A firm can reduce its cash conversion cycle by
a. increasing its average age of inventory
b. increasing its average collection period
c. decreasing its average payment period
d. none of the above
Cash flows from operating activities might include:
a. net income
b. increase in equity sold to investors
c. dividend payment
d. all the above
e. none of the above
A market has ________ if it can absorb large orders without disrupting prices; it has
___________ if it has many trades.
a. depth, breadth
b. breadth, depth
c. liquidity, quick execution
d. quick execution, liquidity
Which of the following statements is false?
a. The present value of a future sum decreases as the discount rate increases.
b. If the present value of a sum is equal to its future value, the interest rate must be zero.
c. If the discount (or interest) rate is positive, the future value of an expected series of
payments will always exceed the present value of the same series.
d. For a given APR, the present value of a future sum decreases as the number of
discounting periods per year decreases.
The ________________________, the greater the chance of the option becoming
_____________________.
a. shorter the time to expiration, in-the-money
b. longer the time to expiration, in-the-money
c. less the volatility, in-the-money
d. two of the above are correct.
e. none of the above.
Which of the following statements is most correct?
a. Higher levels of fixed costs result in lower levels of operating leverage.
b. Higher variable costs result in larger contribution margin.
c. Higher fixed costs result in larger break-even quantity.
d. Each of the above statements is false.
All of the following accounts are considered to be fixed assets on the balance sheet
except:
a. buildings
b. equipment
c. depreciation
d. machinery
e. all of the above are fixed assets
Money decreed to be ‘legal tender’ for the payment of debts is money backed by:
a. precious metals
b. commodities
c. government creditworthiness
d. gold or silver
These are short-term money market investments that are extremely safe and liquid; they
can be quickly converted into cash at values very close to their intrinsic values.
a. preferred stocks.
b. treasury bonds.
c. corporate bonds.
d. marketable securities.
e. none of above are correct
The stage in the capital budgeting process that involves applying the appropriate capital
budgeting techniques to help make a final accept or reject decision is called the
_____________ stage.
a. follow-up.
b. selection.
c. identification.
d. development.
e. none of the above are included
Which of the following is a use of cash?
a. an increase in an asset account
b. an increase in a liability account
c. an increase in an equity account
d. none of the above
Which of the following are typical financing strategies used by businesses?
a. maturity matching, aggressive financing, and conservative financing
b. size matching, aggressive financing, and aggressive financing
c. maturity matching, size matching, and aggressive financing
d. maturity matching, size matching, and conservative financing
The most used monetary policy instrument used by the Fed is
a. open market operations
b. changing the discount rate
c. changing the reserve requirement
d. none of the above
Which of the following would not be considered an asset?
a. cash
b. accounts receivable
c. equipment
d. accounts payable
A decrease in contractual managers’ salaries will result in:
a. an increase in the degree of financial leverage
b. a decrease in the degree of financial leverage
c. no change in the degree of financial leverage
All of the following statements are correct EXCEPT:
a. Capital budgeting analysis is a framework for evaluating all business decisions; it is
not only a tool for the “financial” types.
b. Proper analysis will identify relevant cash flows and an appropriate discount rate to
reflect the risk of the strategy and will compare the benefits and costs of the project by
considering the time value of money.
c. Whether the investment is one in a business strategy, building a new warehouse,
seeking fuel efficient methods of doing business, upgrading information technology
systems, or investing in human resources, we should try to quantify the benefits and
cost of these choices in order to evaluate them properly.
d. To achieve success over time, a firm’s managers must identify and invest in projects
that provide positive net present values to maximize shareholder wealth.
e. all of the above statements are correct
Pledging accounts receivable has all of the following characteristics except:
a. money is advanced to the borrower as a loan against accounts receivable
b. accounts receivable balances remain on the balance sheet
c. the customer payment is made to the firm, which then submits the payment to the
bank
d. all of the above are characteristics of pledging
A loan amortization schedule shows the breakdown of each payment between interest
and principal, as well as the remaining balance after each payment.
The identification stage in capital budgeting involves finding potential capital
investment opportunities and determining whether a project involves a replacement
decision and/or revenue expansion.
The role of financial markets in a country’s financial system is to accumulate and invest
savings.
The European Economic Organization (EEO) is an organization of twelve European
countries that agreed to have a common overall monetary policy and the euro as their
common currency.
The maturity matching approach is a financing strategy that attempts to match the
maturities of assets with the maturities of the liabilities which they are financed.
Accounting is primarily concerned with matching revenues and expenses while finance
focuses on identifying cash inflows and outflows.
Money markets are markets where equity securities and debt securities with maturities
of greater than one year are traded.