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LEG 500 Week 11 Final Exam – Strayer NEW
LEG 500 Week 11 Final Exam – Strayer NEW
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Chapters 1 Through 9
LAW & ETHICS IN THE BUSINESS ENVIRONMENT
CHAPTER 1
Law, Ethics, Business: An Introduction
Questions
1. Select the best definition of ethics:
a set of rules for behavior.
a menu of options regarding what we must do.
a menu of options regarding what we should do.
standards that must be met to avoid penalty.
2. Laws must be static and unyielding in order to provide stability for a society.
a. True
b. False
3. Choose the statement regarding duty to rescue that is false:
There is no general duty to rescue an individual.
Individual freedom of dictates that a person should not be forced to act.
Under a liberal–communitarian approach, citizens owe a duty to the state to rescue other citizens.
When one taunts another person who then puts themselves in danger in response to the teasing, the teaser has a duty to rescue the person teased.
4. All of the following are considered exceptions to the general rule that there is no duty to rescue except:
a. Pre-existing duty: For example, lifeguards have signed contracts agreeing to rescue people in exchange for pay and benefits.
b. Witnessing an accident: This creates a duty to step in and help the injured.
c. Employer: A duty exists to help an employee injured while working for that employer.
d. Endangerment: If one puts another in danger, they are obligated to rescue the person put in danger.
5. Which of the following views would be consistent with the free market ethics approach advocated by Milton Friedman?
Outsourcing to other countries is wrong because it is detrimental to the overall US economy.
When making decisions, corporate managers should consider the interests of all the corporation’s stakeholders.
The only social responsibility of business is to increase profits in a legal and ethical manner.
Automating processes and replacing workers is unethical since it does not serve a greater good.
6. Which of the following statements best illustrates the view of “utilitarianism”?
I. From each according to his abilities, to each according to his needs.
II. The risk reasonably to be perceived defines the duty to be obeyed and risks imports relation; it is risk to another or to others within the range of apprehension.
III. An action is right when maximizing welfare and total well-being.
IV. Individuals should pursue his or her own self-interest, even at the expense of others.
I only
III only
I and II
I, II, and III
7. According to deontological thinker Kant:
I. It is only acceptable to lie when done to protect an innocent person.
II. The level of respect owed to another is based on one’s relationship to that person.
III. It is wrong to use another person unless mutual benefit is attached.
IV. Once chosen, actions will be repeated whenever the same situation arises.
a. I and III
b. II and IV
c. III and IV
d. I, III, and IV
8. Virtue ethics:
a. focuses on what human beings are capable of being.
b. develop from learning how to make choices in difficult situations.
c. accepts that individuals rarely reach moral excellence.
d. are based on the concept that a person’s ethical beliefs are developed in childhood and do not change.
9. The Ethic of Care is:
a. A set of rules that explain how to prioritize those people affected by a decision so that a utilitarian analysis can be done successfully.
b. A set of universal principles, which applied evenly to all decisions will result in fairness and equity in ethical decisions.
c. The idea that we should all make decisions under the assumption that we don’t know our station in life, that we could be the person most negatively impacted by the decision.
d. A set of principles that encourage decision makers to look at human relationships as a primary motivator for a decision.
10. Assuming a business ethical dilemma, which statement best illustrates Gilligan approach suggested in her theory of “The Ethics of Care”?
individual rights and justice for all
applies only to women and not men
care and responsibility to others
obedience to independent moral rules or duties
11. Which of the following statements is INCORRECT regarding the rights of shareholders?
I. voting power on major issues and ownership in a portion of the company
II. right to transfer ownership and dividend entitlement
III. hire and fire management and select and appoint a chief executive
I and II
I, II, and III
I only
III only
12. According to Citizens United v. Federal Election Commission, which of the following is not a reason to allow corporations the right to spend money and advertise for political candidates?
a. Political speech is the most important, and most protected, speech that exists. It is crucial to the democratic process that political speech be encouraged and heard.
b. The immense wealth of a corporation allows it to be the most accurate in providing messages to people.
c. Independent expenditure by corporations do not give rise to corruption or the appearance of corruption.
d. Rapid changes in technology suggest laws restricting political speech should not be upheld.
13. Corporate director or officer decisions to dedicate corporate funds for social causes is called:
a. Corporate Social Responsibility (CSR)
b. Social Activism (SA)
c. Business Engagement in Environmental Situations (BEES)
d. Strategic Investment in Stakeholder Issues (SISI)
14. Which of the following statements regarding Benefit Corporations is true?
a. Benefit corporations are required to identify one or more specific benefit purposes.
b. Directors of benefit corporations are protected from all lawsuits from both shareholders and beneficiaries of the corporation’s public benefit purpose.
c. Benefit corporations are incorporated under state law with the intent to be profitable.
d. All of these statements regarding benefit corporations are true.
Essay Questions
15. Describe the difference between the law and ethics.
16. From where do ethical preferences originate?
17. Discuss how multinational corporations can be both a benefit and a detriment to society.
18. Explain why laws exist that do not impose a duty to rescue.
19. Describe the philosophy of noted economist, Milton Friedman, on the issue of “free market ethics.”
20. Discuss the differences in utilitarianism and virtue ethics in making a decision.
21. Discuss the similarities and differences between a traditional corporation and a benefit corporation.
CHAPTER 2
The Duty of Loyalty: Whistleblowing
Questions
22. Select the best definition of whistleblower:
the sole goal of modern ethics training
originated from the Latin "qui tam pro domino regequam pro sic ipso in hoc parte sequitur" meaning "who as well for the king as for himself sues in this matter."
a narrow exception under the general rule of at-will employment
people who report unethical or illegal activities under the control of their employers
23. Under the legal doctrine of “employment at will” an employee can be lawfully terminated from her job for:
V. wearing a shirt that clashes with her suit
VI. any non-discriminatory reason
VII. complaining about illegal activity in the workplace
VIII. only for good cause
a. I only
b. II only
c. I and II
d. III and IV
24. Exceptions to the rule of employment-at-will include which of the following?
I. organization of unions
II. passage of Sarbanes Oxley Act
III. raising of public policy issues
IV. promise of implied-contract or covenant-of-good-faith
I only
II only
I and II
I, II, III, IV
25. The Food Safety Modernization Act:
I. offers some protections for whistleblowers
II. covers vegetables, seafood and dairy
III. covers eggs and poultry
IV. gives the FDA power to make mandatory recalls
I and II only
I, III and IV only
I, II and IV only
I, II, III, IV
26. Ag Gag would criminalize:
undercover video recordings showing animal cruelty
recordings of public health violations occurring in agricultural facilities
Both a. and b.
Neither a. nor b.
27. The National Labor Relations Board has stated that the right to discuss working conditions freely and without fear of retaliation should exist at the work site. However, the Board believes the same right does not exist online.
True
False
28. The Constitution does not always protect free-speech rights for what public employees say on the job. Which of the following is true?
When a citizen enters government service, the citizen need not accept certain limitations on his or her freedom.
Public employees may speak out on matters of public concern and have First Amendment protection but not when they speak out in the course of their official duties.
As public employees speak out and receive First Amendment protection, there is an acceptable chilling of the speech of all potential whistleblowers.
None of the above
29. To determine whether a public employee receives First Amendment protection from speech (and therefore cannot be fired for it), the Supreme Court has stated that all of the following are important except:
a. The employer must have a justification for treating the employee differently than it would treat a member of the general public.
b. The speech cannot be about political topics.
c. The speech must be about something of great public concern.
d. The speech cannot be made as part of the employment (such as an internal memorandum).
30. When Qui Tam whistleblowers against the pharmaceutical industry were questioned about their motivation, several reasons were mentioned. Which of the following was NOT given as a reason?
a. Potential risk to public health.
b. Unfair employment practices.
c. Financial reward.
d. Self-preservation.
Essay Questions
31. According to research, what are the characteristics of the typical whistleblower?
32. According to the Montana Wrongful Discharge from Employment Act, what are the three elements of a wrongful discharge?
33. How was Ken Kendrick of The Peanut Corporation of America a typical whistleblower? An atypical whistleblower?
34. Explain what happened in the 1968 Supreme Court’s re-interpretation of the First Amendment to the U.S. Constitution regarding public employees’ limited speech protections.
35. Describe at least two other times since the Pickering decision in which the Supreme Court revisited the ruling. What were the outcomes?
36. As discussed in the text, False Claims Act or qui tam suits have been successful in the health care industry. The text mentions several things that all these successful claims have in common. Discuss those things.
CHAPTER 3
Privacy and Technology
Questions
In considering the legality of employer interception of employee e-mails at work, pick the correct statement.
IX. Employees have complete expectation of privacy since they can select their password for in-house and remote access of e-mails.
X. A subpoena is required by the employer to read any e-mail that is clearly marked “confidential” by the employee.
XI. No expectation of privacy exists over an employer-owned computer system at work.
XII. Statement by the employer that e-mails are confidential and privileged cannot be later used by an employer to defeat an employee’s claim of privacy
a. I only
b. II only
c. III only
d. I and IV
It is perfectly legal for employers to secretly and intrusively spy on their employees.
a. True
b. False
c.
Which of the following are ways businesses justify electronic surveillance of employees?
