Should a business fail after receiving shipping documents from its bank on the basis of
a trust receipt, the bank:
a. becomes a preferred creditor to the extent of the amount due less cash deposits with
the bank
b. repossesses the merchandise on the basis of a specific lien thereon
c. repossesses the merchandise on the basis of its holding of title to the merchandise
d. has a prior claim relative to other general creditors
Which of the following is not true of Treasury bills?
a. long-lived
b. sold at a discount
c. mature at par
d. all the above are false
The U.S. bimetallic standard was based on:
a. gold and platinum
b. silver and gold
c. gold and copper
d. silver and copper
Information generation develops three types of data: internal financial data, external
economic and political data, and non-financial data.
According to Standard & Poors and Fitch, bonds rated ______ and below are
considered to be speculative or “junk.”
a. BBB+
b. BB+
c. B+
d. CCC
Purchasers and sellers of futures are generally required to deposit an initial margin in
the range of ___________ with the exchange’s clearinghouse to reduce credit risk.
a. 3 to 6 percent
b. 3 to 6 dollars
c. 10 to 15 percent
d. 10 to 15 dollars
e. none of the above.
Suppose you were going to save $1,000 per year for three years at a 10% interest rate
compounded annually, with the first investment occurring today. What would be the
future value of this investment?
a. $2,124
b. $2,310
c. $3,641
d. $3,812
__________________ are the two important forms of contractual savings
organizations.
a. Insurance companies and pension funds
b. banks and insurance companies
c. Investment banks and pension funds
d. Pension funds and brokerage firms
e. none of the above
The basic strategies that should be employed by the business firm in managing cash
include all of the following EXCEPT
a. paying accounts payable as late as possible without damaging the firm’s credit rating.
b. turning over inventory as quickly as possible while avoiding stock outs.
c. operating in a fashion that requires maximum cash.
d. collecting accounts receivable as quickly as possible without damaging customer
rapport.
e. none of the above
Which of the following securities have voting rights?
a. convertible bond
b. preferred stock
c. common stock
d. all the above
The narrowest definition of money supply is:
a. M1
b. M2
c. M3
d. M4
Ithaca Iron has annual operating outlays of $1,800,000 and a cash conversion cycle of
60 days. If the firm currently pays 12 percent for negotiated financing and reduces its
cash conversion cycle to 50 days, the annual savings is closest to
a. $60,000.
b. $10,000.
c. $6,000.
d. $16,000.
Other factors being constant, higher fixed operating costs mean:
a. higher financial leverage
b. higher operating leverage
c. lower combined leverage
d. the degree of financial leverage is equal to 1.0
Which one of the following balance sheet accounts would not be considered to be a
current liability?
a. account payable
b. bank notes payable
c. accrued liabilities
d. mortgage debt
Automatic stabilizers include all of the following except:
a. unemployment insurance
b. social security
c. welfare
d. pay-as-you-go tax system
An analyst should be careful when conducting ratio analysis to ensure that
a. the overall performance of the firm is not judged on a single ratio.
b. the dates of the financial statements being compared are different.
c. audited statements are not being used.
d. different accounting procedures are used.
e. none of the above
____________ are debt instruments or securities with maturities of one year or less and
have low default risk and high liquidity.
a. capital market securities
b. money market securities
c. derivative securities
d. all of the above
e. none of the above
Eurodollar bonds are:
a. denominated in Eurodollars
b. extremely long-term obligations
c. scrutinized by the SEC
d. none of the above
An international gold standard dominated international trade during:
a. World War II
b. 1880-1914
c. 1944-1971
d. 1914-1932
Using the DuPont system of analysis and holding other factors constant, an increase in
financial leverage will result in ________ in the return on equity.
a. an increase
b. a decrease
c. no change
d. an undetermined change
Although not provided for in the original organization of the Fed, open market
operations have become the most important and effective means of monetary control.
There are two basic sources of loanable funds: current savings and the expansion of
deposits of depository institutions.
Treasury bonds may be issued with any maturity but generally have an original maturity
in excess of one year.
The nominal interest rate may include a default risk premium.
Bank solvency reflects the ability to meet depositor withdrawals and to pay off other
liabilities when due.
Common stock possesses the highest claim on the assets and cash flow of the firm.
Because credit card balances and limits can affect the rate of turnover of money supply
and contribute to money supply eXpansion, these balances and limits are included in
the M3 definition of money supply.