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atluriram
atluriram, Professor
Category: Homework
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Experience:  MASTER OF COMMERCE, BACHELOR OF LAWS, COMPANY SECRETARY QUALIFICATIONS
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1) Insider trading occurs when A. lawyers, investment

Customer Question

1) Insider trading occurs when
A. lawyers, investment bankers, and others buy common stock in companies represented by their firms.
B. any stock transactions occur in violation of the Federal Trade Commissions restrictions on monopolies.
C. corporate officers buy stock in their company.
D. someone has information not available to the public which they use to profit from trading in stocks.



2) Regarding risk levels, financial managers should
A. focus primarily on market fluctuations
B. evaluate investor's desire for risk
C. avoid higher risk projects because they destroy value
D. pursue higher risk projects because they increase value



3) One of the major disadvantages of a sole proprietorship is
A. low organizational costs.
B. low operating costs.
C. the simplicity of decision making.
D. that there is unlimited liability to the owner.

4) Which of the following would represent a use of funds and, indirectly, a reduction in cash balances?
A. an increase in accounts payable
B. the sale of new bonds by the firm
C. a decrease in marketable securities
D. an increase in inventories



5) Which account represents the cumulative earnings of the firm since its formation, minus dividends paid?
A. Retained earnings
B. Accumulated depreciation
C. Common stock
D. Paid-in capital



6) An increase in investments in long-term securities will:
A. increase cash flow from financing activities.
B. decrease cash flow from financing activities.
C. decrease cash flow from investing activities.
D. increase cash flow from investing activities.

7) If a firm has both interest expense and lease payments,
A. times interest earned will be the same as fixed charge coverage.
B. fixed charge coverage cannot be computed.
C. times interest earned will be greater than fixed charge coverage.
D. times interest earned will be smaller than fixed charge coverage.



8) The most rigorous test of a firm's ability to pay its short-term obligations is its
A. current ratio.
B. quick ratio.
C. times-interest-earned ratio.
D. debt-to-assets ratio.



9) For a given level of profitability as measured by profit margin, the firm's return on equity will
A. increase as its debt-to-assets ratio decreases.
B. decrease as its current ratio increases.
C. decrease as its times-interest-earned ratio decreases.
D. increase as its debt-to assets ratio increases.

13) The need for an increase or decrease in short-term borrowing can be predicted by
A. ratio analysis.
B. trend analysis.
C. an income statement.
D. a cash budget.



14) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced
A. is higher.
B. is lower.
C. can be either higher or lower.
D. is the same.



15) In order to estimate production requirements, we
A. add beginning inventory to projected sales in units and subtract desired ending inventory.
B. add projected sales in units to desired ending inventory and subtract beginning inventory.
C. add beginning inventory to desired ending inventory and subtract projected sales in units.
D. add beginning inventory to desired ending inventory and divide by two.

16) In developing the pro forma income statement we follow four important steps:
1) compute other expenses,
2) determine a production schedule,
3) establish a sales projection,
4) determine profit by completing the actual pro forma statement.

What is the correct order for these four steps?
A. 1,2,3,4
B. 3,2,4,1
C. 3,2,1,4
D. 2,1,3,4



17) The difference between total receipts and total payments is referred to as
A. cumulative cash flow.
B. beginning cash flow.
C. cash balance.
D. net cash flow.



18) A firm utilizing LIFO inventory accounting would, in calculating gross profits, assume that
A. all sales were from current production.
B. all sales were from beginning inventory.
C. all sales were for cash.
D. sales were from current production until current production was depleted, and then use sales from beginning inventory.

19) Under which of the following conditions could the overuse of financial leverage be detrimental to the firm?
A. Cyclical demand for the firm's products.
B. Upswing of business cycle.
C. Low interest cost compared to return on assets
D. Stable industry



20) The concept of operating leverage involves the use of __________ to magnify returns at high levels of operation.
A. variable costs
B. marginal costs
C. semi-variable costs
D. fixed costs



21) Financial leverage deals with:
A. the relationship of debt and equity in the capital structure.
B. the entire income statement.
C. the entire balance sheet.
D. the relationship of fixed and variable costs.

22) The break-even point can be calculated as
A. total costs divided by contribution margin.
B. variable cost times contribution margin.
C. fixed cost divided by contribution margin.
D. variable costs divided by contribution margin.



23) In break-even analysis, the contribution margin is defined as
A. price minus fixed cost.
B. variable cost minus fixed cost.
C. fixed cost minus variable cost.
D. price minus variable cost.



24) If TechCor has fixed costs of $80,000, variable costs of $1.20/unit, sales price/unit of $6, and depreciation expense of $25,000, what is their cash breakeven in units?
A. 11,458
B. 21,875
C. 45,833
D. 9,167

25) Normally, permanent current assets should be financed by
A. short-term funds.
B. borrowed funds.
C. internally generated funds.
D. long-term funds.



26) During tight money periods
A. short-term rates are higher than long-term rates.
B. short-term rates are equal to long-term rates.
C. the relationship between short and long-term rates remains unchanged.
D. long-term rates are higher than short-term rates.