I. It measures and encourages efficiency.
II. It uncovers employee disloyalty.
III. It enhances the fairness of personnel evaluations.
IV. It prevents employees from sending personal emails on company time.
a. I and II only
b. I, II and III only
c. I, II and IV only
d. I, II, III and IV
The Electronic Communications Privacy Act of 1986 (ECPA):
i. supplements the Omnibus Federal Employee Workplace Privacy Rights Law of 2008.
j. has been an effective law because employee privacy intrusions are less common and steadily declining since 2000.
k. restricts employer access to public chat room interactions.
l. fails to protect employees in most situations involving e-mail monitoring by public and private employers.
According to the article excerpted in the text entitled, The Functions of Privacy,by Alan Westin, privacyhas several functions in today’s society. These include:
a. Total freedom in the private life with no consequences to the work life.
b. The ability to vent anger at authority without being held responsible.
c. The ability to post critical information on the Internet without consequences at work.
d. The ability to spend time quietly analyzing the actions and reactions of other people.
It is illegal to increase a specific employee’s health insurance premiums based on the employee’s lifestyle.
a. True
b. False
A majority of states have enacted off-the-job privacy protection laws. What is the LEAST effective argument by an employer to regulate off-the-clock activities in a state that has not enacted such lifestyle rights legislation?
a. It will provide a healthy work force.
b. Unregulated employees are less productive.
c. There is no invasion of privacy since the employee is “at will.”
d. It will prevent higher health care and insurance costs.
According to the article, Can They Do That? By Lew Maltby:
a. A job candidate who has been arrested will probably not be disqualified unless the candidate was found guilty.
b. Psychological tests are a good way to determine a job candidate’s honesty.
c. Employees who are being treated unfairly can protect themselves by joining a union.
d. Credit score can keep you from getting a job, even if it doesn’t involve handling money.
The government cannot interfere with the choices adults make about their private family and sexual life.
An individual’s medical history cannot be publicized by the government.
Individuals are protected against unwarranted invasion of privacy by private corporations.
Corporations are protected against unreasonable government searches or seizures.
a. when a corporation has authorized an agent with direct authority to perform an electronic search of an employee’s e-mail account.
b. upon issuance of a subpoena duces tecum to bring electronic data (e-mails, files, etc.) including electronic metadata such as headers, directional information, and other such useful tracking data.
c. when the government is conducting a search.
d. during an archival search of e-mails on a corporation’s server.
When it comes to employment and social media:
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CIS 513 Week 11 Final Exam – Strayer New
CIS 513 Week 11 Final Exam – Strayer New
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Chapters 5 Through 8
Chapter 5 - Wireless Personal Area Networks
TRUE/FALSE
1. WPAN technologies are designed to connect devices that are typically up to 10 meters apart.
2. One of the advantages of WPAN technologies is their conservative use of battery power.
3. The first step in the Bluetooth pairing process is the paging procedure.
4. A reduced-function device can only connect to one full-function device on the network.
5. Bluetooth uses a challenge-response strategy for device authentication.
MULTIPLE CHOICE
1. Which of the following is NOT a likely application for WPAN technologies?
a.
home control systems
c.
industrial control systems
b.
video streaming
d.
security systems
2. Which of the following is true about WPAN standards?
a.
IEEE developed standards for protocols above layer 2
c.
IEEE 802.15.1 is the Bluetooth standard
b.
industry alliances developed specifications for layers 1 and 2
d.
802.16n is the ZigBee standard
3. Which of the following is true about the OSI model and IEEE 802?
a.
the PMD is part of the Data Link layer
c.
the LLC is part of the Physical layer
b.
the PLCP formats data received from the MAC
d.
the MAC layer is responsible for establishing connectivity to the local network
4. Which radio frequency band does Bluetooth use?
a.
2.4 GHz ISM
c.
2.0 GHz ISM
b.
5.0 GHz ISM
d.
4.2 GHz ISM
5. Which of the following is true about the Bluetooth protocol stack?
a.
the L2CAP sits between Baseband and RF
c.
Link Manager communicates directly with the Physical Radio
b.
the Baseband layer sits atop the RF layer
d.
The RF layer communicates between the Link Manager and L2CAP
6. What feature available in some Bluetooth devices increases data rates to 2.1 or 3 Mbps?
a.
Link Manager
c.
L2CAP
b.
radio module
d.
EDR
7. Which Bluetooth power class allows transmission ranges up to 330 feet?
a.
Power Class 1
c.
Power Class 3
b.
Power Class 2
d.
Power Class 4
8. Bluetooth 1.x uses a variation of which modulation technique?
a.
PSK
c.
FSK
b.
ASK
d.
GSK
9. What feature of Bluetooth version 3.0 uses a separate radio module that transmits using the same methods as IEEE 802.11?
a.
BLE
c.
AMP
b.
ULP
d.
NFC
10. Which transmission technique is used by Bluetooth devices?
a.
Narrowband
c.
DHSS
b.
FHSS
d.
UWB
11. Which feature of Bluetooth version 1.2 allows Bluetooth networks to coexist with 802.11 networks with a minimum of interference?
a.
adaptive frequency hopping
c.
alternate MAC/PHY
b.
frequency hopping spread spectrum
d.
Bluetooth low energy
12. What is created when a Bluetooth network has one master and at least one slave using the same channel?
a.
scatternet
c.
piconet
b.
wi-fi net
d.
bluenet
13. How is the master device determined in a Bluetooth network?
a.
the device with the lowest address number
c.
the first device to send out an inquiry message to discover other devices
b.
the device with the highest priority hop sequence on the piconet
d.
the device that carries out a paging procedure and establishes a connection
14. Which of the following is NOT a field in a Bluetooth frame?
a.
Access code
c.
Header
b.
Frame check sequence
d.
Payload
15. Which of the following is NOT a Bluetooth error correction scheme?
a.
1/3 rate FEC
c.
ARQ
b.
2/3 rate FEC
d.
CRC
16. In which Bluetooth power mode is only the slave device’s internal timer running?
a.
active mode
c.
hold mode
b.
sniff mode
d.
park mode
17. Which of the following is true about the ZigBee standard?
a.
designed to support mesh networking
c.
used for larger data transfers than Bluetooth
b.
replaced an existing global, open standard
d.
operates in the 5.0 and 6.5 GHz ISM bands
18. Which layer in a ZigBee device is responsible for detecting the presence of an RF signal in the currently selected channel?
a.
LLC
c.
MAC
b.
PHY
d.
Upper
19. Which task is the MAC layer responsible for in an 802.15.4 device?
a.
turning the radio transceiver on and off
c.
association and disassociation
b.
analyzing link quality
d.
selecting a frequency channel for operation
20. Which type of ZigBee device controls the network in a star topology?
a.
all end-node devices
c.
full-function device
b.
reduced function device
d.
PAN coordinator
COMPLETION
1. In a ZigBee tree topology, if a child loses it connection with its FFD, it becomes a(n) _____________.
2. ________________ is an 802.15.4-based technology that implements IPv6 on WPANs and supports mesh networking.
3. A ______________ authority is a private company that verifies the authenticity of each user in order to discourage fraud.
4. In Bluetooth Encryption Mode ______, all traffic is encrypted.
5. 802.15.4 provides for _______________ integrity, a technique that uses a message integrity code.
MATCHING
a.
8-DPSK
f.
inquiry procedure
b.
ACL link
g.
MIC
c.
ARQ
h.
modulation index
d.
binding
i.
sequential freshness
e.
guaranteed time slots
j.
superframe
1. a reserved period for critical devices to transmit priority data
2. a simple method of phase shift keying that uses eight degrees of phase to encode tribits
3. the process of establishing a relationship between endpoints in a ZigBee network
4. a security service available in 802.15.4 and used by the receiving device
5. a process that enables a device to discover which devices are in range
6. a packet-switched link that is used for data transmissions
7. the amount that the frequency varies
8. an error-correction scheme that continuously retransmits until an acknowledgment is received or a timeout value is exceeded
9. a mechanism for managing transmissions in a piconet
10. a code composed of a subset of the data, the length of the data, and the symmetric key
SHORT ANSWER
1. What are the three types of addresses used in a Bluetooth piconet? Describe each.
2. Describe the two types of physical links between Bluetooth devices.
3. What are the two types of network access used in IEEE 802.15.3 networks? Describe them.
4. List three of the seven tasks the 802.15.4 MAC layer is responsible for.
5. What are the four levels of addresses for identifying devices within a ZigBee PAN?
6. What is a cluster tree topology and how do they compare to mesh networks?
7. How is power management implemented in a ZigBee network?
8. Describe the WirelessHART technology.
9. List and describe the three levels of Bluetooth security.
10. What is the process that ZigBee WPANs use for authentication and encryption? Describe how it works.
Chapter 6 - High-Rate Wireless Personal Area Networks
TRUE/FALSE
1. IEEE 802.15 covers all the WPAN working groups.
2. The WHDI consortium developed the WHDI specification primarily for the delivery of data produced from online database queries.
3. The piconet coordinator in a WirelessHD network should be a battery operated device for mobility.
4. The DSPS power saving mode allows devices to sleep for long periods of time until they choose to wake up and listen to a beacon.
