A company's balance sheet reports total liabilities of $2,000,000. The debt to equity ratio is 2.5. What is the company's stockholders' equity?

A) $800,000

B) $320,000

C) $1,000,000

D) $2,000,000

Answer: A

Which of the following accounts is not reported in the stockholders' equity section of the balance sheet?

A) Treasury Stock.

B) Common Stock.

C) Sales Revenue.

D) Retained Earnings.

Answer: C

The times interest earned ratio is calculated as

A) Interest expense/Net income.

B) Net income/Interest expense.

C) (Net income + interest expense + tax expense)/Interest expense.

D) Interest expense/(Net income + interest expense + tax expense).

Answer: C

A company reports net income of $250,000. The return on assets for the year is 20%. What is the company's average total assets for the year?

A) $1,250,000

B) $1,000,000

C) $1,500,000

D) $250,000

Answer: A

Financial leverage is best measured by which of the following ratios?

A) The debt to equity ratio.

B) The return on equity ratio.

C) The times interest earned ratio.

D) The return on assets ratio.

Answer: A

Which of the following is true regarding a company assuming more debt?

A) Assuming more debt is always bad for the company.

B) Assuming more debt is always good for the company.

C) Assuming more debt can be good for the company as long as they earn a return in excess of the rate charged on the borrowed funds.

D) Assuming more debt reduces leverage.

Answer: C

A company's balance sheet reports stockholders' equity of $400,000, total liabilities of $600,000, and total assets of $1,000,000. What is the company's debt to equity ratio?

A) 1.5

B) 0.66

C) 2.5

D) 1.0

Answer: A

The balance sheet of Montezuma reports total assets of $900,000 and $1,100,000 at the beginning and end of the year, respectively. The net income for the year is $100,000. What is Montezuma's return on assets?

A) 10%

B) 11%

C) 9%

D) 25%

Answer: A

Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a face value of $100,000. Interest payments are made semi-annually

Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a face value of $100,000. Interest payments are made semi-annually. The market rate for this type of bond is 5%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use a financial calculator or Excel)

A) $102,323.

B) $84,557.

C) $104,376.

D) $100,000.

Answer: C

The balance sheet of Sub America reports total assets of $400,000 and $450,000 at the beginning and end of the year, respectively. The return on assets for the year is 10%. What is Sub America's net income for the year?

A) $42,500.

B) $45,000.

C) $4,250,000.

D) $85,000.

Answer: A

A company's balance sheet reports stockholders' equity of $800,000. The debt to equity ratio is 2.5. What is the amount of the company's total liabilities?

A) $2,000,000

B) $320,000

C) $1,000,000

D) $800,000

Answer: A

Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a face value of $100,000. Interest payments are made semi-annually.

Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a face value of $100,000. Interest payments are made semi-annually. The market rate for this type of bond is 5%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table 2 and Table 4, contained within a separate file.)

A) $102,323.

B) $84,557.

C) $104,376.

D) $100,000.

Answer: C

Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a face value of $100,000. Interest payments are made semi-annually. The market rate for this type of bond is 7%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use a financial calculator or Excel)

A) $104,265.

B) $95,842.

C) $71,906.

D) $100,000.

Answer: B

Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually.

Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually. The market rate for this type of bond is 6%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use a financial calculator or Excel)

A) $163,200.

B) $186,410.

C) $214,877.

D) $200,000.

Answer: C

Underwater Experiences issues a bond due in 5 years with a stated interest rate of 6% and a face value of $100,000. Interest payments are made semi-annually. The market rate for this type of bond is 7%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table 2 and Table 4, contained within a separate file.)

A) $104,625.

B) $95,842.

C) $71,906.

D) $100,000.

Answer: B

Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually

Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually. The market rate for this type of bond is 8%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table 2 and Table 4, contained within a separate file.)

A) $139,609.

B) $186,410.

C) $214,877.

D) $200,000.

Answer: B

Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually. The market rate for this type of bond is 6%. What is the issue price of the bond (rounded to nearest whole dollar)? (Use Table 2 and Table 4, contained within a separate file.)

A) $163,200.

B) $186,410.

C) $214,878.

D) $200,000.

Answer: C

Mountain Excursions issues a bond due in 10 years with a stated interest rate of 7% and a face value of $200,000. Interest payments are made semi-annually. The market rate for this type of bond is 8%. What is the issue price of the bond (rounded to nearest whole dollar? (Use a financial calculator or Excel)

A) $139,609.

B) $186,410.

C) $214,877.

D) $200,000.

Answer: B