Question 1

1 / 1 pts
Compounding is the process of converting future value into present value.
  
True
 
Correct!
  
False
 
 
Question 2
1 / 1 pts
Discounting is the process of converting present value into future value.
  
True
 
Correct!
  
False
 
 
Question 3
1 / 1 pts
An ordinary annuity is a series of equal payments made at the beginning of consecutive
periods.
  
True
 
Correct!
  
False
 
 
Question 4
1 / 1 pts
An annuity due is a series of equal payments made at the end of consecutive periods.
  
True
 
Correct!
  
False
 
 
Question 5
1 / 1 pts
Suppose you have P25,000 and plan to purchase a 10-year certificate of deposit (CD)
that pays 6.5% interest, compounded semi-annually.  How much will you have when the
CD matures?
  
P46,928.44
 
  
P41,250.00
 
Correct!
  
P47,395.95
 
  
P42,698.44
 
 
Question 6
1 / 1 pts
Suppose P8,500 is invested at the end of each three months for three years and that
12% interest is paid compounded quarterly. How much will be in the account after three
years?
  
P128,497.15
 
  
P28,682.40
 
Correct!
  
P120,632.25
 
  
P59,290.21
 
 
Question 7
1 / 1 pts
Suppose an ABC Corporation bond will pay P5,000 five years from now.  If the going
interest rate on safe five-year bonds is 3.75%, how much is the bond worth today?
  
P2,967.92
 
Correct!
  
P4,159.39
 
  
P26,946.64
 
  
P4,148.05
 
 
Question 8
1 / 1 pts
Ash borrows P250,000 with interest at 15% compounded quarterly. How many P15,000
quarterly payments are required?
Correct!
  
26.64
 
  
12.81
 
  
25.05
 
  
13.19
 
 
Question 9
1 / 1 pts
ROP Treasury offers to sell you a bond for P1,500.  No payments will be made until the
bond matures 10 years from now, at which time it will be redeemed for P2,500.  What
interest rate would you earn?
  
4.25%
 
Correct!
  
5.24%
 
  
5.50%
 
  
5.77%
 
 
Question 10
0 / 1 pts
Suppose you inherited P500,000 and invested it at 8.25% per year.  How much could
you withdraw at the beginning of each of the next 20 years?
  
P75,357.15
 
You Answered
  
P51,877.19
 
  
P9,817.26
 
Correct Answer
  
P47,923.50
 
 
Question 11
1 / 1 pts
Considered alone, which of the following would increase a company’s current ratio?
  
An increase in net fixed assets.
 
Correct!
  
A decrease in accrued liabilities.
 
  
An increase in notes payable.
 
  
A decrease in accounts receivable.
 
 
Question 12
1 / 1 pts
Which of the following would, generally, indicate an improvement in a company’s
financial position, holding other things constant?
  
The TIE declines.
 
Correct!
  
The acid-test ratio increases.
 
  
The current ratio declines.
 
  
The total assets turnover decreases.
 
 
Question 13
1 / 1 pts
Maria Company’s current ratio is 1.8.  Considered alone, which of the following actions
would lower the current ratio?
 
Borrow using short-term notes payable and use the proceeds to reduce accruals.
Correct!
 
Borrow using short-term notes payable and use the proceeds to buy intangible assets.
  
Purchase supplies with cash.
 
  
Use cash to reduce short-term notes payable.
 
 
Question 14
1 / 1 pts
A firm wants to strengthen its financial position. Which of the following actions would
increase its current ratio?
 
Reduce the company’s days’ sales outstanding to the industry average and use the
resulting cash savings to purchase furniture.
  
Use cash to buy fixed assets.
 
 
Borrow using short-term debt and use the proceeds to repay debt that has a maturity of
more than one year.
Correct!
 
Issue new shares, then use some of the proceeds to purchase fixed assets and hold the
remainder as cash.
 
Question 15
1 / 1 pts
Companies E and P each reported the same earnings per share (EPS), but Company E’s
stock trades at a lower price.  Which of the following statements is CORRECT?
  
Company E probably has more growth opportunities.
 
  
Company E must have a lower market-to-book ratio.
 
  
Company E must pay a higher dividend.
 
Correct!
  
Company E trades at a lower P/E ratio.
 
 
Question 16
1 / 1 pts
Computing the percentage of property, plant, and equipment to total assets is an
example of:
Correct!
  
Vertical analysis
 
  
Solvency analysis
 
  
Profitability analysis
 
  
Horizontal analysis
 
 
Question 17
1 / 1 pts
Vertical analysis is a technique that expresses each item in a financial statement
  
In pesos and centavos
 
  
As a percent of the item in the previous year
 
Correct!
  
As a percent of a base amount
 
  
Starting with the highest value down to the lowest value
 
 
Question 18
1 / 1 pts
All of the following are asset utilization ratios except:
  
Average collection period
 
  
Inventory turnover
 
  
Receivables turnover
 
Correct!
  
Return on assets
 
 
Question 19
1 / 1 pts
The acid-test or quick ratio
 
Is used to quickly determine a company’s solvency and long-term debt paying ability
Correct!
 
Relates cash, short-term investments, and net receivables to current liabilities
 
Is calculated by taking one item from the income statement and one item from the
balance sheet
 
Is the same as the current ratio except it is rounded to the nearest whole percent
 
Question 20
1 / 1 pts
An acceleration in the collection of receivables will tend to cause the accounts
receivable turnover to:
  
Decrease
 
  
Remain the same
 
  
Either increase or decrease
 
Correct!
  