5. UWB is capable of handling multiple data streams, including HD television.
MULTIPLE CHOICE
1. Which IEEE standard enables multimedia connectivity between mobile and fixed consumer devices within the home?
a.
802.15.3c
c.
802.15.1
b.
802.15.5
d.
802.15.4
2. In which frequency range does WHDI operate?
a.
2.4 GHz
c.
5 GHz
b.
800 MHz
d.
400 KHz
3. Which of the following is true about WiGig?
a.
it is compatible with 802.11ac
c.
makes use of technology designed by AMIMON
b.
it requires layer 3 and 4 protocols for audiovisual support
d.
it has adopted the 802.15.3c standard for multimedia distribution
4. What does WiGig use to maintain reliable connections at very high frequencies?
a.
single-carrier modulation
c.
OFDM
b.
beamforming
d.
protocol adaptation layers
5. What technique does WirelessHD employ to support data rates over 25 Gbps?
a.
LRP
c.
HDMI
b.
spatial multiplexing
d.
beamforming
6. Which of the following is true about a WVAN piconet?
a.
the piconet relies on an access point
c.
large non-mobile devices like TVs are not part of a piconet
b.
the PNC is typically a mobile device such as a tablet computer
d.
the PNC is the first sink device in the area
7. Which of the following is described as a piconet that has its own PNC but depends on the original piconet’s PNC to allocate a private block of time when its devices are allowed to transmit?
a.
child piconet
c.
neighbor piconet
b.
parent piconet
d.
subordinate piconet
8. Which of the following is NOT an HR WPAN feature provided by the 802.15.3 MAC layer?
a.
uses a one-octet device ID
c.
data transport includes QoS
b.
PNC can be queried about other devices
d.
infrastructure mode networking is supported
9. Which part of an 802.15.3 superframe is used for association and command communication?
a.
contention access period
c.
channel time allocation period
b.
beacon
d.
management channel time allocation
10. What type of transmission method does an 802.15.3 piconet use during the CTAP?
a.
SDMA
c.
FDMA
b.
TDMA
d.
CDMA
11. Which field of the 802.15.3 MAC frame format is used to reassemble a file in the correct sequence?
a.
Frame control
c.
Fragmentation control
b.
Piconet ID
d.
Stream index
12. Which 802.15.3 power-saving methods allows devices to sleep for the duration of several superframes and allows them to wake up in the middle of a superframe to transmit or receive data?
a.
PSPS
c.
PSPS
b.
APS
d.
APCI
13. Which radio band does the 802.15.3c standard use?
a.
5.0 GHz
c.
2.4 GHz
b.
60 GHz
d.
p00 MHz
14. How many channels and what is the width of each 802.15.3c channel?
a.
4, 2 GHz
c.
11, 25 MHz
b.
6, 200 MHz
d.
14, 50 MHz
15. Which of the following is NOT a 802.15.3c PHY layer enhancement?
a.
passive scanning
c.
channel energy detection
b.
parity bit error detection
d.
transmit power control
16. The RF modulation techniques used for 802.15.3c are variations of which of the following?
a.
QAM and PSK
c.
NRZ-L and NRZ-I
b.
FSK and ASK
d.
BPSK and QPSK
17. In the WirelessHD specification 1.1, Which of the following is NOT a function of the higher protocol layers?
a.
video format selection
c.
device discovery
b.
clock synchronization
d.
video and audio encoding and decoding
18. What application has UWB been used for since the 1960’s?
a.
video streaming
c.
cellular phone towers
b.
ground-penetrating radar
d.
automobile speed detectors
19. What term is used for the technique in which the amplitude, polarity, or position of an analog pulse represents either a 1 or a 0?
a.
biphase modulation
c.
direct-sequence UWB
b.
mesh networking
d.
impulse modulation
20. What type of attack on a Bluetooth device can access contact lists without the user’s knowledge?
a.
bluejacking
c.
bluesnarfing
b.
bluespoofing
d.
blueDoS
COMPLETION
1. The IEEE 802.15.3c standard enables ________________ connectivity between mobile and fixed consumer devices within the home.
2. The WHDI specification is designed to mirror the screens of multiple devices to the TV screen with the use of ____________.
3. _____________________ uses multiple radios and antennas to steer a signal in the direction of the receiver.
4. ZigBee uses a(n) _______________ encryption key for network-wide communications.
5. Security for IEEE 802.15.3 HR WPANs is based on ________________, a symmetric key encryption mechanism.
MATCHING
a.
biphase modulation
f.
isochronous
b.
channel time allocations
g.
MCTA
c.
contention access period
h.
PNC
d.
D-WVAN
i.
spatial multiplexing
e.
H-WVAN
j.
superframe
1. periods of time allocated by the PNC to a specific device for prioritizing communications
2. the home or parent WVAN
3. time periods used for communication between the devices and the PNC
4. a mechanism used to communicate commands or any asynchronous data that may be present in a superframe
5. a technique that uses multiple radios and multiple antennas to transmit and receive different parts of the same PHY frame
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ACC 557 Week 11 Quiz – Strayer NEW
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Chapter 14
All possible questions with answers
TRUE-FALSE STATEMENTS
Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends.
Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Calculating financial ratios is a financial reporting requirement under generally accepted accounting principles.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Measures of a company's liquidity are concerned with the frequency and amounts of dividend payments.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Analysis of financial statements is enhanced with the use of comparative data.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Comparisons of company data with industry averages can provide some insight into the company's relative position in the industry.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Vertical and horizontal analyses are concerned with the format used to prepare financial statements.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Horizontal, vertical, and circular analyses are the most common tools of financial statement analysis.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Another name for trend analysis is horizontal analysis.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
If a company has sales of $110 in 2012 and $154 in 2013, the percentage increase in sales from 2012 to 2013 is 140%.
Ans: LO: 3, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Performance Measurement
In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, no percentage change for that item can be computed.
Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Common size analysis expresses each item within a financial statement in terms of a percent of a base amount.
Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Vertical analysis is a more sophisticated analytical tool than horizontal analysis.
Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Vertical analysis is useful in making comparisons of companies of different sizes.
Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Meaningful analysis of financial statements will include either horizontal or vertical analysis, but not both.
Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales must be 90%.
Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Performance Measurement
In the vertical analysis of the income statement, each item is generally stated as a percentage of net income.
Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
A ratio can be expressed as a percentage, a rate, or a proportion.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
A solvency ratio measures the income or operating success of an enterprise for a given period of time.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
The current ratio is a measure of all the ratios calculated for the current year.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Inventory turnover measures the number of times on the average the inventory was sold during the period.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
The rate of return on total assets will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain.
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
From a creditor's point of view, the higher the total debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations.
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Investment Decisions
A current ratio of 1.2 to 1 indicates that a company's current assets exceed its current liabilities.
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Performance Measurement
Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
When the disposal of a significant segment occurs, the income statement should report both income from continuing operations and income (loss) from discontinued operations.
Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communcations, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
An event or transaction should be classified as an extraordinary item if it is unusual in nature or if it occurs infrequently.
Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Variations among companies in the application of generally accepted accounting principles may reduce quality of earnings.
Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Pro forma income usually excludes items that the company thinks are unusual or nonrecurring.
Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communcations, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The three basic tools of analysis are horizontal analysis, vertical analysis, and ratio analysis.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
A percentage change can be computed only if the base amount is zero or positive.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
In vertical analysis, the base amount in an income statement is usually net sales.
Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Profitability ratios measure the ability of the enterprise to survive over a long period of time.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The days in inventory is computed by multiplying inventory turnover by 365.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Extraordinary items are reported net of applicable taxes in a separate section of the income statement.
Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
MULTIPLE CHOICE QUESTIONS
Which one of the following is primarily interested in the liquidity of a company?
Federal government
Stockholders
Long-term creditors
Short-term creditors
Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
Which one of the following is not a characteristic generally evaluated in analyzing financial statements?
Liquidity
Profitability
Marketability
Solvency
Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
In analyzing the financial statements of a company, a single item on the financial statements
should be reported in bold-face type.
is more meaningful if compared to other financial information.
is significant only if it is large.
should be accompanied by a footnote.
Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
Short-term creditors are usually most interested in evaluating
solvency.
liquidity.
marketability.
profitability.
Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
Long-term creditors are usually most interested in evaluating
liquidity and solvency.
solvency and marketability.
liquidity and profitability.
profitability and solvency.
Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
Stockholders are most interested in evaluating
liquidity and solvency.
profitability and solvency.
liquidity and profitability.
marketability and solvency.
Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
A stockholder is interested in the ability of a firm to
pay consistent dividends.
appreciate in share price.
survive over a long period.
all of these.
Ans:LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
Comparisons of financial data made within a company are called
intracompany comparisons.
interior comparisons.
intercompany comparisons.
intramural comparisons.
Ans:LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
A technique for evaluating financial statements that expresses the relationship among selected items of financial statement data is
common size analysis.
horizontal analysis.
ratio analysis.
vertical analysis.
Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
Which one of the following is not a tool in financial statement analysis?
Horizontal analysis
Circular analysis
Vertical analysis
Ratio analysis
Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
In analyzing financial statements, horizontal analysis is a
requirement.
tool.
principle.
theory.
Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
Horizontal analysis is also called
linear analysis.
vertical analysis.
trend analysis.
common size analysis.
Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
Vertical analysis is also known as
perpendicular analysis.
common size analysis.
trend analysis.
straight-line analysis.
