Archives: Quiz

International capital-flow shocks tend to be less disruptive with floating exchange rates than with fixed exchange-rates. Answer: Too much of a good is produced if some external benefits of producing or consuming it are ignored by the private decision makers. […]

In 2010, _____ dollarized to escape from hyperinflation. a. Zimbabwe b. Argentina c. El Salvador d. Palau Answer: The figure given below represents the U.S. market for steel imports from Korea. The Korean government provides an export subsidy of $25 […]

Free trade may lead to more pollution because: a. with free trade the size of the economy increases resulting in higher production and consumption. b. competition among nations invariably leads to less restrictive pollution standards. c. the countries may not […]

The figure given below shows the market for computers in the U.S. The domestic price line inclusive of the tariff lies above the international price line. Dd and Sd are the domestic demand and supply curves of computers respectively. Under […]

Which of the following is true of mercantilism? a. Mercantilists believed that free trade is always beneficial for the trading nations. b. Mercantilists believed that under free trade each of the trading countries benefit equally. c. Mercantilists believed that a […]

Foreign Direct Investment (FDI) refers to: a. the flow of funding provided by an investor or lender to establish or acquire a foreign company or to expand or finance an existing foreign company that the investor owns and controls. b. […]

Which of the following was a criterion to participate in the European Monetary Union? a. The country’s inflation rate must be less than or equal to 1.5 percentage points above the average inflation rate for the three lowest inflation EU […]

World Trade Organization rules allow a government to take actions to control environmental damage caused by its own firms’ production. Answer: According to the Heckscher-Ohlin theory, if the proportion of labor to capital in a country is greater than the […]

By mid-2014, the U.S. government had approved multiple LNG export facilities so natural gas exports from the U.S. have increased significantly. Answer: Tariffs and quotas are one-size-fits-all measures that work as tools to internalize external effects. Answer: FALSE The net […]

NAFTA has not only eliminated all tariffs and nontariff barriers to trade within the member countries but also allows free human migration across the countries. Answer: A large amount of intra-industry trade is not compatible with the comparative-advantage theory of […]

A major reason why agricultural products are heavily subsidized in the European Union is because farmers have strong political lobbies. Answer: With floating exchange rates, the negative effects of international trade shocks on internal balance are worsened by the effects […]

An acquirer should be willing to pay a higher control premium for a poorly managed company than for a well-managed company. Answer: All else equal, increasing the assumed payables period in a financial forecast will decrease external funding required. Answer: […]

Suppose an acquiring firm pays $100 million for a target firm and the target’s assets have a book value of $70 million and an estimated replacement value of $80 million. What amount would be allocated to the acquiring firm’s goodwill […]

The term “financial distress costs” includes which of the following? I. Direct bankruptcy costs II. Indirect bankruptcy costs III. Direct costs related to being financially distressed, but not bankrupt IV. Indirect costs related to being financially distressed, but not bankrupt […]

Which one of the following is the financial statement that summarizes changes in the company’s cash balance over a period of time? A. income statement B. balance sheet C. cash flow statement D. shareholders’ equity statement E. market value statement […]

In a strong-form efficient market, insider trading is not profitable. Answer: Current liabilities are defined as liabilities with a maturity of less than a year. Answer: TRUE All else equal, a terminal value based on a no-growth perpetuity would be […]

Fiona uses her credit card to purchase groceries at the local supermarket. It can be said that every time she swipes her card at the supermarket with every purchase, she is availing a service that is produced by the manufacturer […]

Which of the following refers to activities performed by sellers and others that accompany the sale of a product and that aid in its exchange or its utilization? A. Service products B. Raw material extractions C. Services D. Manufacturing activities […]

Which of the following statements is true about organizing the multinational company? A. Globalization, as a competitive strategy, is inherently less vulnerable to risk than a multidomestic or domestic strategy. B. In determining whether or not to globalize a particular […]

Postpurchase evaluation of a vendor and the product is necessary to: A. determine the dues that are payable to the vendor. B. compare the purchases of a firm with those made by competitors. C. determine whether the vendor and the […]

Gary is a purchasing agent at Thought Cloud Inc., an advertising agency. He is formally vested with the responsibility of selecting suppliers of campaign material for a new advertising campaign that is being planned. He identifies a sole-sourcing relationship with […]

Marketers who are aware that consistent investment spending is a key factor in advertising are: A. more likely to cut advertising budgets to fund price promotions. B. less likely to invest in advertising than discounting. C. less likely to raid […]

Which of the following is true of the processes and tasks used to carry out market research? A. All nations take censuses and publish their census reports in English. B. Data contained in a census do not vary from country […]

The perceived risks related to the financial and performance considerations of a new purchase are defined as _____ risks. A. psychological B. social C. functional D. relational Answer: When an employee at Fun Bay Resorts hears a customer complain, he […]

