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Accounting and Finance for IT professionals Quiz

Accounting and Finance for IT professionals Quiz Answer. In this post you will get Quiz & Assignment Answer Of Accounting and Finance for IT professionals Quiz

 

Accounting and Finance for IT professionals

Offered By ”Indian School of Business”

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Week- 1

Assessment

1.
Question 1
Cash from operating activities includes ________

1 point

  • all cash receipts and all cash disbursements for long-term business assets
  • all cash receipts and all cash disbursements for loans, contributions from owners, and distributions to owners
  • all cash receipts and cash disbursements for routine sales and payments made in the course of doing business
  • detailed estimates of the sources of cash and uses of cash

2.
Question 2
Stock that has been sold and then repurchased by the issuing corporation is called ________ stock.

1 point

  • authorized
  • issued
  • outstanding
  • treasury

3.
Question 3
Harry & Co purchased books in July. The books were sold to customers in August. Harry & Co received the final cash payments in September. According to the revenue-recognition principle, when should revenue be recorded?

1 point

  • July
  • August
  • September
  • Both August and September

4.
Question 4
Fishy & Co had revenues of $2,000, cost of goods sold of $780, advertising expense of $100, and interest expense of $25. Net income was ________.

1 point

  • $1,095
  • $1,120
  • $1,195
  • $1,220

5.
Question 5
The number of shares of stock a corporation may issue when a corporation is formed is called ________ shares.

1 point

  • Authorised
  • Issued
  • Outstanding
  • treasury

6.
Question 6
Depreciation is ________.

1 point

  • the loss in market value of an asset
  • the allocation of a long-term asset’s cost to an expense account over the asset’s life
  • an increase in an asset’s value over time or usage
  • the revenue earned by a long-term asset over its useful life

7.
Question 7
Accounts payable represents ________.

1 point

  • amounts owed by the company to suppliers
  • amounts owed to the company by customers
  • Expenses
  • shareholders’ equity

8.
Question 8
An accrual is ________.

1 point

  • recorded when cash is paid in advance of receiving the service.
  • another term for a deferral
  • a transaction in which the exchange of dollars comes before the action takes place
  • a transaction in which the action comes before the exchange of cash

9.
Question 9
A
company has a net income of $150 million, depreciation expenses of $20 million,
after-tax interest expense of $10 million, after-tax interest income of $30
million, increase in accounts receivable of $10 million, decrease in inventory
of $20 million and decrease in accounts payable of $40 million. What is the net
cash provided by the company’s operating activities for the year?

1 point

  • $150 million
  • $120 million
  • $180 million
  • $140 million

10.
Question 10
Which of the following is a current asset?

1 point

  • Land
  • Five-year bank loan
  • Building
  • Cash and cash equivalents

 

 

Week- 2

Assessment

1.
Question 1
Use the information provided to analyze the profitability of SDHS Co using the following ratios: return on assets

Sales $ 350,000
Gross profit 206,500
Net income 115,000
Interest expense 2,875
Average total assets 875,000
Average total shareholders’ equity 500,000
Weighted-average common shares outstanding 25,000
The return on assets is

1 point

13%

13.5%

14%

14.5%

2.
Question 2
Use the information provided to analyze the profitability of SDHS Co using the following ratios: return on equity

Sales $ 350,000
Gross profit 206,500
Net income 115,000
Interest expense 2,875
Average total assets 875,000
Average total shareholders’ equity 500,000
Weighted-average common shares outstanding 25,000
The return on equity is

1 point

21%

23%

27%

35%

3.
Question 3
Use the information provided to analyze the profitability of SDHS Co using the following ratios: gross profit ratio

Sales $ 350,000
Gross profit 206,500
Net income 115,000
Interest expense 2,875
Average total assets 875,000
Average total shareholders’ equity 500,000
Weighted-average common shares outstanding 25,000
The gross profit ratio is

1 point

45%

50%

59%

65%

4.
Question 4
Use the information provided to analyze the profitability of SDHS Co using the following ratios: earnings per share. SDHS Co has no preferred stock.

Sales $ 350,000
Gross profit 206,500
Net income 115,000
Interest expense 2,875
Average total assets 875,000
Average total shareholders’ equity 500,000
Weighted-average common shares outstanding 25,000
The earnings per share is

1 point

$3.60

$4.60

$5.60

$6.60

5.
Question 5
Analyze the liquidity of BooZara, a dog food manufacturer, using the current ratio, inventory turnover ratio, and accounts receivable turnover ratio.

