A firm with total liabilities and owners’ equity of $100,000 and net sales of $50,000
would have a total asset turnover of:
a. 100
b. .50
c. 2
d. not enough information given
For bank loans, the effective interest rate is generally
a. not affected by whether or not the loan is a discount loan or a traditional loan.
b. higher if the loan is a premium loan.
c. lower if the loan is a discount loan.
d. higher if the interest is paid at maturity.
e. none of the above
On the balance sheet, retained earnings represents
a. net profits for the current year
b. net profits for the current year minus preferred stock dividends
c. cash reinvested in fixed assets to support growth
d. the cumulative total of earnings reinvested in the firm.
e. none of the above
A firm has a minimum desired cash balance of $10,000. Any cash shortfalls will be
made up with short-term financing. The net cash flow for January is $3,000 and the
beginning balance for that month is $5,000: The cash balance for the beginning of
February will be:
a. -$2,000
b. $10,000
c. $3,000
d. cannot determine from this information
The present value of an annuity of $5,000 to be received at the end of every six months
for over 6 years at a 4% annual rate would be:
a. $26,210
b. $52,875
c. $3,950
d. none of the above
Reasons that banks become insolvent include all of the following EXCEPT:
a. excessive credit risk
b. interest rate risk
c. insufficient collateral
d. all of the above are correct
Management of current assets does not involve which one of the following areas?
a. cash and marketable securities
b. accounts receivable
c. inventory
d. plant and equipment
__________________ are the two important forms of contractual savings
organizations.
a. Insurance companies and brokerage firms
b. banks and insurance companies
c. Investment banks and pension funds
d. Pension funds and brokerage firms
e. none of the above
Which of the following operating characteristics affect a firm’s short-term financing
strategy?
a. industry and company factors
b. seasonal variation
c. sales trend
d. cyclical variations
e. all the above
Which of the following statements is most correct?
a. As levels of income decrease, an individual may dissave, that is, reduce further
consumption expenditures rather than liquidate accumulated savings.
b. The ability to provide adequate funds to meet our investment needs is dependent
primarily on the savings of corporations and the government.
c. In terms of the amount of funds raised annually in the credit markets, borrowing by
the state and local government sector is smaller than borrowing by the U.S.
government.
d. All of the above statements are correct.
__________________ accept savings from individuals and then lend these pooled
savings to businesses, governments, and individuals.
a. Insurance companies
b. Commercial finance companies
c. Depository institutions
d. Investment banks
e. none of the above
At very low interest rates, the “Rule of 72” does not approximate the compounding
process well.
A primary Treasury objective is to maintain satisfactory conditions in the government
securities market through maintaining investor confidence.
When taxes and general revenues fail to meet expenditures, a budgetary deficit occurs.
The primary responsibility of the Fed is to formulate monetary policy which involves
regulating the growth of the supply of money, and therefore regulating its cost and
availability.
Investment banking firms assist individuals to purchase new or existing securities issues
or to sell previously purchased securities.
The International Monetary Fund (IMF) was created to promote world trade through
monitoring and maintaining fixed exchange rates and by making loans to countries with
payment problems.
The risk-adjusted discount rate (RADR) is the risk adjustment factor that represents the
percent of estimated cash inflows that investors would be satisfied to receive for certain
rather than the cash inflows that are possible for each year.
Financial planning begins with a sales forecast for one or more years.