Pluto Inc., a leather goods manufacturer, produces and sells a wide range of leather bags, wallets, purses, and belts. It recently opened an outlet in Mexico. However, since Mexico’s per capita income is approximately one-third that of the U.S., Lolita’s […]

All else constant, the weighted average cost of capital for a risky, levered firm will decrease if: A. the firm’s bonds start selling at a premium rather than at a discount. B. the market risk premium increases. C. the firm […]

You are considering the following two mutually exclusive projects. The crossover point is _____ and Project _____ should be accepted if the discount rate is 14 percent. A. 12.79 percent; B B. 13.28 percent; A C. 13.28 percent; B D. […]

Which of the following provides quantitative standards against which the performance of individual sales representatives or other marketing units can be measured? A. Sales strategies B. Sales calls C. Sales quotas D. Sales forecasts Answer: In the early 1990s, Dean […]

Steve owns a store that caters primarily to men and their hobbies. He is contemplating greatly expanding the hunting and fishing section of the store. If he does this, he expects his fishing and hunting sales will increase, his camping […]

If the market price of existing publicly traded shares declines due to the announcement of a seasoned issue of stock, the decline is referred to as which one of the following? A. Spread B. Direct underwriting cost C. Underpricing D. […]

Stock J has a beta of 1.17 and an expected return of 14.4 percent, while Stock K has a beta of 0.68 and an expected return of 7.6 percent. You want a portfolio with the same risk as the market. […]

Tri-City Grocers is a chain of grocery stores that just hired a new CFO. Which of the following actions would you expect this CFO to adopt given her statement that she wants to implement a more flexible financing policy for […]

Which one of the following terms is most commonly used to describe the cash flows of a new project that are simply an offset of reduced cash flows for a current project? A. Opportunity cost B. Sunk cost C. Erosion […]

Which one of the following terms applies to a junk bond that was originally issued with a bond rating of AA? A. Debenture B. Covenant C. Fallen angel D. Sinking E. Triple B Answer: Which one of the following is […]

You are analyzing a project and have developed the following estimates: unit sales = 1,320, price per unit = $79, variable cost per unit = $43, fixed costs = $24,900. The depreciation is $11,300 a year and the tax rate […]

Which one of the following statements is correct? A. The financial market generally reacts the same to a new issue of equity as it does to a new issue of debt as long as the issuer is the same. B. […]

Sly’s just arranged a three-year direct business loan. Which one of the following terms matches this loan arrangement? A. Term loan B. Private placement C. Rights offer D. Seasoned offer E. Shelf offer Answer: You are making a $120,000 investment […]

Given the following information, what is the standard deviation of the returns on a portfolio that is invested 35 percent in both Stocks A and C, and 30 percent in Stock B? A. 2.77 percent B. 4.13 percent C. 6.67 […]

Based on the most recent survey information presented in your textbook, CFOs tend to use which two methods of investment analysis the most frequently? A. Payback and net present value B. Payback and internal rate of return C. Internal rate […]

You want to create a $65,000 portfolio comprised of two stocks plus a risk-free security. Stock A has an expected return of 14.2 percent and Stock B has an expected return of 17.8 percent. You want to own $20,000 of […]

Which one of the following is the name given to a registration of securities under SEC 415 which permits a firm to issue the securities over a two-year period? A. Seasoned registration B. Negotiated registration C. Shelf registration D. Extended […]

Which one of the following will increase cash flow from assets but not affect the operating cash flow? A. Increase in depreciation B. Increase in accounts receivable C. Sale of a fixed asset D. Decrease in cost of goods sold […]

Assume you can currently exchange one U.S. dollar for one hundred Japanese yen. Also assume the inflation rate will be 2.5 percent annually in the U.S. and 2 percent in Japan. Given these assumptions, how many yen should you expect […]

On which one of the following dates do dividends become a liability of the issuer for accounting purposes? A. First day of the fiscal year in which the dividend is expected to be paid B. Twelve months prior to the […]

It takes The Crossroads Boutique an average of 61 days to sell its inventory and 30 days to collect its accounts receivable. The firm has sales of $568,700 and costs of goods sold of $398,800. What is the accounts receivable […]

Which one of the following features distinguishes an ordinary annuity from an annuity due? A. Number of equal payments B. Amount of each payment C. Frequency of the payments D. Annuity interest rate E. Timing of the annuity payments Answer: […]

The Plaza Cafe has an operating cash flow of $78,460, depreciation expense of $8,960, and taxes paid of $21,590. A partial listing of its balance sheet accounts is as follows: What is the amount of the cash flow from assets? […]

Baxter & Baxter has total assets of $710,000. There are 45,000 shares of stock outstanding with a market value of $28 a share. The firm has a profit margin of 7.1 percent and a total asset turnover of 1.29. What […]

Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm’s net working capital: A. had to increase. B. had to decrease. C. could have remained constant if the amount of […]

Assume the securities markets are strong form efficient. Given this assumption, you should expect which one of the following to occur? A. The risk premium on any security in that market will be zero. B. The price of any one […]