All data are in millions

Cash = $ 961

Average net accounts receivable = 1,236

Average inventory = 2,092

Total current assets = 4,503

Total current liabilities = 3,847

Net credit sales = 19,050

Cost of goods sold = 14,954

The current ratio is

1 point

1.2

2.2

3.2

4.2

6.
Question 6
Analyze the liquidity of BooZara, a dog food manufacturer, using the current ratio, inventory turnover ratio, and accounts receivable turnover ratio.

All data are in millions

Cash = $ 961

Average net accounts receivable = 1,236

Average inventory = 2,092

Total current assets = 4,503

Total current liabilities = 3,847

Net credit sales = 19,050

Cost of goods sold = 14,954

The inventory turnover ratio is

1 point

7.1

8.1

9.1

10.1

7.
Question 7
Analyze the liquidity of BooZara, a dog food manufacturer, using the current ratio, inventory turnover ratio, and accounts receivable turnover ratio.

All data are in millions

Cash = $ 961

Average net accounts receivable = 1,236

Average inventory = 2,092

Total current assets = 4,503

Total current liabilities = 3,847

Net credit sales = 19,050

Cost of goods sold = 14,954

The accounts receivable turnover ratio is

1 point

13.4

14.4

15.4

16.4

8.
Question 8
The following selected information is from Cloudy’s annual report for the years ended December 31:

2012 2011 2010
Sales $ 44,000 $ 29,300 $ 23,200
Interest expense 1,000 300 200
Net income 12,000 8,000 6,000
Total assets 46,500 26,000 16,000
Refer to the annual report above. Calculate the asset turnover ratio for 2010.

1 point

1.45 times

0.375 times

1.10 times

The answer cannot be determined from the information given

9.
Question 9
The following selected information is from Cloudy’s annual report for the years ended December 31:

2012 2011 2010
Sales $ 44,000 $ 29,300 $ 23,200
Interest expense 1,000 300 200
Net income 12,000 8,000 6,000
Total assets 46,500 26,000 16,000
Refer to the annual report above. Calculate the asset turnover ratio for 2011

1 point

1.1 times

0.375 times

1.4 times

The answer cannot be determined from the information given.

10.
Question 10

 

Assets Liabilities & shareholders’ equity
Cash $ 10,000 Accounts payable $ 20,750
Accounts receivable 2,030 Wages payable 1, 220
Supplies 180 Notes payable (due in 2 years) 8,000
Prepaid insurance 2,000
Equipment 25,000 Common stock 100,000
Building 110,000 Retained earnings 19,240
Calculate the current ratio

1 point

0.65

1.15

1.5

2.15

 

 

Week- 3

Assessment

1.
Question 1
The following stream of cash flows is an example of a(n).

1 point

a. ordinary annuity

b. annuity due.

c. constant–payment perpetuity

d. growing perpetuity

2.
Question 2
You win a $100 million lottery. You are offered two ways in which to receive your winnings:

I. Receive $4 million every year for the next 25 years, with the first payment received today.

II. Receive a one-time lump-sum payment of $27 million today.

Assume that the appropriate discount rate is 15% per year. Which of the above choices would you go with?

1 point

a. Choice I

b. Choice II

c. You are indifferent between the two choices

d. Insufficient information provided to decide between the two choices.

3.
Question 3
The bank offers you a return of 3% per year with monthly compounding on an investment. What is the effective annual rate (EAR) of this investment?

1 point

a. 3% per year

b. 3.04% per year

c. 4% per year

a. 36%
per year

4.
Question 4
You estimate that you will need $1 million when you retire in 35 years’ time. How much must you invest at the end of every month for the next 35 years if your investment can earn a return of 8% per year?

1 point

a. $433.06

b. $5,803.26

c. $2,380.95

d. $435.94

5.
Question 5
Will your answer to the above question change if you invest at the beginning of each month for the next 35 years?

1 point

a. No, it will remain the same.

b. Yes, I will have to invest a larger amount every month.

c. Yes, I will have invest to smaller amount each month.

d. Insufficient information to answer the question.

6.
Question 6
Why are investors not compensated for diversifiable risk?

1 point

a. Because no risky asset has diversifiable risk in the real world.

b. Because all risky assets have only systematic risk in the real world.

c. Because, otherwise, investors can add risk premium without adding more risk.

d. Because investors do not demand any compensation for holding risk.

7.
Question 7
7. What is the present value at the end of Year 2 of a lump-sum cash flow of $5,000 that occurs at the end of Year 10? Assume an appropriate discount rate of 12% per year with quarterly compounding.

1 point

a. $1,941.69

b. $1,532.78

c. $2,019.42

d. $1,609.87

8.
Question 8
8. A stock is expected to pay annual dividends of $3 forever. If you pay $36 to buy this stock today and the first dividend is paid in a year’s time, you will earn an annual return of ________ if you hold the stock forever.

