FC 396 Midterm 2

subject Type Homework Help
subject Pages 9
subject Words 1080
subject Authors Edgar A. Norton, Ronald W. Melicher

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If a check is written for the full amount of a derivative deposit created by a bank loan
and then is sent to a bank in another city for deposit:
a. the lending bank would lose all of its excess reserves
b. the lending bank would still have reserves to lend
c. the full amount would be added to the receiving bank€s excess reserves
d. both a and c
The three basic ways to clear a check through the U.S. banking system includes all of
the following EXCEPT:
a. through a Federal Reserve Bank
b. through the U.S. Treasury Bank
c. through a bank clearinghouse
d. bank to bank
Find the average payment period if accounts payable is $20,000, cost of goods sold is
$200,000, and sales are $500,000.
a. 10
b. 36.5
c. 25
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d. 14.6
The ______________ is a term used to describe the financial system, institutions,
markets, businesses, individuals, and global interactions that help the economy operate
efficiently
a. financial environment
b. regulatory environment
c. international environment
d. operating environment
e. none of the above
One of the most significant advantages claimed by branch banking is:
a. lower interest rates are usually available from branch bank
b. convenience for customers
c. banking operations are easier to regulate
d. all the above
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Assume a firm's production process requires an average of 80 days to go from raw
materials to finished products and another 40 days before the finished goods are sold. If
the accounts receivable cycle is 70 days and the accounts payable cycle is 80 days, what
would the operating cycle be?
a. 110 days
b. 130 days
c. 190 days
d. 270 days
All of the following accounts are considered to be current assets on the balance sheet
except:
a. cash
b. accruals
c. accounts receivable
d. inventory
e. none of the above
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Given the conflict between risk and return, the purpose of capital structure management
is to find the debt level:
a. that will always be kept below the equity level
b. where the price of company stock is maximized
c. that most adequately supports corporate goals
d. that is equal in dollar value to the equity level
Carol is planning for her son's college education to begin five years from today. She
estimates the yearly tuition, books, and living expenses to be $5,000 per year for a
four-year degree. How much must Carol deposit today, at an interest rate of 8 percent,
for her son to be able to withdraw $5,000 per year for four years of college?
a. $20,000
b. $13,620
c. $39,520
d. $11,277
The accrued liabilities of a firm are:
a. retained earnings from past years
b. reflect the prepayment of certain expenses
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c. owners' equity in the firm
d. amounts owed but not yet due
Assume a firm is developing, manufacturing, and selling a basic software package at
$500 per copy. Raw materials and direct labor total $200 per copy. Fixed costs are
$250,000. If the firm sells 5,000 units per year, what will be the operating profit?
a. $1,250,000
b. $1,500,000
c. $2,250,000
d. $2,500,000
Existing firms that are already public and wish to raise additional funds may:
a. sell additional securities by using the underwriting process
b. sell securities to a private party
c. seek competitive bid
d. all the above
e. none of the above
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The Small Business Administration assists in the financing of small businesses in which
of the following ways?
a. limit interest rates charged on a SBA loan
b. participating jointly with banks in extending loans to businesses
c. guaranteeing bank loans to businesses
d. all the above
Unlike other corporations undertaking the capital budgeting process, ___________
need to consider possible added political and economic risks such as the possibility of
seizure of assets, unstable currencies, foreign exchange controls and foreign tax
regulations.
a. MOGs.
b. MNCs.
c. SWOTs.
d. LTDs.
e. none of the above
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The notes of the Bank of North America
a. served as a circulating medium of exchange
b. loaned liberally to the government
c. were redeemed in metallic coins upon demand
d. all the above
e. none of the above
The Monetary Control Act:
a. extended the Fed's control to thrift institutions and non-member commercial banks
b. has resulted in more competition among depository institutions
c. increased federal deposit insurance from $40,000 to $80,000 for each account
d. established minimum capital requirements for banks with federal charters
When accounts receivable are pledged: money is advanced to the borrower as a loan
against accounts receivable; accounts receivable balances remain on the balance sheet;
the customer payment is made to the firm, which then submits the payment to the bank;
and interest is charged on the loan.
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Federal Reserve actions that stimulate or repress the level of prices or economic activity
are called dynamic actions.
The international monetary system consists of institutions and mechanisms that foster
oversees the World Bank, sets international trade policy, and determines the exchange
rate regime for all participating countries.
Real assets are claims against the income or assets of individuals, businesses, and
governments.
Inflation is an increase in the price of goods or services that is not offset by an increase
in quality.
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A Dutch auction is an offering process in which investors bid on the price and quantity
of securities they wish to purchase.
Commercial banks are one of the four policy making groups.
A firm's net income over some period is the same as its cash flow.
The minimum acceptable rate of return for a project is the return that generates
sufficient cash flow to pay investors their expected return.

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