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One item that does not affect the cash conversion cycle is:
a. inventory period
b. accounts receivable
c. accounts payable period
d. all the above affect the cash conversion cycle
___________________ is an agreement by the investment banker to sell securities of
the issuing corporation whereby the investment banker assumes no risk for the possible
failure of the flotation.
a. A prospectus
b. An underwriting agreement
c. A best-effort agreement
d. none of the above
Financial statements that must be included in the annual report include the:
a. income statement
b. balance sheet
c. statement of cash flows
d. all of the above
e. none of the above
The actual disbursement of cash is recorded in which of the following financial
statements?
a. income statement
b. balance sheet
c. statement of cash flows
d. treasurer's report
A firm's stock is expected to pay a $2 annual dividend next year, and the current $50
stock price is expected to rise to $53 over the next year. What is the expected return?
a. 8%
b. 10%
c. 12%
d. 15%
Of the following forms of business organization, which have stockholders with limited
liability?
a. proprietorships
b. partnerships
c. corporations
d. limited partnerships
Cash disbursements may include all of the following EXCEPT
a. tax payments
b. rent payments
c. depreciation expense
d. fixed asset outlays
Which of the following statements is most correct?
a. Because global depository receipts are listed on the London Stock Exchange, U.S.
investors cannot buy GDRs through a broker in the United States.
b. Foreign stocks can be traded in the United States if they are registered with the
Securities and Exchange Commission.
c. The fourth market is a market for large blocks of listed stocks that operates outside
the confines of the organized exchanges.
d. All the above statements are correct.
Which item is not included in the calculation for both the quick ratio and the current
ratio?
a. accounts receivable
b. current assets
c. inventories
d. current liabilities
_______________ provide loans directly to consumers and businesses and help
borrowers obtain mortgage loans on real property.
a. banks
b. securities firms
c. pension funds
d. finance firms
e. none of the above
Commercial paper issued by large U.S. corporations is backed by:
a. accounts receivable
b. inventories
c. credit quality of the issuer
d. fixed assets
Which of the following is not considered to be one of the five C's of credit analysis?
a. character
b. capacity
c. capital
d. collateral
e. caution
Federal Reserve open market operations, setting reserve requirement, and lending to
depositories are:
a. usually conducted simultaneously
b. all designed to have their effect by influencing the reserves of depository institutions
c. of equal importance in their effort
d. functions shared with the U.S. Treasury
Under the Federal Reserve Act of 1913, the number of Federal Reserve districts
established is:
a. 8
b. 10
c. 12
d. 25
The ____________ the coefficient of variation, the ____________ the risk.
a. lower, lower
b. higher, lower
c. lower, higher
d. more stable, higher
e. none of the above
Fiat money is:
a. paper money issued by central banks with full metallic backing
b. government notes representing a specific amount of gold in storage
c. full-bodied money
d. none of the above
Financial functions in the U.S. financial system include:
a. transferring financial assets
b. creating money
c. accumulating savings
d. all of the above
The Truth in Lending Act:
a. prohibits discrimination in the granting of credit on the basis of sex, race, color, and
religion
b. limits liability on lost or stolen credit cards
c. prohibits unfair or deceptive acts or practices on the part of banks
d. requires prompt correction of errors on a revolving charge account
Which of the following statements is correct?
a. The degree of combined leverage measures the sensitivity of earnings per shareinto
changes in EBIT.
b. A firm's business risk is measured by its variability in earnings per share over time.
c. A firm's degree of combined leverage is the product of its degree of operating
leverage and its degree of financial leverage.
d. All the above statements are false.
If there were no secondary markets for trading between investors, there would be no
primary market for the initial sale of securities.
When a government borrows to finance budget deficits, crowding out may occur, which
results in a restriction of available funds for private sector borrowers due to public
sector demand.
Implicit agency costs do not have a direct expense associated with them, but they harm
shareholders anyway.
If the cash conversion cycle shortens, then the firm's investment in inventories and
receivables will always be smaller.
One advantage of preferred is that it increases a firm's equity without diluting the
ownership and control of the common shareholders.
The United Nations operates a world central bank that provides a world monetary unit
to accommodate commerce across national boundaries.
