QRB 501 FINAL EXAM

1. one disadvantage of the corporate form of business ownership is the:

double taxation of profits

2. which one of the following statements is false?

An aging schedule includes only overdue accounts

3. A firm has a debt-equity ratio of .64, a pretax cost of debt of 8.5 percent, and a required

return on assets of 12.6 percent. What is the cost of equity if you ignore taxes?

15.22%

4. Which one of these statements is correct concerning the cash cycle?

The longer the cash cycle, the more likely a firm will need external financing.

5. You plan to invest $6,500 for three years at 4 percent simple interest. What will your

investment be worth at the end of the three years?

$7,311.62 (OG)

$7,280 (NEW)

6. Which one of the following statements about preferred stock is true?

Preferred stock usually has a stated liquidating value of $100 per share

7. A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every:

$1 in fixed assets (OG)

$.53 in total equity (NEW)

8. The costs of avoiding a bankruptcy filing by a financially distressed firm are classified as

______ costs.

Indirect bankruptcy

9. All else held constant, interest rate risk will increase when the time to maturity:

Increases or the coupon rate decreases.

10. What is the present value of $6,811 to be received in one year if the discount rate is 6.5

percent?

$7,253.72 (OG)

$6,395.31 (NEW)

11. All else equal, the contribution margin must increase as:

The variable cost per unit declines

12. The process of planning and managing a firm’s long-term assets is called:

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