6.Which of the following is NOT correct? a. Firms might window dress in order to

Question

6.Which of the following is NOT correct?

a. Firms might window dress in order to make their statements look better

b. Balance sheets report book values of assets

c. An increase in dividends would cause AFN to decrease

d. Depreciation is a source of funds

7.         Other things held constant, which of the following would lead to a decrease in working capital?

a.         Missing inventory is written off against retained earnings.

b.         A stock split is declared.

c.         Cash is used to buy marketable securities.

d.         Merchandise is sold on credit, but at a profit.

8. Suppose that Sales for the entire year were $200,000 and Cost of Goods Sold 60% of Sales. The Inventory Balance is $10,000, the Accounts Payable Balance is $5,000, and the Cash Conversion Cycle is 50 days. What is the Inventory Conversion Period?

            a.15                 b. 20                c. 25                d. 30               

9. What is the nominal cost of a six-month discount loan of $100,000 with a stated rate of 8% if there are $100 in closing costs due at the beginning?

            a.8.34%                       b. 8.48%                      c. 8.62%                      d. 9.16%         

10. Which statement is NOT correct?

a.A negotiable certificate of deposit is a security issued by a commercial bank which entitles the holder to receive the amount deposited plus accrued interest on a specified date.

b. Treasury Bills are issued by state and local govts., interest is not taxed by US govt.

c. Eurodollar Deposits are Dollar denominated CDs issued by non US banks

d. Bankers Acceptances are Intl. trade document that has been guaranteed by a bank

11. Which Statement is correct?

a. If a firm factors their accounts receivable with recourse, then they are still liable if their customer doesn

Explanation / Answer

(6)a. Firms might window dress in order to make their statements look better.

(7)d.         Merchandise is sold on credit, but at a profit.

(8) c. 25

(9)b. 8.48%   

(10)c. Eurodollar Deposits are Dollar denominated CDs issued by non US banks

(11)a. If a firm factors their accounts receivable with recourse, then they are still liable if their customer doesn

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