Ans:LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
In ratio analysis, the ratios are never expressed as a
rate.
negative figure.
percentage.
simple proportion.
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FIN 350 Week 11 Quiz – Strayer
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Quiz 10 Chapter 22 and 23
Finance Company Operations
1. ____ finance companies concentrate on purchasing credit contracts from retailers and dealers.
a.
Consumer
b.
Sales
c.
Commercial
d.
None of the above
2. Which of the following is not a source of finance company funds to support operations?
a.
loans from banks
b.
commercial paper
c.
federal funds
d.
bonds
3. When a finance company's assets are ____ interest rate sensitive than its liabilities and when interest rates are expected to ____, bonds can provide long-term financing at a rate that is completely insulated from rising market rates.
a.
less; increase
b.
less; decrease
c.
more; increase
d.
more; decrease
4. Finance companies differ from commercial banks, savings institutions, and credit unions in that they
a.
normally do not obtain funds from deposits.
b.
focus on financing acquisitions by companies.
c.
focus on providing residential mortgages.
d.
use most of their funds to purchase stocks.
5. Which of the following is not a main source of funds for finance companies?
a.
bank loans
b.
commercial paper issues
c.
bonds
d.
capital
6. Finance companies are more likely to issue bonds when their assets are presently ____ interest-rate sensitive than their liabilities, and when interest rates are expected to ____.
a.
more; decrease
b.
less; increase
c.
more; increase
d.
less; decrease
7. If finance companies were confident about projections of ____ interest rates, they may consider using the funds obtained from issuing bonds to offer loans with ____ rates.
a.
declining; variable
b.
rising; fixed
c.
rising; variable
d.
A and B
8. Finance companies would prefer to increase their long-term debt most once interest rates
a.
have declined.
b.
have increased.
c.
were stable for several years.
d.
were projected to decline.
9. The main competition for finance companies in the consumer loan market comes from
a.
pension funds.
b.
life insurance companies and property and casualty insurance companies.
c.
commercial banks and savings and institutions.
d.
mutual funds.
10. When finance companies purchase a firm's receivables at a discount, and are responsible for processing and collecting the balances of these accounts, they act as a
a.
leasing agent.
b.
lessor.
c.
lessee.
d.
factor.
11. When a finance company purchases equipment for use by another business, the finance company provides financing in the form of
a.
factoring.
b.
leasing.
c.
a banker's acceptance.
d.
a letter of credit.
12. Finance companies are exempt from state regulations.
a. True
b. False
13. Finance companies are not subject to state regulations on intrastate business.
a. True
b. False
14. Finance companies are subject to
a.
a maximum limit on loan size.
b.
ceiling interest rates on loans provided.
c.
a maximum length on loan maturity.
d.
regulations on intra-state banking.
e.
all of the above
15. If finance companies with a greater rate-sensitivity of liabilities than assets wanted to reduce interest-rate risk, they could
a.
shorten their average asset life.
b.
lengthen their average asset life.
c.
shorten the maturity of debt that they issue.
d.
make greater use of fixed-rate loans.
16. Overall, the liquidity risk of finance companies is higher than that of other financial institutions.
a. True
b. False
17. Compared to other lending financial institutions, finance companies have a ____ loan delinquency rate, and the average rate charged on loans is ____ on average.
a.
lower; lower
b.
lower; higher
c.
higher; higher
d.
higher; lower
18. A wholly owned subsidiary whose primary purpose is to finance sales of the parent company's products and services, provide wholesale financing to distributors of the parent company's products, and purchase receivables of the parent company is a
a.
captive finance subsidiary.
b.
factor.
c.
leasing agent.
d.
captive factoring agent.
19. Which of the following statements is incorrect?
a.
A captive finance subsidiary's purpose is to finance sales of the parent company's products and services.
b.
An operating agreement between the parent and the captive specifies the type of receivables that qualify for same and specific services provided by the parent.
c.
A captive can be used to finance distributor or dealer inventories until a sale occurs.
d.
A captive is rarely used to finance products leased to others.
20. ____ provide loans to firms that cannot obtain financing from commercial banks.
a.
Consumer finance companies
b.
Sales finance companies
c.
Commercial finance companies
d.
None of the above
21. Which of the following is not a use of finance company funds?
a.
consumer loans
b.
business loans
c.
commercial paper
d.
real estate loans
e.
All of the above are uses of finance company funds.
22. Finance companies commonly act as ____ for accounts receivable; that is, they purchase a firm's receivables at a discount and are responsible for processing and collecting the balances of these accounts.
a.
brokers
b.
dealers
c.
market makers
d.
factors
e.
none of the above
23. Most finance companies are commonly exposed to all forms of risk below except ____ risk.
a.
exchange rate
b.
interest rate
c.
liquidity
d.
credit
24. Changes in economic growth are ____ related to a finance company's cash flows, and changes in the risk-free rate are ____ related to a finance company's cash flows.
a.
positively; negatively
b.
negatively; positively
c.
negatively; negatively
d.
positively; positively
25. Finance companies participate in the ____ market to reduce interest rate risk.
a.
money
b.
bond
c.
options
d.
swap
26. Many consumer finance companies also provide personal loans, directly to individuals to finance purchases of large household items.
a. True
b. False
27. Business finance companies focus on loans to very large businesses.
a. True
b. False
28. Consumer finance companies sometimes provide Business finance companies to individuals.
a. True
b. False
29. Although commercial paper is available only for short-term financing, finance companies can continually roll over their issues to create a permanent source of funds.
a. True
b. False
30. After interest rates increase, finance companies tend to use more long-term debt to lock in the cost of funds over an extended period of time.
a. True
b. False
31. Some finance companies offer credit card loans through a particular retailer.
a. True
b. False
32. The main competition for finance companies in the consumer loan market comes from pension funds and insurance companies.
a. True
b. False
33. The value of a finance company can be modeled as the present value of its future cash flows.
a. True
b. False
34. The most important risk for finance companies is ____ risk.
a.
settlement
b.
accounting
c.
credit
d.
exchange rate
35. Finance companies can accumulate capital by doing all of the following except
a.
retaining earnings.
b.
issuing stock.
c.
issuing commercial paper.
d.
Finance companies can build their capital base by doing all of the above.
36. Consumer finance companies primarily focus on for
a.
consumer loans.
b.
consumer advising.
c.
consumer regulation.
d.
none of the above
37. Finance companies are regulated by the states but are not subject to regulation by an agency of the federal government.
a. True
b. False
38. Historically, captive finance subsidiaries were associated with:
a.
the automobile industry.
b.
the oil and gas industry.
c.
the textile industry.
d.
department stores.
Chapter 23—Mutual Fund Operations
1. Which of the following statements is incorrect?
a.
Mutual funds serve as a key financial intermediary.
b.
Managers of mutual funds do not analyze economic and industry trends.
c.
Because of their diversification, management expertise, and liquidity, mutual funds have grown at a rapid pace.
d.
Some mutual funds offer check-writing privileges.
2. No-load mutual funds are normally promoted by ____. Load funds are promoted by ____.
a.
registered representatives of a brokerage firm; registered representatives of a brokerage firm
b.
registered representatives of a brokerage firm; the mutual fund of concern
c.
the mutual fund of concern; registered representatives of a brokerage firm
d.
the mutual fund of concern; the mutual fund of concern
3. To cover managerial expenses, mutual funds typically charge
a.
management fees of less than 2 percent of total assets per year.
b.
commissions of typically 8 to 10 percent of transaction market value per year.
c.
management fees of typically more than 10 percent of total assets per year.
d.
commissions of typically 3 to 5 percent of the transaction market value per year.
4. Mutual funds that are willing to repurchase their shares from investors at any time are referred to as
a.
closed-end funds.
b.
load mutual funds.
c.
no-load mutual funds.
d.
open-end mutual funds.
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BUS 536 Week 11 Final Exam – Strayer New
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Chapter 7 Through 12
Chapter 7 – MAKING STRATEGIC ALLIANCEE AND NETWORKS WORK
TRUE/FALSE QUESTIONS
Examples of equity-based alliances include strategic investment.
A non-JV, equity-based alliance can be regarded as two firms “getting married,” but not having “children.”
The term “strategic networks” is derived from the term “social networks” highlighting the social aspects of interfirm relationships.
In regards to strategic alliances and networks, in the traditional industry-based view, firms are dependent players.
From the view of industry structure, in oligopolistic industries, there are an above average number of available players as potential partners.
From the perspective of network position, firms located in the center of interfirm networks accumulate less power and influence.
Firms with a high degree of network centrality are likely to be more attractive partners.
Successful alliances and networks normally avoid socially complex relations among partners.
The ad hoc approach to organization allows firms to systematically learn from the experience.
Since firms act to enhance or protect their legitimacy, copying other reputable organizations is not a way to gain legitimacy.
In finding organizational partners, it is desirable to identify candidates that present both strategic fit and organizational fit.
The more tacit the resources and capabilities are, the less likely firms will prefer equity involvement in establishing relationships.
A firm would prefer equity relationships if it fears that its intellectual property may be expropriated by partners.
As each firm is likely to have multiple interfirm relationships, it is important to not manage the relationships as a corporate portfolio.
