Investment and financing decisions, which may be short-term or long-term decisio
ID: 2438076 • Letter: I
Question
Investment and financing decisions, which may be short-term or long-term decisions are best described as:
financial decision making.
economic decision making.
accounting decision making.
Mutual funds, pension funds, investment dealers and insurance companies are best described as examples of:
corporate finance.
market intermediaries.
financial intermediaries.
Farmers and Merchants Bank lends money to Ruth to purchase a car from Steven Toyota. Ruth is going to insure the car with Allstate Insurance. Which party is best described as the creditor?
Ruth
Steven Toyota
Allstate Insurance
Farmers and Merchants Bank
Which of the following would not be described as a debenture?
An unsecured loan
A loan secured by collateral
A loan secured by the “full faith and credit” of the issuer
Morgan Stanley was the investment banking firm that took Facebook from being a closely held company to issuing stock to the public for the first time. Which of the following terms most closely describes this?
money market security.
issuing commercial paper.
initial public offering (IPO).
debt security backed by the general credit of the issuer.
Which of the following transactions does not take place in the primary market? An investor:
buying a newly issued municipal bond.
buying shares of an initial public offering.
selling one hundred shares of stock through a stock broker.
buying a U.S. Treasury bill through the government auction.
The majority of home purchases in the U.S. are secured with a mortgage. A mortgage is:
an unsecured loan.
an equity investment in the property.
a debt obligation secured by a specific property.
Which form of business would most likely describe the following, a college student other students, a retired woman who babysits children, a teenager who mows lawns, and a party clown?
Partnership
Corporation
Sole proprietorship
Limited liability company
Flow-through taxation is a characteristic for all but the following forms of business?
Partnership
Corporation
Sole proprietorship
Limited liability company
Your sister wants to start a tee shirt business on e-Bay with you to help pay for college tuition. All of the following are advantages to partnerships that you should both consider, except ____________?
Easy to form
Access to capital
Business income is taxed once, at the individual partner’s level
Which of the following takes into account takes into account the opportunity cost of funds?
Net profit
Economic profit
Accounting profit
When we talk about capital structure, this refers to:
the cash, inventory, and accounts receivable.
mix of debt and equity to finance an enterprise.
the investment in plant, property and equipment.
The uncertainty associated with the use of debt to finance a business enterprise is best described as:
financial risk.
business risk.
operating risk.
The mix of debt and equity that is used to finance a business enterprise is best described as the enterprise’s:
assets.
working capital.
capital structure.
capital expenditures
Generally accepted accounting principles (GAAP) are best described as a(n):
organization that establishes the accounting principles for U.S. financial reporting.
accounting standards promulgated by the International Accounting Standards Board (IASB.)
set of basic principles and conventions that are applied in the preparation of financial statements.
organization that establishes the accounting principles for business entities in the European Economic Community.
Which reporting convention requires recording revenue and expenses when the transaction occurs, regardless of when cash changes hands?
Cost basis
Cash basis
Accrual basis
The summary of the company’s performance over a period of time, typically a fiscal quarter or fiscal year
Balance sheet
Statement of stockholder’s equity
Income statement
Statement of cash flows
_______ is the cash flow from the day-to-day operations of the business; the result of subtracting the increase in new working capital from traditional cash flow.
Cash flow from investing
Cash flow from financing
Simple cash flow
Cash flow from operations
The debt ratio is classified as which type of ratio?
Owner
Liquidity
Efficiency
Productivity
Financial Leverage
Inventory turnover, accounts receivable turnover, fixed asset turnover, and total asset turnover are all classified as which type of ratio?
Owner
Liquidity
Efficiency
Productivity
Financial Leverage
ABC Company attempts to manage its earnings by extending the useful life of all of its equipment. Which of the following will not be an outcome of this choice by management?
Income will be higher than it would have been under prior accounting methods.
Equipment values will be higher than they would have been without the change.
Depreciation expense will be lower than it would have been under prior accounting methods.
Depreciation expense will be higher than it would have been under prior accounting methods.
It is important for a company to know the level of sales at which it covers all its variable and fixed operating costs. This level of sales is best described as the:
gross profit margin.
contribution margin.
operating break even.
operating profit margin.
The minimum return that investors expect to earn on the investment in stock is best described as:
growth rate.
risk premium.
capital gains yield.
required rate of return
If a company returns more than the required rate of return on a stock, what happens to the value of that stock?
The stock price falls.
The stock price rises.
The stock price stays the same.
When market rates are greater than the dividend rate, preferred shares will trade at:
par.
a discount.
a premium.
Explanation / Answer
As per policy only first four questions will be answered
1. Investment and financing decisions, which may be short-term or long-term decisions are best described as: financial decision making.
2. Mutual funds, pension funds, investment dealers and insurance companies are best described as examples of: financial intermediaries.
3. Farmers and Merchants Bank lends money to Ruth to purchase a car from Steven Toyota. Ruth is going to insure the car with Allstate Insurance. Which party is best described as the creditor? Ruth
4. Which of the following would not be described as a debenture? A loan secured by the “full faith and credit” of the issuer
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