Increase
 
 
Question 21
1 / 1 pts
Which of these ratios are measures of a company’s asset utilization and liquidity?

1. Earnings per share

2. Current ratio
3. Return on sales
4. Debt-equity ratio
5. Return on assets
6. Inventory turnover
7. Receivables turnover
8. Price-earnings ratio

  
All eight ratios
 
  
2, 3, 6, and 7 only
 
  
1, 3, 5, 6, 7, and 8 only
 
Correct!
  
2, 6, and 7 only
 
 
Question 22
1 / 1 pts
How are financial ratios used in decision making?
Correct!
 
They can help identify the reasons for success and failure in business, but decision
making requires information beyond the ratios.
  
They remove the uncertainty of the business environment.
 
  
They aren’t useful because decision making is too complex.
 
  
They give clear signals about the appropriate action to take.
 
 
Question 23
1 / 1 pts
What ratio results when cash and marketable securities are divided by current liabilities?
  
Current ratio
 
  
Quick ratio
 
Correct!
  
Super Quick ratio
 
  
Liquidation ratio
 
 
Question 24
1 / 1 pts
Horizontal analysis is a technique for evaluating a series of financial statements data
over a period of time
 
That has been arranged from the highest number to the lowest number
 
That has been arranged from the lowest number to the highest number
  
To determine which items are in error
 
Correct!
 
To determine the amount and/or percentage increase or decrease that has taken place
 
Question 25
1 / 1 pts
Recently the N&N Company has been having problems. As a result, its financial situation
has deteriorated. N&N approached the Oro National Bank for a badly needed loan, but
the loan officer insisted that the current ratio (now 0.5) be improved to at least 0.8
before the bank would even consider granting the credit. Which of the following actions
would do the most to improve the ratio in the short run?
  
Using some cash to pay off some current liabilities
 
  
Collecting some of the current accounts receivable
 
  
Paying off some long-term debt
 
Correct!
  
Purchasing additional inventory on credit (accounts payable)
 
 
Question 26
1 / 1 pts
When a balance sheet amount is related to an income statement amount in computing a
ratio,
 
The income statement amount should be converted to an average for the year.
  
Comparisons with industry ratios are not meaningful.
 
Correct!
 
The balance sheet amount should be converted to an average for the year.
 
The ratio loses its historical perspective because a beginning-of-the-year amount is
combined with an end-of-the-year amount.
 
Question 27
1 / 1 pts
Use the following information for the next three items.
 
The balance sheet of Y Company showed the following:

Accounts payable P140,000

Accounts receivable 80,000

Accrued liabilities 9,000

Cash 100,000

Income tax payable 15,000

Inventory 135,000

Marketable securities 260,000

Notes payable, short-term 80,000

Prepaid expenses 20,000

 
The amount of working capital for the company is
Correct!
  
P351,000
 
  
P361,000
 
  
P211,000
 
  
P336,000
 
 
Question 28
1 / 1 pts
he company’s current ratio as of the balance sheet date is
  
2.67:1
 
Correct!
  
2.44:1
 
  
2.02:1
 
  
1.95:1
 
 
Question 29
1 / 1 pts
The company’s acid-test ratio as of the balance sheet date is
Correct!
  
1.80:1
 
  
2.40:1
 
  
2.02:1
 
  
1.76:1
 
 
Question 30
1 / 1 pts
Soni Manufacturing reports the following capital structure:

Current liabilities P100,000

Long-term debt 380,000

Deferred income taxes 30,000

Preferred stock 70,000

Common stock 110,000

Premium on common stock 180,000

Retained earnings 170,000

What is the debt ratio?

  
0.48
 
Correct!
  
0.49
 
  
0.93
 
  
0.96
 
 
Question 31
1 / 1 pts
Medi Company had the following financial statistics for 2020:

Long-term debt (average rate

P400,000
of interest rate is 8%)

Interest expense 35,000

Net income 48,000

Income tax 46,000

Operating income 107,000

What is the times interest earned for 2020?

  
11.4 times
 
  
3.3 times
 
  
3.1 times
 
Correct!
  
3.7 times
 
 
Question 32
1 / 1 pts
Bunny Corporation’s common stock is currently selling at P100 per share, which
represents a P/E ratio of 10. If the firm has 100 shares of common stock outstanding, a
return on equity of 20%, and a debt ratio of 60%. What is its return on total assets
(ROA)?
Correct!
  
8.0%
 
  
10.0%
 
  
12.0%
 
  
16.7%
 
 
Question 33
1 / 1 pts
During 2020, Star Company purchased P960,000 of inventory. The cost of goods sold
for 2020 was P900,000, and the ending inventory at December 31, 2020 was P180,000.
What was the inventory turnover for 2020?
  
6.4
 
Correct!
  
6.0
 
  
5.3
 
  
5.0
 
 
Question 34
1 / 1 pts
Ward Corporation had net income of P2 million in 2018. Using the 2018 financial
elements as the base data, net income decreased by 70% in 2019 and increased by
175% in 2020. The respective net income reported by Ward Corporation for 2020 and
2019 are:
  
P600,000 and P5,500,000
 
Correct!
  
P5,500,000 and P600,000
 
  
P1,400,000 and P3,500,000
 
  
P1,400,000 and P5,500,000
 
 
Question 35
1 / 1 pts
Eugene Store had net credit sales of P6,500,000 and cost of goods sold of P5,000,000
for the year. The accounts receivable balances at the beginning and end of the year were
P600,000 and P700,000, respectively. The receivable turnover was
  
7.7 times
 
  
10.8 times
 
  
9.3 times

10.0 times
 
Correct!