Possible ways to minimize the threat of opportunism include swapping critical skills and technologies through credible commitments.
In international alliances, setting up a parallel and reciprocal relationship in the foreign partner’s home country may decrease the incentives for both partners to cooperate.
Weak ties excel at connecting with distant others who possess unique and novel information.
Strong ties are more beneficial to environments conductive for exploitation whereas weak ties are more suitable for exploration.
An increase in the experience of one partner may bring instability into the relationship as it reduces the need to rely on the other partner.
Higher level shared technology is associated with lower profitability for parent firms.
MULTIPLE CHOICE QUESTIONS
1. Strategic alliances involve:
a. Voluntary agreements between firms.
b. Compromises between short-term transactions and long-term solutions.
c. Contracts.
d. Equity-based arrangements.
e. All of the above.
2. Contractual alliances include all of the following except:
a. Co-marketing.
b. Research and development (R&D) contracts.
c. Cross-shareholding.
d. Turnkey projects.
e. Licensing/franchising.
3. A joint venture can be described as:
a. A special case of equity-based alliance.
b. A new legally independent entity.
c. A “corporate child” given birth by two (or more) parent firms.
d. All of the above.
e. None of the above.
4. Which represents an alliance with suppliers?
a. Horizontal alliances.
b. Upstream vertical.
c. Downstream vertical.
d. All of the above.
e. None of the above.
5. Which is not an advantage of strategic alliances and networks?
Reduce costs, risks and uncertainties.
Costs of negotiation and coordination.
Gain access to complementary assets and capabilities.
Opportunities to learn from partners.
Possibilities to use alliances and networks as real options.
6. Which of the following are not true regarding managers involved in alliances and networks?
a. They require relationship skills which foster trust with partners.
b. They must guard against opportunism.
c. They must recognize that interests of the firms fully overlap.
d. They have to represent the interests of their respective firms.
e. They must attempt to make the complex relationship work.
7. Institution-based considerations regarding organization include:
a. Collusion concerns.
b. Entry requirements.
c. The social pressures to find partners.
d. The internalized beliefs in the value of collaboration.
e. All of the above.
8. Cooperation between rivals is usually suspected of being:
a. Tacit collusion.
b. Explicit collusion.
c. Socialism.
d. All of the above.
e. None of the above.
9. Emerging trends concerning formal government policies on entry mode requirements include:
a. More liberal policies.
b. Imposing considerable requirements.
c. A and B above.
d. Welcoming wholly owned subsidiaries.
e. Banning joint ventures.
10. Which (if any) of the following are not involved in the stages of forming business relationships?
The decision to cooperate.
The decision to not cooperate.
The choice of contract or equity.
Positioning the Relationship.
All of the above are involved.
11. The strategic choice concerning whether to form cooperative interfirm relationships or to rely on pure market transactions or M&As to grow the firm is part of:
a. Stage One.
b. Stage Two.
c. Stage Three.
d. Stage Four.
e. Stage Five.
12. In comparing M&As with alliances and networks, which of the following is not correct?
M&As are costly.
M&As have significant transaction costs.
Many M&As end up destroying value.
Alliances and networks preclude future upgrading into possible M&As.
Alliances and networks can be considered as a flexible intermediate solution.
13. Strategic fit refers to whether the partner firm possesses:
Technology.
Capital.
Distribution channels.
A through C above.
Goals, experiences, and behaviors that facilitate cooperation.
14. The first concern in determining whether a relationship should be based on contract or equity is:
The kind of resources and capabilities that are shared.
Direct monitoring and control.
Real options.
Institutional constraints.
None of the above.
15. Weak ties in organizational relationships:
a. Are more trustworthy and are cultivated over a long period of time.
b. Are associated with exchanging finer-grained information.
c. Provide an informal, social control mechanism.
d. A through C above.
e. Are less costly to maintain.
16. As a type of relationship tie, exploitation refers to such things as:
a. Selfishness.
b. Choice.
c. Efficiency.
d. Execution.
e. B through D above.
17. In measuring the performance of strategic alliances and networks, subjective measures include:
Market performance.
Stability.
A and B above.
The level of managers’ satisfaction.
Longevity.
18. Which (if any) of the following will not influence the performance of alliances and networks?
Equity.
Learning and experience.
Nationality.
Relational capabilities.
All can have an influence.
19. A lower level of ____contribution may indicate a firm’s relative lack of commitment:
Equity
Learning and experience
Nationality
Relational capabilities
All of the above
20. The stock market responds favorably to alliance activities, but only under which circumstances?
a. Complementary resources.
b. Previous alliance experience.
c. Ability to manage the host country’s political risk.
d. Partner buyouts.
e. All of the above.
SHORT ANSWER ESSAY QUESTIONS
How can an organizational alliance be “win-win?” How can the concept of “cooperative specialization” help?
Why and how might a “real option” be useful in a joint venture?
A friend of yours stated: “I would never want to be dependent on an alliance. I prefer an acquisition so that everything would be under my control.” How would you respond?
What are the limitations in trying to clearly identify rights and expectations for alliances and acquisitions among global corporations?
What can be done to maintain a successful alliance among global firms?
Chapter 8 – MANAGING GLOBAL COMPETITIVE DYNAMICS
TRUE/FALSE QUESTIONS
Strategy involves planning for actions rather than reactions or interaction.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-1; Bloom’s: Knowledge; Difficulty: Moderate
Multimarket competition occurs when firms engage the same rivals in multiple markets.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-1; Bloom’s: Knowledge; Difficulty: Easy
Multimarket competition destroys mutual forbearance.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-1; Bloom’s: Comprehension; Difficulty: Moderate
If an attack is so subtle that rivals are not aware of it, the attacker’s objectives are not likely to have been attained.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Comprehension; Difficulty: Moderate
If the attacked market is of marginal value, managers may decide not to counterattack.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Comprehension; Difficulty: Easy
The “strategy as action” perspective highlights the power of creative destruction.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-1; Bloom’s: Comprehension; Difficulty: Easy
Bargaining can take place through signals and actions.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Comprehension; Difficulty: Easy
Industry-based considerations are fundamentally concerned with the very first of the Porter five forces, interfirm rivalry.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Moderate
Barriers for entrants with similar products and with substitute products are involved in the other two of the five forces.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Challenging
Collusion survives because it does not have an incentive problem as is illustrated by the prisoner’s dilemma.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Challenging
The capability to attack in multiple markets throws the firm off balance leaving it vulnerable to rivals and thus reducing value.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-3; Bloom’s: Knowledge; Difficulty: Moderate
Firms that have a high degree of resource similarity are likely to have similar strengths and weaknesses.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-3; Bloom’s: Knowledge; Difficulty: Easy
Under antitrust law a company can be in trouble for setting prices too high but not for setting them too low.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 8-3; Bloom’s: Knowledge; Difficulty: Easy
US courts have not sought to unilaterally punish non-US cartels (if they are legal elsewhere) simply because they may have a substantial adverse impact on US markets.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 8-4; Bloom’s: Knowledge; Difficulty: Easy
Critics of US policy on dumping at least agree that our policy on predatory pricing is consistent both domestically and internationally.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 8-4; Bloom’s: Knowledge; Difficulty: Moderate
Thrust makes use of military theory that the attacker needs to have at least a three-to-one advantage to overcome a well-defended position through a conventional frontal assault.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Knowledge; Difficulty: Easy
Local firms’ primary strengths lie in a deep understanding of local markets, and thus they would pursue a dodger strategy.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Comprehension; Difficulty: Moderate
A strategy that leverages local assets is called an extender strategy.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Knowledge; Difficulty: Easy
An extender strategy may be appropriate in some industries where pressures for globalization are relatively low.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Comprehension; Difficulty: Easy
An extender strategy is being used when local firms engage in rapid learning to approach the capabilities of the MNEs and then expand overseas.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Knowledge; Difficulty: Easy
MULTIPLE CHOICE QUESTIONS
21. Which is true of strategy?
f. Business strategy has similarities with military strategy.
g. Military principles cannot be completely applied in business.
h. Militaries fight over territories, waters, and air spaces, firms compete in markets.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-1; Bloom’s: Knowledge; Difficulty: Easy
22. Which of the following are least likely to result in collusion?
f. High concentration ratio.
g. Heterogeneous products.
h. High entry barriers.
i. High market commonality.
j. Industry price leader exists.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Analysis; Difficulty: Challenging
23. The main types of attack include:
f. Thrust.
g. Feint.
h. Gambit.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Knowledge; Difficulty: Easy
24. Issues affecting collaboration include:
f. Secrecy.
g. Exclusivity.
h. Informality.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Moderate
25. In developing a strategy regarding competition or cooperation, it would be useful to not:
Understand the nature of your industry.
Strengthen capabilities that more effectively compete and/or cooperate.
Understand the rules of the game governing competition.
