Question: On a Statement of Cashflows, which of the following is a cash inflow?

Answer Choices: A. a decrease in inventory B. a decrease in long-term debt C. distributing cash dividends D. an increase in accounts receivable

Answer: A – a decrease in inventory

 

Question: If the shares of a closed-end investment company sell for a discount,

Answer Choices: A. the shares are undervalued B. the net assets exceed the price of the shares C. the value of the assets have declined more than the price of the stock D. the price of the stock is less than the company’s liabilities

Answer: B – the net assets exceed the price of the shares

 

Question: Operating income does not consider

Answer Choices: A. depreciation B. cost of goods sold C. salaries D. taxes paid

Answer: D – taxes paid

 

Question: Advantages of investing in mutual funds include

Answer Choices: A. tax avoidance B. diversification C. avoiding brokerage fees D. capital losses

Answer: B – diversification

 

Question: Penny sold 400 shares short of Bloomingdales Corp. at $30 a share. The price of the stock then fell to $28 before rising to $34 at which time Penny covered her position. What is the percentage gain or loss on this position?

Answer Choices: A. Gain of 16.67% B. Gain of 13.33% C. Loss of 13.33% D. Loss of 16.67%

Answer: C – Loss of 13.33%

 

Question: An investor may place a limit order that

Answer Choices: A. establishes the exchange on which the security is to be bought or sold B. limits the amount of commissions C. specifies when the stock will be purchased D. states a price at which the investor seeks to buy or sell a stock

Answer: D – states a price at which the investor seeks to buy or sell a stock

 

Question: The larger the debt ratio

Answer Choices: A. the larger are the firm’s total assets B. the smaller is the firm’s use of financial leverage C. the riskier the firm becomes D. the more equity the firm is using

Answer: C – the riskier the firm becomes

 

Question: An increase in the days sales outstanding implies

Answer Choices: A. receivables turn into cash more slowly B. an increase in inventory C. receivables turn into cash more rapidly D. the price of the product has been reduced

Answer: A – receivables turn into cash more slowly

 

Question: Short-term government debt secured by expected tax revenues is referred to as:

Answer Choices: A. Collateral Tax Securities B. Tax Anticipatory Notes C. Tax Revenue Neutral Bills D. Treasury Bond

Answer: B – Tax Anticipatory Notes

 

Question: Assets equal

Answer Choices: A. liabilities minus equity B. equity C. liabilities plus equity D. liabilities

Answer: C – liabilities plus equity

 

Question: The current ratio excludes

Answer Choices: A. accrued interest B. cash C. inventory D. retained earnings

Answer: D – retained earnings

 

Question: On a Statement of Cashflows, which of the following is a cash outflow?

Answer Choices: A. a decrease in inventory B. a new issue of bonds C. an increase in accounts payable D. an increase in plant expenditures

Answer: D – an increase in plant expenditures

 

Question: When an asset is depreciated,

Answer Choices: A. the cost of the asset is increased to reflect appreciation in its value B. its cost is allocated over a period of time C. the firm’s earnings and taxes are increased D. the cash flow from an investment is reduced

Answer: B – its cost is allocated over a period of time

 

Question: A short-term security issued by the federal government (also considered to be the safest short-term security) is called a:

Answer Choices: A. Federal Debt Deposit B. Negotiable Certificate of Deposit (CD) C. Banker’s Acceptance D. Treasury Bill

Answer: D – Treasury Bill

 

Question: Efficient securities markets imply that

Answer Choices: A. there is little risk of loss over an extended investment horizon B. security prices are randomly determined C. investors cannot expect to outperform the market D. investors cannot outperform the market

Answer: C – investors cannot expect to outperform the market

 

Question: Leverage ratios measure

Answer Choices: A. sales relative to some base such as equity B. the extent to which the firm uses debt financing C. the speed with which the firm sells inventory D. capacity of the firm to meet current obligations

Answer: B – the extent to which the firm uses debt financing

 

Question: Federally insured investments include

Answer Choices: A. savings accounts in national commercial banks B. certificates of deposit in excess of $500,000 C. commercial bank assets D. life insurance policies

Answer: A – savings accounts in national commercial banks

 

Question: _______ is the price quoted by a market maker at which he is willing to sell

Answer Choices: A. Ask B. Bid C. Low D. High

Answer: A – Ask

 

Question: Banks and Thrifts are regulated by the

Answer Choices: A. Federal Reserve B. Securities and Exchange Commission C. Federal Deposit Insurance Corporation D. Federal Home Loans Association

Answer: A – Federal Reserve

 

Question: Equity includes

Answer Choices: A. cash B. investments C. assets D. retained earnings

Answer: D – retained earnings