The method of calculating interest on a loan that is set by law is called the:
a. negotiated legal rate (NLR)
b. effective annual rate (EAR)
c. annual percentage rate (APR)
d. none of the above
Suppose a firm just issued a $1,000 par value convertible bond. Its conversion ratio is
30 and the stock currently sells for $25 per share. Would it make better financial sense
to hold onto the bond or convert it?
a. hold onto the bond
b. convert the bond
c. can’t tell from this information
d. none of the above
A firm’s excess cash balance during a particular month could be best deployed if it were
a. financed with short term investments
b. financed with long term investments
c. invested in short term investments
d. invested in long term investments
e. none of the above
Variations in a firm’s tax rate and tax-related charges over time due to changing tax laws
and regulations is called:
a. interest rate risk
b. business risk
c. exchange rate risk
d. purchasing power risk
e. none of the above
In order to borrow $100,000 for a 5% loan on a discount loan basis with a 5%
compensating balance; the firm will actually have to borrow:
a. $105,263
b. $111,111
c. $100,000
d. $90,000
The extent to which assets are used to support sales is indicated by which of the
following ratios:
a. liquidity ratios
b. asset utilization ratios
c. financial leverage ratios
d. profitability ratios
Federal funds rates usually parallel the:
a. prime rate
b. U. S. Treasury bill rate
c. Dow Jones Industrial Average
d. none of the above
_______________________issue shares to customers and invest the proceeds in highly
liquid, very-short-maturity, interest-bearing debt instruments called money market
investments.
a. Money market mutual funds (MMMFs)
b. Corporations
c. Insurance companies
d. none of the above
If a firm has positive net working capital, the current ratio is:
a. greater than one
b. less than one
c. equal to one
d. not enough information given to tell
12. Which of the following statements is false?
a. Factors affecting the amount of savings include: levels of income, economic
expectations, cyclical influences, and the life stage of the individual saver.
b. Gross savings are the profits remaining after tax, and in the case of corporations,
after the payment of cash dividends to stockholders.
c. Voluntary savings are financial assets set aside for use in the future.
d. After the Civil War, the United States was able to generate sufficient capital to
finance its expansion.
A ____________ is a short-term debt instrument issued by commercial banks in
denominations of $100,000 or more with typical maturities ranging from one month to
one year that have an active secondary market that allows short-term investors to easily
match their cash or liquidity needs when they arise.
a. negotiable certificate of deposit (NCD)
b. A repurchase agreement
c. government bond
d. money market security
e. none of the above
Suppose Ningbo Steel had sales revenue of $10,000 sales revenue, cost of goods sold of
$5,000, operating expenses of $3000, interest expense of $1,000, a tax rate of 20%, and
2,000 shares of common stock outstanding. Based on this information, earnings per
share was:
a. $1.20
b. $1.00
c. $0.80
d. $0.40
e. none of the above
_________________________ was an international monetary system in which the U.S.
dollar was valued in gold and other exchange rates were pegged to the dollar.
a. The gold standard
b. The flexible exchange rate system
c. The Bretton Woods System
d. none of the above
Market value added can be written as: the market value of stock minus the market value
of debt plus the book value of stock minus the book value of debt.
Permanent current assets reflect the minimum investment level in cash, accounts
receivable, and inventories needed to support sales.
Credit unions are cooperative nonprofit organizations that exist primarily to provide
member depositors with consumer credit.
The fixed charge coverage ratio is a stricter measure of a firm’s ability to meet its fixed
payment obligations than the interest coverage ratio.
A ‘shock” may be defined as an unanticipated change that will cause the demand for, or
supply of loanable funds to change.