“Look ahead, reason back
All of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-8; Bloom’s: Analysis; Difficulty: Moderate
26. Industry-based considerations regarding strategy:
f. Focus on the nature of collusion.
g. Deal with the relationship between industry structures and firms’ propensity to collude.
h. Deal with the relationship between industry structures and firms’ propensity to collude to competing.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Moderate
27. Explicit collusion is exemplified by:
f. Cartels.
g. Trusts.
h. Users of game theory.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Moderate
28. Firm A may be more successful in imitating Firm B if Firm B:
f. Is competitively aggressive.
g. Carries out complex actions.
h. Uses difficult to execute maneuvers.
i. All of the above.
j. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-3; Bloom’s: Analysis; Difficulty: Moderate
29. Which of the following will enable a firm to be competitive even if there is a lack of top management commitment and employee involvement?
a. Organizational structure.
b. Use of stealth attacks.
c. Rapid responses, and willingness to answer challenges.
d. All of the above.
e. None of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-3; Bloom’s: Analysis; Difficulty: Moderate
30. “The extent to which a given competitor possesses strategic endowment comparable, in terms of both type and amount, to those of the focal firm” refers to similarity of:
Strategy.
Resources.
Markets.
Industry.
Economic environment.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-3; Bloom’s: Knowledge; Difficulty: Moderate
31. Which of the following aspects of U.S. competition/antitrust policy has been opposed by the EU?
f. Collusive price setting.
g. Predatory pricing.
h. Extraterritoriality.
i. Court decisions.
j. Changes in policy.
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 8-4; Bloom’s: Knowledge; Difficulty: Moderate
32. Cartels:
Involvecollusion.
Are often outlawed.
A and B above.
Entail the “prisoner’s dilemma for participants.
All of the above.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-2; Bloom’s: Comprehension; Difficulty: Easy
33. Which is not true concerning US anti trust policy today?
Legislation has legally permitted rivals to join hands in research and development (R&D).
There is increased permissiveness regarding mergers among rivals.
Clarity of policy has improved.
The legal standards for interfirm cooperation are no longer ambiguous in the United States.
The legal standards for interfirm cooperation are ambiguous in many other countries.
AACSB: BUSPROG: Reflective Thinking; DISC: Legal Responsibilities
LO: 8-4; Bloom’s: Analysis; Difficulty: Challenging
34. Dumping is defined as:
Shipping hazardous waste to locations in other countries.
An exporter selling below cost abroad.
Unloading unsold inventory from the US in other countries.
Excessive criticism of international rivals.
Getting rid of unprofitable operations.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-4; Bloom’s: Knowledge; Difficulty: Easy
35. Which of the following would not be considered an initial set of actions to gain competitive advantage:
a. Price cuts.
b. Advertising campaigns.
c. Market entries.
d. Counterattacks.
e. New product introductions.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Comprehension; Difficulty: Easy
36. A firm's attack on a focal arena important to a competitor, but not the attacker's true target area, is referred to as:
f. Thrust.
g. Feint.
h. Gambit.
i. Miscalculation.
j. Practice attack.
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-5; Bloom’s: Knowledge; Difficulty: Easy
37. The three drivers of counterattacks do not include:
Awareness.
Motivation.
Capability.
B and C above.
Vengeance.
AACSB: BUSPROG: Reflective Thinking; DISC: Motivation Concepts
LO: 8-5; Bloom’s: Comprehension; Difficulty: Moderate
38. Which of the following is not a legal means of signaling?
Nonaggression or fat cat.
Direct discussion of reduced rivalry with competitors.
Truce seeking.
Communication via governments.
Strategic alliances.
AACSB: BUSPROG: Analytic; DISC: Legal Responsibilities
LO: 8-5; Bloom’s: Knowledge; Difficulty: Moderate
39. In some industries where pressures for globalization are relatively low, local firms may possess some skills and assets that are transferable overseas, thus leading to a/an_____strategy.
Defender
Extender
Dodger
Contender
Transfer
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Comprehension; Difficulty: Moderate
40. Local firms in emerging economies typically can at least match the ________ of MNEs.
a. Expertise
b. Experience
c. Endowments
d. A and B above
e. None of the above
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 8-6; Bloom’s: Knowledge; Difficulty: Easy
SHORT ANSWER ESSAY QUESTIONS
The text points out that modern ideas of strategy, pioneered by Michael Porter, have turned IO economics “on its head.” While IO economics attempts to prevent any firm from gaining sustained competitive advantage, the very purpose of strategy is to gain a sustainable advantage. Is that good or bad?
Dumping involves selling something below cost. Using what you have learned in accounting or economics (or perhaps by talking to someone familiar with these courses) point out why it might sometimes be difficult to prove that a firm is selling below cost.
3. In the interest of maintaining high standards for international trade, the U.S. has at various times attempted to legislate the behavior of U.S. based companies. It has even at times tried to apply U.S. standards to those from other countries. Does this make sense to you?
Can national policies that seek to promote the well being of its citizens by its attempts to maintain competition actually have the opposite effect? Why or why not?
In some of the discussions of strategy. It was suggested that a firm might attempt to mislead a rival as to the firm’s true objective – i.e. feint. Is that unethical? Explain.
Chapter 9 – DIVERSIFYING, ACQUIRING, AND RESTRUCTURING
TRUE/FALSE QUESTIONS
Operational synergy involves economies of scale.
a. True b. False
AACSB: BUSPROG: Reflective Thinking; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy
Not all product-related diversifiers outperform product-unrelated diversifiers.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-2; Bloom’s: Comprehension; Difficulty: Easy
Porter’s five forces affect the structural attractiveness of an industry.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Comprehension; Difficulty: Moderate
The economic benefits of the last unit of growth (such as the last acquisition) can be defined as MBC.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-2; Bloom’s: Knowledge; Difficulty: Easy
The scope of the firm is thus determined by a comparison between MEB and MBC.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-2; Bloom’s: Knowledge; Difficulty: Moderate
In the United States between the 1950s and 1970s MEB decreased, resulting in a decreased scope of the firm into conglomeration.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-2; Bloom’s: Knowledge; Difficulty: Moderate
By the 1980s MBC began to decrease.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-2; Bloom’s: Knowledge; Difficulty: Easy
Interest in conglomerates has declined in emerging economies due to their developed capital markets.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Comprehension; Difficulty: Easy
You should understand that the nature of your industry might call for diversification, acquisitions, and restructuring.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-6; Bloom’s: Knowledge; Difficulty: Easy
You and your firm need to develop policies that avoid acquisitions and restructuring.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-6; Bloom’s: Knowledge; Difficulty: Easy
Answering why firms choose different diversification strategies does not help answer why firms differ and how they behave.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Comprehension; Difficulty: Easy
A superior product-related diversification strategy does not require a centralized and cooperative organizational architecture in order to add value.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy
Instead of operational synergy, conglomerates focus on financial synergy.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy
Diversification discount is the situation when unrelated-product diversification enables conglomerate units to beat stand-alone rivals.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy
When conglomerate units are better off competing as stand-alone entities, we call it diversification premium.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy
Research shows that the linkage between product diversification and firm performance seems to be inverted-U shaped.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Creation of Value
LO: 9-1; Bloom’s: Knowledge; Difficulty: Easy
Porter’s five forces model can be used in regards to the structural attractiveness of an industry.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Knowledge; Difficulty: Moderate
High entry barriers often result in green-field entries as opposed to acquisitions.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Comprehension; Difficulty: Moderate
An industry whose products can be easily substituted faces more threats from other firms currently not in the same industry.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-2; Bloom’s: Comprehension; Difficulty: Easy
Although the term mergers and acquisitions (M&As) is often used, in reality, acquisitions dominate the scene.
a. True b. False
AACSB: BUSPROG: Analytic; DISC: Strategy
LO: 9-3; Bloom’s: Knowledge; Difficulty: Easy
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ECO 450 Week 11 Final Exam – Strayer
ECO 450 Week 11 Final Exam – Strayer
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Chapters 8 Through 18
ECO 450 Week 6 Quiz
Chapter 8
Social Security and Social Insurance
True/False Questions
1. The Social Security pension system is a fully funded retirement plan.
2. Social Security pension benefits are transfers from workers to retirees.
3. Social Security pensions are financed by voluntary contributions by workers.
4. The gross replacement rate measures the ratio of taxes paid per year by workers to their annual Social Security pension when they retire.
5. In the year prior to retirement, a worker earned $20,000 and paid $5,000 in taxes on those earnings. His annual Social Security pension is $10,000 per year. Then it follows that his net replacement rate is 50 percent.
6. The gross replacement rate for Social Security pensions is the same for all workers independent of their preretirement earnings.
7. The annual growth in wages subject to Social Security taxes is 3 percent. Given the payroll tax rate, the growth in funds available to pay pension benefits is also 3 percent.
8. The asset-substitution effect of Social Security pensions discourages saving.
9. The availability of Social Security pensions to workers over normal retirement age results in an income effect unfavorable to work but no substitution effect.
10. The bequest effect of Social Security encourages workers to save less.
11. The normal retirement age for Social Security old-age pensions is 67 for people born in the United States in 1960 or later.
12. Workers in the United States can retire under Social Security at age 62 with lower pensions than they would receive at their normal retirement age.
13. As of 2009, retired workers between the ages of 62 and their normal retirement age were subject to an “earnings test” that reduced their pension by $1 for each $2 of earnings after a certain minimum level of earnings.
14. Reducing the replacement rate will have no effect on the tax rate necessary to finance pensions under a pay-as-you-go, tax-financed pension system.
