In cash budgeting, the ________ seasonal and uncertain a firm’s cash flows, the
________ the number of budgeting intervals it should use
a. more; greater
b. more; fewer
c. less; greater
d. less; fewer
An increase in the general overall prices of goods and services that is not offset by
increases in the quality of those goods and services is the definition for:
a. liquidity
b. inflation
c. full-bodied goods and services
d. store of purchasing power
Transactions that affect bank reserves can be initiated by the:
a. nonbank public
b. Federal Reserve System
c. U. S. Treasury
d. all the above
The seller of an option contract is called a (n) ____________ and the price paid for the
option itself is the called the ___________.
a. option broker, option price
b. sales agent, option premium
c. option writer, option premium
d. option writer, option price
e. none of the above.
If net working capital is negative:
a. current assets are greater than current liabilities
b. it represents the portion of fixed assets that are financed through long-term financing
c. it represents the portion of fixed assets that are financed by current liabilities
d. none of the above
e. all the above
____________ include the direct ownership of land, buildings or homes, equipment,
inventories, durable goods, and even precious metals.
a. financial assets
b. real assets
c. government investments
d. all of the above
e. none of the above
A documentary draft is accompanied, among other things, by a (n):
a. order bill of lading
b. manifest
c. trust receipt
d. letter of credit
Higher financing cost and lower risk of not being able to borrow when short-term funds
are needed are characteristics of:
a. aggressive financing
b. conservative financing
c. maturity matching
d. none of the above
The total risk of a well-diversified international portfolio of stocks appears to be about
what proportion of the risk of an average one-stock portfolio?
a. one-quarter
b. one-third
c. one-half
d. two-thirds
e. three-fourths
Rental or lease payments are included in which one of the following ratios?
a. interest coverage
b. times-interest-earned
c. fixed charge coverage
d. equity multiplier
76. Sacramento Sandals (SS) has fixed annual operating costs of $75,000. SS retails
each pair of sandals for $14.99 each and the variable cost per pair is $4.99. Based on
this information, the breakeven sales level in units is
a. 7,500
b. 15,030
c. 5,003
d. none of the above
29. The largest category of federal budget outlays is from
a. national defense
b. Medicare and social security
c. Interest on the federal debt
d. international affairs
Which statement best describes the six principles of finance?
a. Money has a time value; Higher returns are expected for taking on more risk;
Diversification of investments does not impact risk; Financial markets are efficient in
pricing securities; Manager and stockholder objectives may differ; Reputation matters.
b. Money has a time value; Higher returns are expected for taking on more risk;
Diversification of investments can reduce risk; Financial markets are efficient in pricing
securities; Manager and stockholder objectives may differ; Reputation matters.
c. Money has a time value; Higher returns are expected for taking on more risk;
Diversification of investments can reduce risk; Financial markets are inefficient in
pricing securities; Manager and stockholder objectives may differ; Reputation matters.
d. Money has a time value; Higher returns are expected for taking on more risk;
Diversification of investments can reduce risk; Financial markets are efficient in pricing
securities; Manager and stockholder objectives may differ; Reputation doesn€t matter.
Which of the following factors is most correct?
a. Demand-pull inflation traditionally exists during periods of economic expansion
when the demand for goods and services exceeds the available supply of such goods
and services.
b. Cost-push inflation occurs when prices are raised to cover rising production costs,
such as wages
c. Speculative inflation is caused by the expectation that prices will continue to rise,
resulting in increased buying to avoid even higher future prices
d. All of the above are correct
e. none of the above are correct
Which of the following statements is false?
a. The cash conversion cycle is the time between when the firm pays its suppliers and
when it collects money from its customers.
b. Because commercial paper rates are typically below the U.S. Treasury bill rates,
commercial paper is a valuable short-term financing source for high quality business
firms.
c. More efficient management of working capital assets will lessen the firm’s need to
obtain financing.
d. All of the statements above are correct.
________ evidence of the existence of a problem or outstanding management
performance is provided by ratio analysis.
a. Conclusive
b. Inconclusive
c. Complete
d. Definitive
e. all of the above
21. Continuing federal programs that stabilize economic activity are called
a. transfer payments
b. leveling programs
c. social insurance programs
d. socialist spending
e. none of the above
_____________ costs are a function of time (not sales) and are generally contractual.
a. fixed
b. semi-variable
c. operating
d. variable
e. none of the above
A mercantile credit bureau serves primarily as a (n):
a. collection agency for delinquent accounts
b. common meeting place where credit managers may exchange information
c. organization through which accounts receivable may be sold to other businesses
d. central record-keeping organization for credit information on business firms
When referring to an “upward sloping” yield curve, interest rates:
a. are flat across all maturities
b. decrease as maturity increases
c. increase as maturity decreases
d. increase as maturity increases
Economic risk is the risk associated with possible slow or negative economic growth, as
well as with the likelihood of variability.
If the imports of goods and services exceed exports, GDP will be higher.
The accounts payable period would be added to the operating cycle to get the cash
conversion cycle.
A trustee represents the company to ensure that the covenants of the bond indenture are
met.
The method of calculating the annual percentage rate (APR) is set by law.
The capital account balance includes all foreign private and government investment in
the United States netted against U.S. investments in foreign countries.