In a perfect world, a firm would prefer to have a
a. positive operating cycle.
b. negative operating cycle.
c. positive cash conversion cycle.
d. negative cash conversion cycle.
e. none of above are correct
BP has an operating cycle of 150 days, an average collection period of 40 days, and an
average payment period of 20 days. Based on this information, BPs average age of
inventory is ________ days.
a. 130
b. 60
c. 90
d. 110
e. none of the above
Which are included in the money supply?
a. outstanding balances on credit cards
b. credit card limits
c. both the above
d. neither the above
The 2002 Sarbanes-Oxley Act was designed to:
a. limit the compensation that could be paid to CEOs.
b. eliminate the many disclosure and conflict of interest problems of corporations
c. provide uniform international accounting standards
d. two of the above
e. none of the above
All other things being equal, a decrease in the contribution margin for a firm would:
a. increase the break-even point
b. decrease the break-even point
c. have no impact on the break-even point
d. not enough information given
Today’s Federal Reserve notes are:
a. backed by gold
b. backed by silver
c. fiat money
d. none of the above
Which one of the following is not a primary market function of investment bankers?
a. originating
b. underwriting
c. selling
d. making loans
If the total asset turnover of a firm is 1.5, total assets are $500,000, and net income is
$50,000, what is the profit margin?
a. 1%
b. 5%
c. 6.7%
d. not enough information available
Direct payments to individuals from the Federal government do not include:
a. Social Security payments.
b. Medicare payments
c. health expenditures
d. all the above are included
The short-term accumulation of financial assets on the part of business corporations:
a. are held in short-term, safe, and liquid debt obligations
b. add to the level of long-term savings of the economy as a whole
c. do not enter the monetary stream to fund consumers, government, or other businesses
d. are held in the form of long-term obligations of the federal government
The relevant cash flows of a project do not include which one of the following?
a. incremental after-tax cash flows
b. cannibalization effects
c. opportunity costs
d. sunk costs
Commercial banks lend unsecured short-term funds in the following three basic ways:
a. Commercial paper, lines of credit, and revolving credit agreements.
b. Single-payment note, revolving credit agreements, and commercial paper.
c. Single-payment note, lines of credit, and revolving credit agreements.
d. Commercial paper, lines of credit, and compensating balances.
e. none of the above
The six principles of finance include all of the following except:
a. Money has a time value.
b. Higher returns are expected for taking on more risk
c. Diversification of investments can reduce risk
d. Financial markets are efficient in pricing securities
e. all of the above are included in the six principles.
A domestic importer ordering foreign merchandise from a specific supplier would
probably obtain:
a. a brokers’ acceptance
b. a traveler’s letter of credit
c. a commercial letter of credit
d. travelers’ checks
Preferred stock can have which of the following characteristics ? It can be:
a. cumulative
b. non-cumulative
c. convertible
d. all of the above
The bank line of credit is:
a. the type of business activity on which a particular bank concentrates its lending
b. the maximum amount of credit extended to a business customer during a period of
one year
c. the average of loans made to a business customer during a year
d. the loan limit that a bank has established for a business customer
Which of the following statements is false?
a. Other factors being constant, higher fixed costs mean a higher operating leverage.
b. Corporate bonds and notes provide no voting rights.
c. The cost of debt is the minimum acceptable rate of return to a firm on a project of
average risk.
d. All of the above statements are true.
Inflation occurs when an increase in the price of goods or services is more than offset
by an increase in quality.
Holding demand constant, a decrease in supply for one currency relative to another will
cause its value to depreciate relative to that currency.
Financial risk affects the bottom half of the income statement.
The net profit margin is calculated as the firms earnings before interest and taxes
divided by net sales.
Unsystematic risk is the risk that cannot be eliminated through diversification.
Securitization is the process of pooling and packaging mortgage loans into debt
securities.
Fiat money must be backed by a specific amount of gold or silver.