15. Workers who quit their jobs are eligible for unemployment insurance benefits in the United States.
16. By 2050, the expected percentage of the U.S. population that is considered elderly will be less than 20%.
17. Social Security was created in 1965.
18. On average, the elderly are less likely to be poor when compared to the rest of the U.S. population.
Multiple Choice Questions
1. The Social Security retirement system:
a. is a fully funded pension system.
b. is a tax-financed system that pays benefits from taxes that are invested to return principal and interest to workers when they retire.
c. is a tax-financed retirement system that finances pensions by taxing workers each year and transferring the bulk of revenues obtained directly to retirees.
d. does not use taxes on workers to pay pensions to retirees.
2. The gross replacement rate:
a. measures a worker’s monthly retirement benefit divided by monthly earnings before taxes in the year prior to retirement.
b. measures a worker’s monthly retirement benefit divided by monthly earnings after taxes in the year prior to retirement.
c. is an increasing function of gross monthly earnings prior to retirement.
d. is independent of gross monthly earnings prior to retirement.
3. A worker earns $2,000 per month before taxes. He pays $140 per month payroll tax on those wages.In addition, the income taxes on those wages are $360 per month. On retirement, the worker receives a Social Security pension of $750 per month. Which of the following statements is true?
a. The worker’s gross replacement rate is 50 percent.
b. The worker’s net replacement rate is 50 percent.
c. The worker’s net replacement rate is 38 percent.
d. The worker’s net replacement rate is 75 percent.
4. The growth in hourly wages over the past 50 years has averaged about 2 percent per year. However, the growth in Social Security pensions has far exceeded this 2-percent rate. The growth in tax revenue to finance Social Security benefits in excess of 2 percent per year can be accounted for by:
a. increases in payroll tax rates.
b. use of other taxes beside the payroll tax to pay Social Security benefits.
c. an increase in the number of workers paying Social Security taxes.
d. either (a) or (b)
e. either (a) or (c)
5. Given the structure and level of gross replacement rates and the expected future growth of labor earnings subject to the payroll tax, the tax rates used to tax payrolls were increased in the 1980s because:
a. the number of retirees per worker will increase.
b. the number of retirees per worker will decrease.
c. wages are expected to decline.
d. the size of the work force is expected to increase.
6. Which of the following is likely to increase the net federal debt as a share of GDP?
a. a federal budget surplus.
b. a federal budget deficit.
c. a recession.
d. either b or c.
7. The asset-substitution effect of the Social Security retirement system leads all workers to:
a. save more for retirement.
b. save less for retirement.
c. save absolutely nothing for retirement.
d. work more
8. Which of the following is a consequence of a growing federal budget deficit in the United States?
a. A decrease in the federal debt outstanding.
b. An increase in the federal debt outstanding.
c. A decrease in the portion share of federal government expenditures that must be allocated to interest in the future.
d. An increase in national saving.
9. The induced-retirement effect of the Social Security pension system induces workers to:
a. save less for retirement.
b. save more for retirement.
c. reduce savings for retirement to zero.
d. work more after retirement.
10. Unemployment insurance benefits are:
a. financed by payroll taxes levied on workers.
b. financed by payroll taxes levied on employers.
c. both (a) and (b)
d. financed by sales taxes.
11. Which of the following is true about the Social Security pension system in the United States?
a. Pensions received by retired workers are based entirely on their contributions to the Social Security pension trust fund and the investment return on that fund.
b. Pensions received by married retirees with dependents are greater than that received by those without dependents.
c. Gross replacement rates are inversely related to preretirement earnings.
d. both (b) and (c)
12. Which of the following can decrease tax rates necessary to pay pensions for a pay-as-you-go pension system?
a. an increase in replacement rates
b. a decrease in the retirement age
c. an increase in the size of the work force
d. an increase in the number of retirees
13. Unless legislation is introduced to change the normal retirement age, people born in 1960 or later will be able to retire with full Social Security benefits at age:
a. 62.
b. 65.
c. 66.
d. 67.
14. The earnings test for retirees:
a. increases their incentive to work.
b. is applied to all retirees.
c. is applied only to retirees below normal retirement age.
d. reduces pension benefits by $1 for each $2 of earnings.
e. both (c) and (d)
15. A nation has 40 million current retirees and a work force of 100 million. Which of the following is true?
a. The replacement rate is 40 percent.
b. The replacement is 2.5.
c. The dependency ratio is 0.4.
d. The dependency ratio is 2.5.
16. Social Security tax rates can be reduced if:
a. taxable wages decline.
b. the retirement age is lowered.
c. the retirement age is raised.
d. the work force decreases in size.
17. A retiree subject to the earnings test under Social Security:
a. can earn as much as he or she chooses without losing Social Security pension benefits.
b. has his or her Social Security pension benefits reduced by one dollar for each dollar of labor earnings.
c. has his or her Social Security pension benefits reduced immediately by one dollar for each three dollars of labor earnings.
d. has his or her Social Security pension benefits reduced by one dollar for each two dollars of earnings after a certain minimum amount per year.
18. A pay-as-you-go social security retirement system is:
a. exemplified by the current U.S. social security system.
b. exemplified by the current Chilean social security system.
c. designed to have retirees set aside a contribution specifically for themselves during their earlier working life.
d. both (a) and (b).
19. Approximately, what percentage of beneficiaries of U.S. Social Security are retired workers?
a. 50%
b. 60%
c. 70%
d. 80%
20. The Social Security Act was implemented in the United States in:
a. 1927.
b. 1935.
c. 1947.
d. 1965.
Chapter 9
Government and Health Care
True/False Questions
1. In the United States the government pays the health bills of 90 percent of the population.
2. The American system of health care is financed by a mix of private and government insurance programs that pay over 80 percent of the health care bills for U.S. citizens.
3. Spending per person on health care in the United States is less than in the United Kingdom where national health insurance finances health expenditures.
4. Government spending on health care is declining as a percent of total government spending.
5. Medicare is a government program of health insurance for the elderly.
6. Exclusion of employer-provided health insurance to employees is an indirect subsidy to private provision of health insurance.
7. Third-party payments for health care services increase the quantity of health care demanded by reducing out-of-pocket costs to patients.
8. An increase in coinsurance and deductibles for health insurance can contribute to a reduction in expenditures on health care.
9. Half of Americans do not have health insurance coverage.
10. Under national health insurance in Great Britain, the price system is used to ration health care.
11. Approximately 16 percent of GDP was allocated to provision of health care in the United States as of 2006.
12. Individuals in the United States, on average, pay 50 percent of their health care costs out-of-pocket, and the remaining 50 percent is paid by insurance, governments, and charity.
13. Asymmetric information in the market for health care occurs when sellers of medical care are better informed about cost and quality of care than buyers.
14. Because of third-party payment for services in the market for health care, the price paid by buyers is less than the payment sellers receive, and the marginal social cost of health care exceeds its marginal social benefit.
15. Medicaid costs are paid entirely by the federal government.
16. Healthcare expenditures in the U.S. are projected to be 20% of GDP by 2017.
17. Asymmetric information can occur when the provider of a service is better informed than the consumer of the service.
18. A risk averse individual prefers to pay certain modest costs in exchange for possible unforeseen high costs.
Multiple Choice Questions
1. Most of the medical bills of Americans in the United States are paid by:
a. the patients.
b. private and government health insurance.
c. charities.
d. Medicaid.
2. Since 1960, expenditures on health care as a percent of GDP has:
a. been cut in half.
b. nearly tripled.
c. remained the same.
d. doubled.
3. The government program that provides the health insurance to the poor in the United States is called:
a. national health insurance.
b. Medicare.
c. Medicaid.
d. employer-provided health insurance.
4. Which of the following programs accounts for the greatest amount of government expenditures on public health in the United States?
a. Medicare
b. worker’s compensation
c. the Public Health Service
d. medical research
5. Which of the following subsidizes private provision of health insurance?
a. Medicare
b. Medicaid
c. the Public Health Service
d. tax exclusion of the value of employer-provided health insurance to workers
6. Which of the following could help decrease the rate of increase of spending on health care in the United States?
a. a reduction in the deductibles on private health insurance policies
b. an increase in the coinsurance rate on health insurance and subjecting a larger volume of services to coinsurance
c. extension of Medicaid insurance to all persons who are poor
d. a reduction in the coinsurance rate on health insurance and subjecting a smaller volume of services to coinsurance
7. Which of the following is an example of the “moral hazard of health insurance”?
a. an increase in the number of surgeries prescribed for benign prostate disease beyond the point at which the marginal benefit equals the marginal cost
b. a decreased willingness of individuals to go to the doctor for minor ailments because of increases in coinsurance rates
c. an underallocation of resources to medical care because of monopoly power of hospitals
d. experience rating of health insurance groups by health insurers
8. A third-party payment system for health care:
a. results because of externalities in the production of health care services.
b. encourages more than the efficient amount of resources to be allocated to health care.
c. encourages patients and health care providers to economize on the use of health care resources.
d. means that patients pay the full price for health care services they consume.
9. Which of the following services is typically not covered under private health insurance and Medicare in the United States?
a. treatment for heart attack
b. surgery
c. office visits to physicians
d. long-term care services
10. Under national health insurance as operated in Great Britain,
a. the British system pays fees equal to half of the costs of services provided to them.
b. general practice physicians are paid on a per-patient rather than on a per-unit-of-service basis.
c. patients requiring surgery can pick their surgeons and can usually obtain the surgery in a matter of days, even if it is not an emergency.
d. there are no government limits on health care spending by hospitals.
