60. The effect on revenues and expenses from variations in the value of the U.S. dollar
in terms of other currencies is called:
a. interest rate risk
b. business risk
c. purchasing power risk
d. financial risk
e. none of the above
58. Variations in operating income over time because of variations in unit sales, price,
cost margins, and/or fixed expenses are called:
a. interest rate risk
b. exchange rate risk
c. purchasing power risk
d. financial risk
e. none of the above
The corporate planning tool that develops project plans that fit well with the firm’s
plans is often referred to by the following acronym:
a. SWOT
b. MOGS
c. STOW
d. GOMS
e. none of the above statements are correct
Your current bank is paying 6.25% simple interest rate. You can move your savings
account to Harris Bank that pays 6.25% compounded annually or to First Chicago bank
paying 6% compounded semi-annually. To maximize your return you would choose:
a. your current bank
b. Harris Bank
c. First Chicago bank
d. you are indifferent, because the effective interest rate for all three banks is the same
The term ___________ conveys a relationship of equality between the assets of the
business and the sources of funds for their acquisition.
a. statement of cash flows
b. cash transactions statement
c. income statement
d. balance sheet
The prudent use of derivatives to hedge, or reduce risk, is similar to the concept of
________________.
a. gambling
b. juggling
c. hiding
d. religion
e. none of the above.
Which monetary policy tool does the Fed use most infrequently?
a. changing reserve requirements
b. changing the discount rate
c. open market operations
d. none of the above
Under the authority of the Federal Reserve Act of 1913:
a. all national and state-chartered banks must become members of the Fed
b. only national banks were permitted to become members of the Fed
c. state-chartered banks were permitted to withdraw from membership with the Fed
d. a system of deposit insurance was created
In general, short-term self-liquidating bank loans are intended to:
a. help recapitalize a company.
b. help a company finance merger & acquisitions.
c. help a company finance seasonal inventory and accounts receivable requirements.
d. help a company finance investment in capital assets.
e. none of the above
Firm A has a total debt to total assets ratio of 50% and an interest coverage ratio of 1.0.
Firm B has a total debt total assets ratio of 80% and an interest coverage ratio of 10.0.
Based on this limited information firm ________ appears to be in ________ debt
management position than firm ________.
a. A, better, B
b. B, better, A
c. A, a comparable, B
d. none of the above
The Equity Capital Ratio for a bank with owners’ equity of $3 million and total assets of
$50 million would be:
a. 3%
b. 6%
c. 2.83%
d. 5.66%
e. none of the above
Examples of internal financial data required for project analysis include all of the
following except:
a. investment costs
b. estimates of revenues, costs, and cash flows
c. financing costs
d. transportation costs
e. all of the above are included
Which of the following statements would be false? The discount rate is
a. an instrument of monetary policy
b. frequently used as a tool of fiscal policy
c. regarded as a fine-tuning mechanism
d. all the above are true
If Stock A is considered to be of average risk for the market and Stock B is also
considered of average risk for the market, then the
a. standard deviation for each of the stocks will be equal
b. beta for each of the stocks will be equal
c. coefficient of variation for each of the stocks will be equal
d. cannot determine from the information given
All of the following statements are correct except:
a. Venture capitalists usually are members of partnerships that consist of a few general
partners.
b. The typical venture capital partnership manages between $50 million and $100
million in assets.
c. It is common to organize a venture capital fund as a limited partnership in which the
venture capitalist is the general partner and the other investors are limited investors.
d. At the end of a fund’s life, cash and securities are distributed to the investors.
e. All of the above statements are correct.
You are trying to determine the fair price to pay for a share of Philip Morris. If you buy
this stock, you plan to hold it for a year. At the end of the year, you expect to receive a
dividend of $5.50 and to sell the stock for $154. The discount rate for Philip Morris
stock is 16%. What should be the price of this stock?
a. $99.80
b. $137.50
c. $144.22
d. $151.66
Asset management ratios do not measure which of the following:
a. productivity of fixed assets in terms of sales
b. how current assets are used in the generation of sales
c. earnings generated by efficient asset management
d. all of the above are measured by asset management ratios
The issuing of new securities, mortgages, and other claims to wealth takes place in the:
a. secondary market
b. money market
c. primary market
d. securities market
The Federal Savings and Loan Insurance Corporation:
a. has ceased operations and has been replaced by the FDIC in its insuring operations
b. protects credit unions
c. insures money market accounts
d. is responsible for insuring deposits at savings banks
A factor engages in accounts receivable financing for business by taking accounts
receivable as collateral for making short-term loans.
The monetary base is the banking system reserves, plus currency held by the public.
The Fed would be practicing contractionary monetary policy if it caused a decrease in
market interest rates.
Personal finance is the study of how growth-driven performance-focused, early-stage
firms raise financial capital and manage operations and assets.
Ratio analysis is a financial technique that involves dividing various financial
statements numbers into one another.
The average collection period is calculated as the year-end accounts receivable divided
by the net sales.
Sunk costs are relevant in capital budgeting analysis and should be considered in
calculating a project’s initial investment.
Expansion projects involving new areas and product lines are usually associated with
greater cash inflow uncertainty.