Capital budgeting is
a. the process of identifying, evaluating, and implementing a firm’s working capital
requirements.
b. the process of identifying, evaluating, and implementing a firm’s management
objectives.
c. the process of identifying, evaluating, and implementing a firm’s strategic plans.
d. the process of identifying, evaluating, and implementing a firm’s financing
requirements.
e. none of the above statements are correct
_______________ accept the savings of individuals and lend pooled savings to
individuals primarily in the form of mortgage loans and operate almost entirely in New
England , New York, and New Jersey, with most of their assets continuing to be
invested in mortgage loans.
a. Commercial banks
b. Thrift institutions
c. Savings banks
d. Credit unions
e. none of the above
Money market funds are not included in which of the following definitions of the
money supply?
a. M1
b. M2
c. M3
d. M4 or L
U.S. firms are continuing to raise more funds overseas include all of the following
EXCEPT:
a. it makes sense to raise funds in the county where a firm has a facility
b. financing costs are sometimes lower overseas
c. foreign underwriters often have more experience than U.S. underwriters
d. issuers avoid the costly SEC approval process
Agency costs may include:
a. costs of auditing financial statements
b. liability insurance for board of directors
c. management perks
d. all the above
e. none of the above
The future value of $200 received today and deposited for three years in an account
which pays semiannual interest of 8 percent is ________.
a. $253
b. $252
c. $158
d. $135
Georgemakes annual end-of-year payments of $5,043.71 on a four-year loan with an
interest rate of 13 percent. The original principal amount was
a. $24,462
b. $15,000
c. $3,092
d. $20,175
The following factors may affect a bond rating:
a. security provisions
b. indenture provisions
c. expected trends of industry operations
d. all the above
e. none of the above
The first step in the capital budgeting process is
a. implementation
b. selection
c. follow-up
d. identification
Which one of the following asset accounts is not a part of a firm’s working capital?
a. cash and marketable securities
b. accounts receivable
c. inventories
d. fixed assets
Specialists are dealers who have the responsibility of making a market in an assigned
security.
The bylaws are the rules established to govern the corporation and include how the firm
will be managed.
A positive NPV suggests that a project produces sufficient cash flows to cover not only
its initial cost, but also all financing costs.
Political risk is the risk associated with possible actions by a sovereign nation to
interrupt or change the value of cash flows accruing to foreign investors.
Interest rate parity (IRP) states that the currency of a country with relatively higher
interest rate will appreciate relative to the currency of a country with a relatively lower
interest rate.
Foreign exchange markets are electronic communication systems connecting the major
financial centers of the world.
The balance sheet equation or accounting identity can be written as: assets equal
liabilities minus owners’ equity.