27) A conservatively financed firm would
A. finance a portion of permanent assets and short-term assets with short-term debt.
B. use equity to finance fixed assets, long-term debt to finance permanent assets, and short-term debt to finance fluctuating current assets.
C. use long-term financing for permanent current assets and fixed assets and a portion of the short-term fluctuating assets and use short-term financing for all other short-term assets
D. use long-term financing for all fixed assets and short-term financing for all other assets.

28) Risk exposure due to heavy short-term borrowing can be compensated for by
A. carrying illiquid assets.
B. carrying longer term, more profitable current assets.
C. carrying more receivables to increase cash flow.
D. carrying highly liquid assets.



29) Which of the following combinations of asset structures and financing patterns is likely to create the most volatile earnings?
A. Illiquid assets and heavy long-term borrowing
B. Liquid assets and heavy long-term borrowing
C. Liquid assets and heavy short-term borrowing
D. Illiquid assets and heavy short-term borrowing



30) Which of the following is not a condition under which a prudent manager would accept some risk in financing?
A. Easy access to capital markets
B. Price of inventory is stable
C. Predictable cash-flow patterns
D. Inventory is highly perishable

31) The difference between the amount of cash on the firm's books and the amount credited to it by the bank is
A. float.
B. extended disbursement.
C. an overdraft.
D. interest revenue.



32) "Float" takes place because
A. a customer writes "hot" checks.
B. a lag exists between writing a check and clearing it through the banking system.
C. a firm is early in paying its bills.
D. the level of cash on the firm's books is equal to the level of cash in the bank.



33) The system whereby funds are moved between computer terminals without use of checks is
A. magnetic character recognition.
B. a lock-box system.
C. electronic funds transfer.
D. float.

34) Variables important to credit scoring models include
A. all of these variables apply.
B. facility ownership.
C. age of company in years.
D. negative public records.



35) The most subjective and also significant segment of the 5 C's of credit for giving final approval is
A. conditions.
B. character.
C. capacity.
D. collateral.



36) When developing a credit scoring report, many variables would be considered. Which of the following best represent the major factors Dun & Bradstreet would examine?
A. The company's cash balances, return on equity, and its average tax rates.
B. The financial statements, satisfactory or slow payment experiences, negative public records (suits, liens, judgments, bankruptcies).
C. The age of the management team, the dollar amount of sales, net profits, and long-term debt.
D. The age of the company, the number of employees, the level of current assets.

37) Compensating balances
A. are used to reward new accounts.
B. generate returns to customers from interest bearing accounts.
C. are used by banks as a substitute for charging service fees.
D. are created by having a sweep account.



38) Commercial paper that is sold without going through a broker or dealer is known as
A. term paper.
B. book-entry transactions.
C. direct paper.
D. dealer paper.



39) Large firms tend to be
A. firms with low levels of inventory turnover and accounts receivable turnover.
B. firms with high levels of profitability.
C. net users of trade credit.
D. net suppliers of trade credit.

40) From the banker's point of view, short-term bank credit is an excellent way of financing
A. seasonal bulges in inventory and receivables.
B. repayment of long-term debt.
C. fixed assets.
D. permanent working capital needs.



41) A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 2/20, net 90. What change might be expected on the balance sheets of its customers?
A. Increased receivables and increased bank loans
B. Decreased receivables and increased bank loans
C. Increased payables and decreased bank loans
D. Increased payables and increased bank loans



42) Trade credit may be used to finance a major part of the firm's working capital when
A. the firm extends more liberal credit terms than the supplier.
B. the firm extends less liberal credit terms than the supplier.
C. the firm and the supplier both extend the same credit terms.
D. neither the firm nor the supplier extends credit.

43) As the discount rate becomes higher and higher, the present value of inflows approaches
A. minus infinity
B. 0
C. plus infinity
D. need more information



44) Increasing the number of periods will increase all of the following except
A. the present value of $1.
B. the present value of an annuity.
C. the future value of $1.
D. the future value of an annuity.



45) As the interest rate increases, the present value of an amount to be received at the end of a fixed period
A. decreases
B. increases
C. remains the same
D. Not enough information to tell

46) John Doeber borrowed $125,000 to buy a house. His loan cost was 11% and he promised to repay the loan in 15 equal annual payments. How much are the annual payments?
A. $9,250
B. $3,633
C. $13,113
D. $17,383



47) If you invest $8,000 at 12% interest, how much will you have in 7 years?
A. $17,688
B. $18,016
C. $3616
D. $80,712



48) The future value of a $1000 investment today at 8 percent annual interest compounded semiannually for 5 years is
A. $1,480
B. $1,469
C. $1,520
D. $1,555
Submitted: 5 years ago.
Category: Homework
Expert:  atluriram replied 5 years ago.
Sir/Madam

I will provide within 24-48 hours

with regards
Expert
Customer: replied 5 years ago.
are you saying you will answer these within 48 hours?
Expert:  atluriram replied 5 years ago.

