Trading on the NYSE is executed without a specialist (i.e. a market maker). (T/F)
False
Stocks and bonds are two types of financial instruments
... [Show More] (T/F)
True
The matching principle in accrual accounting requires that:
Revenues be recognized when the earnings process is complete and matches expenses to revenues recognized.
A basic equation for the balance sheet is:
Equity = Assets - Liabilities
Why is the Balance Sheet known as a permanent statement?
Because the other statements are reset at the end of the fiscal year
How do you calculate the change in Retained Earnings?
Net Income - Dividends
Which of the following is generally true?
Operating Income and EBIT are the same
Which components are part of total assets?
Cash Accounts Receivable, Inventory, Long Term Assets
Which components are part of current assets?
Inventory, Cash, Accounts Receivable, Short Term Investments
Which components are part of Total Liabilities?
Bonds, Accounts Payable, Mortgage
When Fixed Assets increase what happens to Cash?
Cash decreases
Which is the purpose of the statement of cash flows?
explains the change in cash balance for one period of time
The OIROI (Operating Income Return on Investment) uses what elements on the income statement?
EBIT, Total Assets
Why would a company be interested in the TAT-Total Asset Turnover-ratio?
a
How efficient assets are at producing sales
Which of the following gives the largest effective rate (APY)
18.6% compounded daily
What does the beta coefficient represent?
It is a statistically-derived measure of volatility
Why is depreciation expense taken out of the net income calculation, yet added back at the end?
Because depreciation expense is tax deductible
Why is the NPV preferred over the IRR? Pick Two
1-It measures the dollar value 2- It is harder to calculate
What does the Degree of Financial Leverage indicate?
The reliance on debt
If a company has a high degree of financial leverage, what does that tell us about the firm's risk profile?
Higher profits to shareholders
What is the cash cycle?
The amount of time to regenerate cash
Why is float important to understand?
To time cash expenditures
What should a company do to manage its working capital?
Collect quickly and pay slowly
What would be a source of information to determine Replacement Cost?
Building Appraisal
What does the Sarbanes-Oxley Act require companies to do?
Have internal control audits
FINRA (Financial Industry Regulatory Authority) does the following: (pick one)
Prosecutes naughty stock brokers
If a product is made 100% domestically, what can affect its domestic market?
International competition
If a company makes its product in a foreign country where labor costs are much lower, what happens?
Profits go up and domestic employment decreases.
If the value of a dollar increases, the price of imports:
Decreases
Why would a farmer buy a hedge when he signs a contract to sell produce overseas?
To reduce currency risk
A basic equation for the balance sheet is:
Equity = Assets - Liabilities
Why is the Balance Sheet known as a permanent statement?
Because the other statements are reset at the end of the fiscal year
How do you calculate the change in Retained Earnings?
Net Income - Dividends
Which of the following is generally true?
Operating Income and EBIT are the same
Which components are part of total assets?
Cash Accounts Receivable, Inventory, Long Term Assets
Which components are part of current assets?
a. Cash, Accounts Receivable, Property Plant & Equipment
b. Accounts Receivable, Accounts Payable, Inventory
c. Long Term Debt, Property Plant & Equipment, Common Stock
d. Inventory, Cash, Accounts Receivable, Short Term Investments
Inventory, Cash, Accounts Receivable, Short Term Investments
Suppose the inventory turnover of a company is higher than the industry. Based on this observation, which of the following is most likely?
The firm has too little inventory resulting in lost sales or stock-outs.
If a company wishes to obtain a bank loan, will it want to have a higher current ratio or a lower current ratio?
higher
If an investor knows the idiosyncratic risk, the investor knows the:
Beta Coefficient
Why would we reject a project based on the NPV?
the NPV is a negative number
Why would we reject a project based on the IRR?
the discount rate is higher than the IRR
Company A wishes to keep 20% of its assets as cash. Company B keeps its cash balance at 5% of assets. Which of the following statements apply?
company B invest in more working current assets
Company A offers trade credit of 2% 10 / net 30 and Company B offers trade credit at net 30. What can be said about the credit policies of each company?
company A can attract more customers
Which of the following characterizes collection float
increased float indicates slower processing time
Company A's inventory is larger than Company B. Both companies are competitors and are about the same size. What does this difference mean from a working capital management standpoint?
company B might have higher inventory turnover
In regards to Accounts Payable balances, which of the following is true:
paying off Accounts Payable on the last day due is good policy
If two companies have earnings of $2,000,000, and Company X has a multiple of 1.2 and Company Z has a multiple of 2.0, what can we estimate about the value of each company?
the value of company Z id higher
Dodd-Frank regulates which segment of the U.S. Economy?
banking industry
The SEC Securities & Exchange Commission requires companies to do the following: (pick two)
1-register all public offering 2-regulates stock sales
false. Economics is a subfield of Finance (T/F)
False
Capital is defined as a financial asset. (T/F)
True
Stocks and bonds are two types of financial instruments (T/F)
True
Primary financial markets are markets where issuers place new securities with investors. (T/F)
True
An IPO occurs on the primary market (T/F)
True
false. An IPO is a seasoned equity offering (T/F)
False
Syndicates are generally made up of investment banks and other institutional investors (T/F)
True
false. While competitive sales allow underwriters to submit bids to purchase bonds, negotiated sales do not. (T/F)
False
faslse. NASDAQ is the world's largest secondary financial market. (T/F)
False [Show Less]