1.Liquidity of a company is generally defined as a measure of: (Points : 2)

Question

the ability of a company to pay its employees in a timely manner.
the ability to pay interest and principal on all debt.
the ability to pay dividends.
the ability to pay current liabilities.

2.How much would you be prepared to pay for a $500 bond which comes due in 5 years and pays $80 interest annually assuming your required rate of return is 8% (pick closest answer)? (Points : 2)

$740
$660
$608
$500

3.If a company receives an unqualified audit opinion it means the auditors: (Points : 2)

did not complete a full audit and therefore do not feel qualified to give an opinion on financial statements.
are providing assurance that the company will remain financially viable for at least the next year.
are providing assurance that the company's financial statements fairly present company's financial performance and position.
are providing assurance that the company's financial statements are free from misstatement, fraudulent accounting and fairly indicate future performance.

4.Which of the following ratios would be considered useful in assessing operating profitability? (Points : 2)

Debt/Equity ratio
Acid test ratio
Gross profit margin
Return on equity

5.Which of the following ratios is not generally considered to be helpful in assessing short-term liquidity? (Points : 2)

Acid test ratio
Current ratio
Days to collect receivables
Days goodwill held

6.The two primary qualities of accounting information to make it useful for decision making are: (Points : 2)

reliability and comparability.
relevance and reliability.
materiality and comparability.
full disclosure and relevance.

7.Economic income measures change in: (Points : 2)

asset value.
liability value.
shareholder value.
net cash flows.

8.Economic income includes: (Points : 2)

recurring components only.
nonrecurring components only.
both recurring and nonrecurring components.
neither recurring nor nonrecurring components.

9.If a company fails to record a material amount of depreciation in a previous year, this is considered: (Points : 2)

a change in accounting principle.
an unusual item.
an accounting error.
a change in estimate.

10.10-K reports are: (Points : 2)

the quarterly reports to stockholders.
quarterly filings made by a company with the SEC.
annual filings made by a company with SEC.
filings made by a company with SEC when a company changes auditors.

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Robert · Accepted Answer

1. Liquidity of a company is generally defined as a measure of: (Points : 2) 
       the ability of a company to pay its employees in a timely manner. 
       the ability to pay interest and principal on all debt. 
       the ability to pay dividends. 
       the ability to pay current liabilities. 

2. How much would you be prepared to pay for a $500 bond which comes due in 5 years and pays $80 
interest annually assuming your required rate of return is 8% (pick closest answer)? (Points : 2) 
       $740 
       $660 
       $608 
       $500 
 
Workings: 
Value of bond = Sum of present values of all future coupons + Present value of maturity value, 
all discounted at the required return. 
The annual coupon payment has to be treated as an annuity of $80, for 5 years at 8%. 
 [$80 x PVIFAn=5,r=8%] + [$500 x PVFn=5, r=8%] 
 [$80 x 3.9927] + [ $500 x 0.6806] 
 319.416 + 340.30 
 659.716 (or) $660 rounded.
3.

1. Liquidity of a company is generally defined as a measure of: (Points : 2) the ability of a company to pay its employees in a timely manner. the ability to pay interest and principal on all debt....

Answer To: 1. Liquidity of a company is generally defined as a measure of: (Points : 2) the ability of a...

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