Finance Quiz

Question 1 (10 points)

The __________ provides a snapshot of a firm’s financial position.

Question 1 options:

balance sheet

retained earnings statement

income statement

statement of cash flows

Question 2 (10 points)

The alternative minimum tax (AMT) is designed to:

Question 2 options:

prevent wealthier taxpayers from escaping their fair share of tax liability through tax breaks.

allow high income tax payers to lower their income tax.

reduce corporate income taxes.

reduce estate taxes.

Question 3 (10 points)

The __________ summarizes a firm’s revenues, expenses, and profit during a specific period.

Question 3 options:

retained earnings statement

balance sheet

income statement

statement of cash flows

Question 4 (10 points)

Acme Inc. turns its inventory over 6 times each year, what is Acme’s Average Age of Inventory:

Question 4 options:

180 days

42 days

61 days

6 days

Question 5 (10 points)

The rate of interest actually paid or earned that includes compounded interest is called the ____________ rate.

Question 5 options:

nominal

external

internal

effective

Question 6 (10 points)

The after-tax cost of debt for a firm with a 10% before-tax cost of debt and a 30% percent marginal tax rate is:

Question 6 options:

7 percent.

10 percent.

13 percent.

3 percent.

Question 7 (10 points)

The ability of a firm to pay its short-term debts is measured by:

Question 7 options:

profitability ratios.

ROE.

times-interest-earned.

liquidity ratios.

Question 8 (10 points)

According to the DuPont analysis, return on assets (ROA) consists of:

Question 8 options:

Profit margin x asset turnover.

ROE x debt ratio.

Gross profits x equity margin.

ROE / (1 – Debt/Assets).

Question 9 (10 points)

A firm’s capital structure is composed of the following sources and after-tax costs: 30% long-term debt (cost 6%), 10% preferred stock (cost 8%), and 60% common stock (cost 14%). The weighted average cost of capital is:

Question 9 options:

10 percent.

11 percent.

13 percent.

12 percent.

Question 10 (10 points)

What is the present value of $100 received in one year, $200 received in two years, and $300 received in three years if the opportunity cost is 12%?

Question 10 options:

$417

$462

$517

$562

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