Sir/Madam

 

Yes, sure

 

with regards

Expert

Expert:  atluriram replied 5 years ago.

1) Insider trading occurs when


D. someone has information not available to the public which they use to profit from trading in stocks.



2) Regarding risk levels, financial managers should


C. avoid higher risk projects because they destroy value


3) One of the major disadvantages of a sole proprietorship is

D. that there is unlimited liability to the owner.

4) Which of the following would represent a use of funds and, indirectly, a reduction in cash balances?

D. an increase in inventories



5) Which account represents the cumulative earnings of the firm since its formation, minus dividends paid?

A. Retained earnings




6) An increase in investments in long-term securities will:

D. increase cash flow from investing activities.

7) If a firm has both interest expense and lease payments,

D. times interest earned will be smaller than fixed charge coverage.



8) The most rigorous test of a firm's ability to pay its short-term obligations is its

B. quick ratio.



9) For a given level of profitability as measured by profit margin, the firm's return on equity will

D. increase as its debt-to assets ratio increases.

13) The need for an increase or decrease in short-term borrowing can be predicted by

B. trend analysis.


14) In financial statements, the number of units shown in cost of goods sold as compared to the number of the units actually produced

C. can be either higher or lower.




15) In order to estimate production requirements, we

B. add projected sales in units to desired ending inventory and subtract beginning inventory.

16) In developing the pro forma income statement we follow four important steps:
1) compute other expenses,
2) determine a production schedule,
3) establish a sales projection,
4) determine profit by completing the actual pro forma statement.

What is the correct order for these four steps?

C. 3,2,1,4



17) The difference between total receipts and total payments is referred to as

D. net cash flow.



18) A firm utilizing LIFO inventory accounting would, in calculating gross profits, assume that

B. all sales were from beginning inventory.

19) Under which of the following conditions could the overuse of financial leverage be detrimental to the firm?


C. Low interest cost compared to return on assets



20) The concept of operating leverage involves the use of __________ to magnify returns at high levels of operation.

A. variable costs



21) Financial leverage deals with:
A. the relationship of debt and equity in the capital structure.

22) The break-even point can be calculated as

C. fixed cost divided by contribution margin.


23) In break-even analysis, the contribution margin is defined as

C. fixed cost minus variable cost.


24) If TechCor has fixed costs of $80,000, variable costs of $1.20/unit, sales price/unit of $6, and depreciation expense of $25,000, what is their cash breakeven in units?

B. 21,875

25) Normally, permanent current assets should be financed by
C. internally generated funds.




26) During tight money periods
A. short-term rates are higher than long-term rates.


27) A conservatively financed firm would

B. use equity to finance fixed assets, long-term debt to finance permanent assets, and short-term debt to finance fluctuating current assets.

28) Risk exposure due to heavy short-term borrowing can be compensated for by

C. carrying more receivables to increase cash flow.
.

29) Which of the following combinations of asset structures and financing patterns is likely to create the most volatile earnings?

C. Liquid assets and heavy short-term borrowing


30) Which of the following is not a condition under which a prudent manager would accept some risk in financing?
D. Inventory is highly perishable

31) The difference between the amount of cash on the firm's books and the amount credited to it by the bank is

C. an overdraft.




32) "Float" takes place because

B. a lag exists between writing a check and clearing it through the banking system.


33) The system whereby funds are moved between computer terminals without use of checks is
D. float.

34) Variables important to credit scoring models include

A. all of these variables apply.



35) The most subjective and also significant segment of the 5 C's of credit for giving final approval is

C. capacity.


36) When developing a credit scoring report, many variables would be considered. Which of the following best represent the major factors Dun & Bradstreet would examine?

B. The financial statements, satisfactory or slow payment experiences, negative public records (suits, liens, judgments, bankruptcies).

37) Compensating balances
C. are used by banks as a substitute for charging service fees.

38) Commercial paper that is sold without going through a broker or dealer is known as
A. term paper.

39) Large firms tend to be

B. firms with high levels of profitability.

40) From the banker's point of view, short-term bank credit is an excellent way of financing

D. permanent working capital needs.



41) A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 2/20, net 90. What change might be expected on the balance sheets of its customers?

A. Increased receivables and increased bank loans


42) Trade credit may be used to finance a major part of the firm's working capital when
A. the firm extends more liberal credit terms than the supplier.

43) As the discount rate becomes higher and higher, the present value of inflows approaches

A. minus infinity




44) Increasing the number of periods will increase all of the following except

C. the future value of $1.



45) As the interest rate increases, the present value of an amount to be received at the end of a fixed period

B. increases


46) John Doeber borrowed $125,000 to buy a house. His loan cost was 11% and he promised to repay the loan in 15 equal annual payments. How much are the annual payments?

D. $17,383




47) If you invest $8,000 at 12% interest, how much will you have in 7 years?
A. $17,688



48) The future value of a $1000 investment today at 8 percent annual interest compounded semiannually for 5 years is

A. $1,480

Expert:  atluriram replied 5 years ago.
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