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18. Dickinson, Inc uses a balanced scorecard. One of the measures on the scorecard is the percentage of revenue from repeat sales. Which balanced scorecard perspective would this measure most likely fit into?
A. Customer perspective
B. Learning and growth perspective
C. Internal business perspective
D. Financial perspective
19. Which of the following is not a method used to determine transfer prices?
A. Market price method
B. Costbased method
C. Negotiation
D. Balanced scorecard method
20. The transfer pricing method that uses either the variable cost or the full cost as the basis for setting the transfer price is the
A. market price method.
B. costbased method.
C. negotiation.
D. balanced scorecard method
21. A company's ability to generate income is referred to as:
A. Liquidity.
B. Solvency.
C. Effectiveness.
D. Profitability.
22. A company's ability to use current assets to repay liabilities as they come due is referred to as:
A. Liquidity.
B. Solvency.
C. Effectiveness.
D. Profitability.
23. Which of the following is not a profitability ratio?
A. Times interest earned.
B. Net profit margin.
C. Return on assets.
D. Earnings per share.
24. Morgan Company has the following account balances
What is Morgan's debt to assets?
A. 1.56
B. 0.64
C. 1.2
D. 0.36
25. All of the following are common benchmarks used for comparison when interpreting a company's ratios except:
A. Prioryear results.
B. Results from other industries.
C. Competitor results.
D. Industry average information.
26. Company A and B are competitors in the same industry. Company A has cost of sales of $405,000 and average inventory of $37,000, while Company B has cost of sales of $233,000 and average inventory of $39,000. Which of the following is true?
A. Company B appears to be to be managing inventory better than Company A.
B. Company A appears to be managing inventory better than Company B.
C. Company B has a higher inventory turnover ratio.
D. These two companies both appear to managing inventory equally well.
27. Persius Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $100,000. The equipment will have an initial cost of $400,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $75,000, what is the annual net cash flow?
A. $25,000
B. $35,000
C. $165,000
D. $175,000
28. Which of the following methods is calculated as annual net income as a percentage of the original investment in assets?
A. Accounting rate of return
B. Payback period
C. Net present value
D. Internal rate of return
29. Summit Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $100,000. The equipment will have an initial cost of $400,000 and have a 7 year life. If the salvage value of the equipment is estimated to be $75,000, what is the accounting rate of return?
A. 14.28%
B. 25.00%
C. 42.11%
D. 147.37%
30. If cash flows are not equal each year, the payback period
A. cannot be calculated.
B. is calculated by dividing the initial investment by the average cash flows.
C. is calculated by subtracting each year's cash flows from the initial investment until zero is reached.
D. is calculated by dividing the total years in the project by two.
31. Peet's Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $100,000. The equipment will have an initial cost of $400,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $75,000, what is the payback period? Ignore income taxes.
A. 3.25 years
B. 4.00 years
C. 4.75 years
D. 7.00 years
32. The discount rate that would return a net present value equal to zero is the
A. Annual rate of return
B. Accounting rate of return
C. Hurdle rate
D. Internal rate of return
33. Minne Corp is considering the purchase of a new piece of equipment. When discounted at a hurdle rate of 8%, the project has a net present value of $24,580. When discounted at a hurdle rate of 10%, the project has a net present value of ($28,940). The internal rate of return of the project is
A. zero.
B. between zero and 8%.
C. between 8% and 10%.
D. greater than 10%.
34. Jonas Inc. is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $120,000 over its estimated life, while the total cost to buy the equipment will be $75,000 over its estimated life. At Jonas's required rate of return, the net present value of the cost of leasing the equipment is $73,700 and the net present value of the cost of buying the equipment is $68,000. Based on financial factors, Jonas should
A. lease the equipment, saving $45,000 over buying.
B. buy the equipment, saving $45,000 over leasing.
C. lease the equipment, saving $5,700 over buying.
D. buy the equipment, saving $5,700 over leasing.
35. Carchill Corp is trying to decide whether to lease or purchase a piece of equipment. The total cost lease the equipment will be $150,000 over its estimated life, while the total cost to buy the equipment will be $120,000 over its estimated life. At Carchill's required rate of return, the net present value of the cost of leasing the equipment is $108,000 and the net present value of the cost of buying the equipment is $119,000. Based on financial factors, Carchill should
A. lease the equipment, saving $30,000 over buying.
B. buy the equipment, saving $30,000 over leasing.
C. lease the equipment, saving $11,000 over buying.
D. buy the equipment, saving $11,000 over leasing.
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Expert:
Linda_us
replied 6 years ago.
THIS ANSWER IS LOCKED!
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Customer:
replied 6 years ago.
Hi Linda Thanks again!
I was aondering how you came to the answer in number 29. I tries that one and got answer c.
29. Summit Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $100,000. The equipment will have an initial cost of $400,000 and have a 7 year life. If the salvage value of the equipment is estimated to be $75,000, what is the accounting rate of return? A. 14.28% B. 25.00% C. 42.11% D. 147.37%
Expert:
Linda_us
replied 6 years ago.
You are correct it should be C 42.11%. Sorry about that.
Regards
Linda
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