6. Which of the following sources of savings is consistently the largest on an annual
basis?
a. personal savings
b. undistributed corporate profits
c. federal, state, and local government surpluses
d. capital consumption allowances
Several factors will be considered by the board of directors and management as they
consider the level of dividend payout. Some of these factors include:
a. the ability of the firm to generate cash to sustain the level of dividends.
b. legal and contractual considerations
c. growth opportunities
d. cost of other financing sources
e. all of the above
Total bank reserves do not include which of the following?
a. deficit reserves
b. excess reserves
c. required reserves
d. all the above are included in total bank reserves
Tracey deposits $5,000 in a five-year certificate of deposit paying 6% compounded
semi-annually. How much will Tracey have at the end of the five-year period?
a. $6,720
b. $6,690
c. $6,596
d. $6,910
The ________ is the lowest rate of interest charged on business loans to the best
business borrowers by the nation’s leading banks.
a. premium rate
b. commercial paper rate
c. federal funds rate
d. treasury bill rate
e. none of the above
Generally accepted accounting principles are formulated by the:
a. Securities and Exchange Commission
b. Financial Accounting Standards Board
c. Federal Trade Commission
d. General Accounting Office
Purchasing commodities, securities, or bills of exchange in one market and immediately
selling them in another to make a profit from price differences in the two markets is
called:
a. profiteering
b. skimming
c. arbitrage
d. all of the above
Which of the following are not depository institutions?
a. The Federal Reserve
b. credit unions
c. savings banks
d. commercial banks
Which of the following statements is false?
a. Time series analysis evaluates a firm’s performance over time.
b. Industry comparative analysis compares a firm’s ratios against average ratios against
average ratios for other companies in the industry.
c. The average collection period is calculated as the year-end accounts receivable
divided by the net sales.
d. All the above statements are correct.
A firm with a operating cycle of 200 days and an cash conversion cycle of 120 days has
an average payment period of:
a. 320
b. 80
c. 3
d. cannot be determined from this information
Which of the following statements about liquidity ratios is true?
a. The lower the quick ratio relative to the current ratio, the safer a firm is in terms of
liquidity.
b. The higher the current ratio, the more likely a firm is able to pay its short-term
obligations.
c. The quick ratio is always between 0 and 1.
d. All the above statements are true.
An individual or organization that represents the bondholders to ensure the indenture’s
provisions are respected by the bond issuer is called a (n):
a. trust indenture
b. trustee
c. investment banker
d. trust organization
Gross domestic product is equal to the sum of all of the following EXCEPT:
a. personal consumption expenditures
b. net exports
c. government expenditures
d. all of the above are included
The method of calculating return on assets which highlights the importance of sales,
profit margin, and asset turnover is known as:
a. the Gordon model
b. cost-volume profit analysis
c. DuPont analysis
d. break-even analysis
One type of investment that would not be suitable for marketable securities would be:
a. bankers’ acceptances
b. short-term notes of U.S. government agencies
c. negotiable CD’s
d. mortgages
Bond issues of a single firm can have different bond ratings if their security provisions
differ.
U.S. Treasury bills are sold at a discount through competitive bidding in an annual
auction.
The U.S. dollar was defined in terms of gold until the 1980s.
More efficient management of working capital assets will lessen the firm’s needs for
financing.
A credit score is a number that indicates the creditworthiness or likelihood that a
borrower will make loan payments when due
A dealer is a person who assists in the trading process by buying or selling securities in
the market for an investor.
The principle of finance that “management objectives may differ from owner
objectives” implies that owner returns may suffer as a result of manager objectives.
Projects with negative net present values will lead to a decrease in the value of the firm.
The firm’s optimum debt/equity mix minimizes the firm’s cost of capital, which in turn
will help the firm to maximize shareholder wealth.