's products.

1) The concept of operating leverage involves the use of __________ to magnify returns at high levels of operation. B.

fixed costs

17) A firm utilizing LIFO inventory accounting would, in calculating gross profits, assume that A.

sales were from current production until current production was depleted, and then use sales from beginning inventory. 15) The need for an increase or decrease in short-term borrowing can be predicted by A.

a cash budget.

9) If a firm has both interest expense and lease payments,

C.

times interest earned will be smaller than fixed charge coverage.

5) An increase in investments in long-term securities will: