1. Which one of the following actions best matches the primary goal of financial management?_x000D_
_x000D_
 increasing the net working capital while lowering the long-term asset requirements_x000D_
 improving the operating efficiency, thereby increasing the market value of the stock_x000D_
 increasing the firm's market share_x000D_
 _x000D_
 reducing fixed costs and increasing variable costs_x000D_
 _x000D_
 increasing the liquidity of the firm by transferring short-term debt into long-term debt_x000D_
_x000D_
 _x000D_
_x000D_
2. Working capital management includes which of the following?_x000D_
_x000D_
 establishing the inventory level_x000D_
 _x000D_
 deciding when to pay suppliers_x000D_
 _x000D_
 determining the amount of cash needed on a daily basis_x000D_
 _x000D_
 establishing credit terms for customers_x000D_
 _x000D_
 all of the above_x000D_
 _x000D_
_x000D_
3. Market value is important to the financial manager because:_x000D_
_x000D_
 It reflects the value of the asset, based on generally-accepted accounting principles._x000D_
 Is a crucial component of the balance sheet, and can impact the financial statements._x000D_
 Market value reflects the amount someone is willing to pay today for an asset._x000D_
 The market value of an asset reflects its historical cost._x000D_
 _x000D_
 None of the above_x000D_
_x000D_
 _x000D_
 4. The income statement reflects:_x000D_
_x000D_
 Income and expenses at the time when those items affect the cash flows of a firm._x000D_
 Income and expenses in accordance with GAAP._x000D_
 _x000D_
 The cash flows in accordance with GAAP._x000D_
 _x000D_
 The flow of cash into and out of a firm during a stated period of time._x000D_
 The flow of cash into and out of a firm as of a particular date._x000D_
_x000D_
 _x000D_
5. Telemarket Inc. has sales of $625,000. They paid $43,000 in interest during the year and depreciation was $79,000. Administrative costs were $100,000 and other costs were $160,000. Assuming a tax rate of 35 percent, what is Telemarket's taxable income?_x000D_
_x000D_
 $157,950_x000D_
 _x000D_
 $322,000_x000D_
 _x000D_
 $243,000_x000D_
 _x000D_
 $200,000_x000D_
_x000D_
_x000D_
6. Home Best Hardware had $315,000 in taxable income last year. Using the tax rates provided in Table 2.3, what is the marginal tax rate?_x000D_
_x000D_
 35%_x000D_
 _x000D_
 39%_x000D_
 _x000D_
 34%_x000D_
 _x000D_
 32%_x000D_
_x000D_
 _x000D_
7. Pizza A had earnings after taxes of $600,000 in the year 2008, and 300,000 shares outstanding. In year 2009, earnings after taxes increased to $750,000, and 25,000 new shares were issued for a total of 325,000 shares. What is the EPS figure for 2008?_x000D_
_x000D_
 $2.0_x000D_
 _x000D_
 $2.21_x000D_
 _x000D_
 $0.50_x000D_
 _x000D_
 $0.47_x000D_
_x000D_
 _x000D_
8. The income statement reflects:_x000D_
_x000D_
 income and expenses at the time when those items affect the cash flows of a firm._x000D_
 income and expenses in accordance with GAAP._x000D_
 _x000D_
 the cash flows in accordance with GAAP._x000D_
 _x000D_
 the flow of cash into and out of a firm during a stated period of time._x000D_
 the flow of cash into and out of a firm as of a particular date._x000D_
_x000D_
 _x000D_
9. Print Imaging has EBIT of $150,000, interest of $30,000, taxes of $50,000, and depreciation of $50,000. What is the company's operating cash flow?_x000D_
_x000D_
 $120,000_x000D_
 _x000D_
 $180,000_x000D_
 _x000D_
 $170,000_x000D_
 _x000D_
 $150,000_x000D_
 _x000D_
 $120,000_x000D_
_x000D_
 _x000D_
10. Mark deposited $1,000 today, in an account that pays eight percent interest, compounded semi-annually. Which one of the following statements is correct concerning this investment?_x000D_
_x000D_
 Mark will earn more interest in year 4 than he will in year 3._x000D_
 _x000D_
 Mark will receive equal interest payments every six months over the life of the investment._x000D_
 Mark would have earned more interest if he had invested in an account paying 8 percent simple interest._x000D_
 Mark would have earned more interest if he had invested in an account paying annual interest._x000D_
 Mark will earn less and less interest each year over the life of the investment._x000D_
_x000D_
 _x000D_
11. Mr. Smith will receive $7,500 a year for the next 14 years from his trust. If the interest rate on this investment is eight percent, what is the approximate current value of these future payments?_x000D_
_x000D_
 $61,800_x000D_
 _x000D_
 $53,500_x000D_
 _x000D_
 $113,400_x000D_
 _x000D_
 $97,200 _x000D_
 _x000D_
_x000D_
12. KED Engineering acquired an additional business unit for $310,000. The seller agreed to accept annual payments of $67,000 at an interest rate of 6.5 percent. How many years will it take KED Engineering to pay for this purchase?_x000D_
_x000D_
 4.70 years_x000D_
 _x000D_
 5.68 years_x000D_
 _x000D_
 6.21 years_x000D_
 _x000D_
 7.84 years_x000D_
 _x000D_
 8.12 years_x000D_
_x000D_
 _x000D_
13. Fine Oak Woodworks is considering a project that has cash flows of $6,000, $4,000, and $3,000 for the next three years. If the appropriate discount rate of this project is 10 percent, which of the following statements is true?_x000D_
_x000D_
 The current value of the project's inflows is $13,000_x000D_
 _x000D_
 The approximate current value of the project's inflows is $11,000_x000D_
 The current value of the project's inflows cannot be determined_x000D_
 The project should be rejected because its present value is negative_x000D_
 _x000D_
_x000D_
14. You are considering two investments. Investment I is in a software company, and Investment II is an engineering company. The investments offer the following cash flows:_x000D_
Year Software Company Engineering Company_x000D_
1 $5,000 $15,000_x000D_
2 $3,000 $8,000_x000D_
3 $4,000 $9,000_x000D_
4 $3,600 $11,000_x000D_
_x000D_
If the appropriate discount rate is 10 percent, what is the approximate present value of the Engineering Company investment?_x000D_
_x000D_
 $33,200_x000D_
 _x000D_
 $34,500_x000D_
 _x000D_
 $42,000_x000D_
 _x000D_
 $43,500_x000D_
 _x000D_
_x000D_
15. North Bank offers you an APR of 13.17 percent compounded monthly, and South Bank offers you an effective rate of 13.75 percent on a business loan. Which bank should you choose and why?_x000D_
_x000D_
 South Bank because its effective rate is higher._x000D_
 _x000D_
 North Bank because the APR is lower._x000D_
 _x000D_
 South Bank because its effective rate is lower._x000D_
 _x000D_
 North Bank because its effective rate is lower._x000D_