1 point

a. 12%

b. 8.33%

c. 108%

d. Insufficient information to answer the question.

9.
Question 9
9. What is the future value of a 16-year annuity with $216 end-of-month payments if the appropriate interest rate is 4.52% per year?

1 point

a. $60,684

b. $3,555

c. $4,915

d. $41,164

10.
Question 10
You know of an investment opportunity that pays $500 a year for five years and
then $800 a year for an additional four years (all end-of-year
payments). If you require a 12%
rate of return on any investment, what is the maximum amount that you
would be willing to pay for the cash flow stream today (i.e. what is the
present value)?

1 point

a. $5,777

b. $3,181

c. $4,686

d. $4,820

 

 

Week- 4

Assessment

1.
Question 1
Which of the following is a drawback of using internal rate of return (IRR) as an investment decision tool?

1 point

a. Ignores time value of money (discounting).

b. Always gives decisions consistent with those when one uses NPV.

c. Assumes that annual profits are reinvested back into the project at the same IRR.

d. Ignores cash flows beyond the payback period.

2.
Question 2
2. A company invests $500 million in a project today. This project will start generating annual cash flows of $50 million forever starting at the end of year 5. Should the company accept or reject the project? Assume that the appropriate discount rate for this project is 10% per year with annual compounding.

1 point

a. The company is indifferent to this project as its NPV is zero.

b. Accept the project as its NPV is positive.

c. Reject the project as its NPV is negative.

d. Insufficient information to answer the question.

3.
Question 3
3. Two projects are expected to last for the same number of years, require the exact same initial investment at time 0 and generate identical annual cash flows. However, one project (call it Project A) is riskier than the other (Project B). Which will have the lower NPV?

1 point

a. Project A

b. Project B

c. Both will have the exact same NPV as risk does not affect NPV and they have identical cash flows.

d. We cannot say without knowing their exact risk levels.

4.
Question 4
4. While calculating FCF from net income using the indirect method, why do we add back depreciation?

1 point

a. It is a financing-related cash flow and hence must be ignored.

b. It is an operations-related cash ow and hence must not be ignored.

c. It is an opportunity cost and hence must not be ignored.

d. It is an expense that is subtracted from revenue but does not result in an actual cash outflow.

5.
Question 5
5. The year-end cash flows for a project are as follows:

Year Cash Flow

0 -$36,700

1 $ 8,000

2 $13,500

3 $15,100

4 $ 200

5 $ 900

6 $24,600

What is the payback period for this project?

1 point

a. 3 years

b. 3.5 years

c. 4 years

d. 4.5 years

6.
Question 6
6. The year-end cash flows for a project are as follows:

Year Cash Flow

0 -$10,000

1 $ 5,000

2 $ 6,500

3 $ 8,000

4 $10,000

What is the project’s internal rate of return (IRR)?

1 point

a. 52.25%

b. 39.66%

c. 104.51%

d. IRR does not exist for this project.

7.
Question 7
7. An e-commerce company is looking to buy a new warehouse for $250,000. To support the increased sales from this new warehouse, the company will have to increase accounts receivable by $300,000, increase inventory by $175,000 and increase accounts payable by $100,000. What will be the Year 0 free cash flow for this project?

1 point

a. –$250,000

b. –$825,000

c. –$325,000

d. –$625,000

8.
Question 8
8. Your company currently generates revenues of $20 million per year. Next year, based on the state of economy, your revenues will either increase by 20% or decrease by 25%. Both the increase as well as the decrease are equally likely. These changed revenues will be realized in perpetuity as long as you own the factory. Other operating costs are $16 million per year, which are also incurred in perpetuity as long as you own the factory. You can sell the plant any time to another company for $50 million. The appropriate discount rate is 10% per year. What is the value of the option to sell the factory?

1 point

a. $3.5 million

b. $65 million

c. $30 million

d. $35 million

9.
Question 9
9. Which of the following is a relevant cash flow for capital budgeting analysis?

1 point

a. Market research expenses paid last year to assess consumer demand.

b. Interest expense paid on bonds issued to finance the new project.

c. Dividends paid on stock issued to finance the new project.

d. Training expenses for the workers that will run the new equipment.

10.
Question 10
10. Which of the following is the least likely to affect information
technology (IT) companies?

1 point

The quality of product and services provided by
a vendor

Regulatory changes on emissions

Trained employees leaving for better employment
opportunities

A competitor introducing a new technology that
makes your company’s technology obsolete

 

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