Bus 401 week 1 quiz.

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This archive file of BUS 401 Week 1 Quiz consists of:
1. The income statement for Brit, Inc. Indicates that tax
expense was $20,000. The balance sheet indicates that taxes
payable for the same year increased by $ 5,000. What
amount did Brit, Inc. actually pay in taxes during this year?
2. A financial manager is considering two projects, A and B. A
is expected to add $ 2 million to profits this year while B is
expected to add $ 1 million to profits this year. Which of the
following statements is most correct?
3. Which of the following statements about depreciation is
true?
4. The principle of risk-return tradeoff means that _____
5. The quick ratio of a firm would be increased by which of
the following?
6. Common sized income statements ___________
7. The December 31, 2007 balance sheet shows net fixed
assets of $100,000 and the December 31, 2008 balance sheet
shows net fixed assets of $140,000. Depreciation expense for
2007 is $15,000 and depreciation expense for 2008 is
$20,000. Based on the information, the cost of fixed assets
purchased during 2008 is ________
8. Project A is expected to generate positive cash flow of $ 1
million in 10 years while Project B is expected to generate $
500,000 in 5 years. Therefore, _______
9. Global.Com has cash of $75,000; short term notes payable
of $100,000; accounts receivable of $275,000; accounts
payable of $135,000; inventories of $350,000; and accrued
expenses of $75,000. What is Global

2. 1.
Question :
The financial goal of a for-profit business is:
Student Answer:
profit maximization.
owner wealth maximization.
cash flow maximization.
utility maximization.
Instructor Explanation:
The answer can be found in the introduction to Chapter 1.
Points Received:
1 of 1
Comments:
2.
Question :
Suppose two investments produce the same expected cash
flows. We would assign a higher value to the investment
with:
Student Answer:
lower risk.
higher cash flow variability.
higher risk.
the highest possible cash flows under ideal conditions.
Instructor Explanation:
The answer can be found in Section 1.1: Valuation.
Points Received:
1 of 1
Comments:
3.
Question :
Opportunity costs can vary over time and:

3. Student Answer:
are almost always close to 10%.
represent the highest possible return you can earn on an
investment.
are always based on the interest rate offered on bank savings
accounts.
set a return that other investments must equal or exceed to
be attractive.
Instructor Explanation:
The answer can be found in Section 1.1: Valuation.
Points Received:
1 of 1
Comments:
4.
Question :
Time is a factor when determining the value of a possible
investment. As investors, all else being equal, we value
investments:
Student Answer:
more the longer we have to wait for the payoff.
less the longer we have to wait for the payoff.
with predefined wait times for payoff.
regardless of time because a dollar is always a dollar.
Instructor Explanation:
The answer can be found in Section 1.1: Valuation.
Points Received:
1 of 1
Comments:
5.
Question :
An investment, such as a bond, will have a higher expected

4. return (or yield) if it:
Student Answer:
has a higher purchase price.
holds a higher rating, such as AAA or AA.
carries greater risk.
has been issued by a well-known company.
Instructor Explanation:
The answer can be found in Section 1.1: Valuation.
Points Received:
1 of 1
Comments:
6.
Question :
The value of an asset is based on four characteristics—cash
flows, time, risk, and opportunity costs—but in many
situations we can estimate an asset’s value by:
Student Answer:
ignoring risk, which simplifies the calculation.
assigning our personal value to the asset.
adding a risk premium to the current return on US
government bonds.
looking at its market price.
Instructor Explanation:
The answer can be found in Section 1.2: Markets.
Points Received:
1 of 1
Comments:
7.
Question :
Over the past 50 years, stocks listed on the NYSE (New York
Stock Exchange) have:

5. Student Answer:
returned a very steady 12% per year.
never had a single year with a negative return.
never been overpriced or underpriced.
had annual returns ranging from negative 30% to over
positive 30%.
Instructor Explanation:
The answer can be found in Section 1.2: Markets.
Points Received:
1 of 1
Comments:
8.
Question :
The accounting method you use in your checkbook is best
described as:
Student Answer:
cash accounting.
accrual accounting.
deficit reduction.
balance sheet accounting.
Instructor Explanation:
The answer can be found in Section 2.1: A Review of
Accounting.
Points Received:
1 of 1
Comments:
9.
Question :
On the typical balance sheet, the right-hand side shows:
Student Answer:
the book value of plant, property, and equipment.

6. the market value of liabilities.
the accounting value of liabilities and equity.
the market value of common stock
Instructor Explanation:
The answer can be found in Section 2.2: A Review of Financial
Statements.
Points Received:
1 of 1
Comments:
10.
Question :
To arrive at a more accurate estimate of cash flow we would
add depreciation expense to net income. The next step
would be to:
Student Answer:
reduce our estimate by the increases in liabilities.
reduce our estimate by the decreases in assets
increase our estimate by the increases in liabilities.
do nothing more because we have an accurate estimate.
Instructor Explanation:
The answer can be found in Section 2.4: Translating
Accounting Profits Into Cash Flows.
Points Received:
1 of 1
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