Quiz 2: Financial Modeling concepts tests

Questions: 20

Time: 30 Minutes

1. What is the net present value of the following cash flows if the discount rate is 12% and the
initial outflow occurs at the beginning of the first period?_____

Choose one answer.

a. -748.61
b. -878.76
c. -926.42

2. ABC Securities, a major brokerage house is currently selling an investment product that offers
a 8% rate of return, compounded monthly. Based on this information, it follows that this
investment has _____ as effective annual rate
a. 8.30%.
b. 0.667%.
c. 8%.
3. Mr. Chandan has purchased 200 shares of company xyz on margin. The margin asked by
broker is 30% (i.e. for a purchase of Rs.100 Mr. Chandan has to keep Rs.30 in his account and
the remaining is provided as a loan by the broker). Mr. Chanda bought the stock at Rs.70 and
sold it at Rs. 80. The broker charges 2.14% for the margin given during the period. Calculate the
ROI for Mr. Chandan in the transaction.
Choose at least one answer.
a. 0.3845
b. 0.4262
c. 0.35

4. A company is considering the purchase of a copier that costs $5,000. Assume a cost of capital
of 10% and the following cash flow schedule: Year 1: $ 3,000 Year 2: $ 2,000 Year 3: $ 2,000
Determine the project's NPV and IRR._____
Choose one answer.
a. NPV = $243; IRR = 20.6%
b. NPV = $883; IRR = 15%
c. NPV = $883; IRR = 20.6%
5. A decrease in assets would least likely be consistent with a:_____
Choose one answer.
a. Increase in Expenses.
b. Decrease in Revenues.
c. Increase in contributed capital.

6. ABC corporation records $30000 of depreciation expense in December 2008 .The most likely
effect on the company
a. An increase in liabilities of $30000.
b. No effect on assets.
c. A decrease in fixed assets of $30000.
7. Pelton Signal Manufacturing, Inc. has the following information from its year-end financial
statements, which are prepared under the accrual basis. On the balance sheet, Pelton reports
Inventory, Year 1, $10,000; Inventory, Year 2, $8,000; Accounts Payable, Year 1, $2,000;
Accounts Payable, Year 2, $6,000. Year 2 Cost of Goods Sold on the income statement is
$60,000. How much cash did Pelton pay for inventory purchases in Year 2?_____

a. 54000
b. 60000
c. 66000
Use the following information to answer items 8 10:
At December 31 a company's records show the following information:

8. The company's working capital is

a. $60000
b. $66,000
c. 196,000
9.. The company's current ratio is
a) 1 : 1
b) 1.5 : 1
c) 2 : 1
10. The company's quick ratio is
a) 0.66 : 1
b) 0.33 : 1
c) 1 : 1

Use the following information to answer items 11 - 12:

For its most recent year a company had Sales (all on credit) of $830,000
and Cost of Goods Sold of $525,000. At the beginning of the year its Accounts
Receivable were $80,000 and its Inventory was $100,000. At the end of the year
its Accounts Receivable were $86,000 and its Inventory was $110,000.
11. The inventory turnover ratio for the year was
a. 4.8
b. 5.0
c.7.9
12. The accounts receivable turnover ratio for the year was
a. 6.3
b. 7.5
c.10.0

13. " Out of the following stages of life cycle of a company which comes the last_____ "
a. Pioneering Stage
b. Growth Stage
c. Decline Stage
d. None of the above
14. __________ Form of efficient market hypothesis says that fundamental analysis cannot help

investors make money always"

a. Weak form
b. Semi strong form
c. Strong form

15. " In top down approach to equity analysis, we analyse ____________ at the beginning.
a. Economy
b. Industry
c. Company

16. " All of the following are factors that can cause shifts in the demand curve for a resource
EXCEPT:_____ "
a. An increase in the resource
b. A decrease in the prices of other resources.

c. An increase in the supply of the resource.

17. " An increase in aggregate demand:_____ "

a. Raises potential output.
b. Reduces potential output.
c. Does not change potential output.

18. " If marginal cost is above the average cost, when you produce your next unit:_____ "
a. Average cost will decline.
b. Average cost will be flat.
c. Average cost will increase

19. " If the firm has economies of scale in the long run, then the long-run average cost curve
is:_____________ "
a. Upward-sloping.
b. Horizontal.
c. Downward-sloping.

20. " If the labor force is 100 million and the number of people who are looking for jobs but
cannot find them is 6 million, the unemployment rate is:_____ "
a. 6 percent.
b. 16.7 percent.
c. 16.7 millions.