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BUS 517 Final Exam – Strayer New
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Final Exam, Part 1: Chapters 6-8
Final Exam, Part 2, Chapters 9-12
Final Exam, Part 3: Chapters 13-14 and Chapter 16
Ch6
1. Information to develop a project network is collected from the
A. Organization breakdown structure
B. Work breakdown structure
C. Budget
D. Project proposal
E. Responsibility matrix
2. Which of the following represents an activity on an AON project network?
A. An arrow
B. A line
C. A node
D. Both A and B are correct
E. A, B, and C are all correct
3. Arrows on an AON project network represent:
A. An activity
B. Project flow
C. Dependency
D. Both B and C are correct
E. Both A and B are correct
4. When translated into a project network, a work package will become
A. A single activity
B. One or more activities
C. A milestone
D. A critical path
E. An arrow
5. Which of the following is provided by a project network but not by the work breakdown structure?
A. Dependencies
B. Sequencing
C. Interrelationships
D. Both A and B are correct
E. A, B, and C are all correct
6. On a project network, the activity times are derived from the
A. Organization breakdown structure
B. Work packages
C. Budget
D. Project proposal
E. Responsibility matrix
7. Part of a project is to Develop Product Specifications. This is best classified as a(n)
A. Event
B. Path
C. Activity
D. Node
E. Milestone
8. An activity that has more than one dependency arrow flowing into it is termed a(n)
A. Parallel activity
B. Critical path
C. Burst activity
D. Merge activity
E. Independent activity
9. The critical path in a project network is the
A. Shortest path through the network
B. Longest path through the network
C. Network path with the most difficult activities
D. Network path using the most resources
E. Network path with the most merge activities
10. A/an _________ activity has more than one dependency arrow flowing from it.
A. Parallel
B. Critical path
C. Burst
D. Merge
E. Independent
11. An item on a project network is Design Software Completed. This is best described as a(n)
A. Event
B. Path
C. Activity
D. Node
E. Milestone
12. Activities which can take place at the same time are termed
A. Parallel activity
B. Critical path
C. Burst activity
D. Merge activity
E. Independent activity
13. A sequence of connected, dependent activities is termed a(n)
A. Critical path
B. Parallel path
C. Activity chain
D. Path
E. Dependent chain
14. An AON project network uses which of the following basic building blocks?
A. Arrows
B. Bars
C. Nodes
D. Both A and C are correct
E. A, B, and C are all correct
15. Which of the following is not one of the basic rules to follow when developing project networks?
A. An activity cannot begin until all preceding activities have been completed
B. Each activity must have a unique identification number
C. Conditional statements are allowed but looping statements are not allowed
D. An activity identification number must be larger that that of any preceding activities
E. Networks flow from left to right
16. ________ activities must be completed immediately before a particular activity.
A. Merge
B. Burst
C. Predecessor
D. Successor
E. Critical
17. ________ activities are to be completed immediately following a particular activity.
A. Merge
B. Burst
C. Predecessor
D. Successor
E. Critical
18. The forward pass in project network calculations determines the
A. Earliest time's activities can begin
B. Earliest time's activities can be finished
C. Duration of the project
D. Both A and B are correct
E. A, B, and C are all correct
19. The backward pass in project network calculations determines the
A. Latest time's activities can begin
B. Earliest time's activities can be finished
C. Critical path
D. Both A and C are correct
E. A, B, and C are all correct
20. Which of the following correctly calculates the early finish for an activity?
A. LS + DUR
B. ES + DUR
C. LF + DUR
D. ES + SL
E. LF + SL
21. Which of the following correctly calculates the late start for an activity?
A. EF - DUR
B. ES - DUR
C. LF - DUR
D. ES - SL
E. LF - SLACK
22. The amount of time an activity can be delayed and yet not delay the project is termed
A. Total slack
B. Free slack
C. Critical float
D. Float pad
E. Slip pad
23. Which of the following will correctly calculate the total slack in an activity?
A. LS - ES
B. LF - EF
C. LS - LF
D. LF - ES
E. Both A and B are correct
24. The laying pipe example in the text illustrates the concept of
A. Laddering
B. Hammock activities
C. Critical path
D. Concurrent engineering
E. Forward pass
25. Using a special color copy machine for a tradeshow publication illustrates the concept of
A. Laddering
B. Hammock activities
C. Critical path
D. Concurrent engineering
E. Forward pass
26. If, for some reason, the project must be expedited to meet an earlier date, which of the following actions would the project manager take first?
A. Check to see which activities cost the least
B. Check to see which activities have the longest duration
C. Check to see which activities are on the critical path
D. Check to see which activities have the most slack
E. Check to see which activities have the highest risk
27. Typically an activity on a project network represents
A. A single work package
B. One or more tasks from a work package
C. Several work packages
D. A sub-deliverable
E. A cost account
28. Project network logic errors include which of the following?
A. Activities with less than 1 day duration
B. Sequences such as "if test successful build prototype, if failure redesign"
C. A sequence such as B succeeds A, C succeeds B, A succeeds C
D. Both B and C are network logic errors
E. A, B, and C are all network logic errors
29. Which company utilized concurrent engineering to design a new line of cars and in the process completed its development six months ahead of schedule?
A. General Motors
B. Chrysler
C. Ford
D. Nissan
E. Toyota
30. The minimum amount of time a dependent activity must be delayed to begin or end is referred to as:
A. Hammock
B. Laddering
C. Lag
D. Cushion
E. Buffer
31. The requirement for a freshly poured foundation to cure before beginning construction is an example of which of the following type of lag?
A. Start to Start
B. Start to Finish
C. Finish to Finish
D. Finish to Start
E. Any of these could be correct
32. Concurrent engineering is a good example of good use of
A. Start to Start lags
B. Start to Finish lags
C. Finish to Finish lags
D. Finish to Start lags
E. Any of these could be correct
33. If testing cannot be completed any earlier than four days after the prototype is built, which of the following type of lag exists?
A. Start to Start
B. Start to Finish
C. Finish to Finish
D. Finish to Start
E. Any of these could be correct
34. Which of the following represents an activity on an AOA project network?
A. An arrow
B. A line
C. A node
D. Both A and B are correct
E. A, B, and C are all correct
35. Nodes on an AON project network represent:
A. An activity
B. An event
C. Responsibility
D. Both B and C are correct
E. Both A and B are correct
36. A(n) ________ is an element in the project that consumes time.
________________________________________
37. The activity time estimates used to build a project network are derived from ________.
________________________________________
38. A ________ is an activity that has more than one predecessor.
________________________________________
39. In a ________ the delaying of any activity will delay the completion of the project by the same amount.
________________________________________
40. Activities that can take place at the same time if the manager wishes them to are called ________.
________________________________________
41. A (n) ________ represents a point in time when an activity is started or completed and does not consume time.
________________________________________
42. A (n) ________ has more than one successor activity.
________________________________________
43. The ________ approach to creating project networks has come to dominate most projects.
________________________________________
44. In a project network, ________ (recycling through a set of activities) is not permitted.
________________________________________
45. In a project network, ________ indicate precedence and flow.
________________________________________
46. The ________ method for creating project networks is sometimes called the Precedence Diagram Method.
________________________________________
47. Activities that must occur immediately before a given activity are called ________ activities.
________________________________________
48. Activities that must immediately follow a given activity are called ________ activities.
________________________________________
49. Activities that can occur while an activity is taking place are called ________ activities.
________________________________________
50. The ________ calculates the earliest times that activities can be started or finished.
________________________________________
51. The ________ calculates the critical path and determines how long an activity can be delayed without delaying the project.
________________________________________
52. An activity is on the critical path if its ________ is the lowest in the network.
________________________________________
53. ________ can never be negative and applies only to the last activity in a single chain of activities.
________________________________________
54. A(n) ________ is the minimum amount of time a dependent activity must be delayed to begin or end.
________________________________________
55. In the ________ technique, an activity with a long duration is broken into smaller segments so that the following activities can begin sooner.
________________________________________
56. ____________ is defined as the difference between the EF of an activity and the ES of the activity that follows it.
________________________________________
57. ___________ reflects the likelihood the original critical path(s) will change once the project is initiated.
________________________________________
58. A ____________ lag exists if debug cannot begin until two days after coding has started and that coding must be completed four days before debug can be completed.
________________________________________
59. The _________ lag is the most typical type of lag that is encountered in developing networks.
________________________________________
60. A __________ activity is frequently used to identify the use of fixed resources or costs over a segment of the project.
________________________________________
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ACC 560 Week 11 Quiz – Strayer NEW
ACC 560 Week 11 Quiz – Strayer NEW
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Week 11 Quiz 10: Chapter 14
TRUE-FALSE STATEMENTS
1. Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends.
Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
2. Calculating financial ratios is a financial reporting requirement under generally accepted accounting principles.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
3. Measures of a company's liquidity are concerned with the frequency and amounts of dividend payments.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
4. Analysis of financial statements is enhanced with the use of comparative data.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
5. Comparisons of company data with industry averages can provide some insight into the company's relative position in the industry.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
6. Vertical and horizontal analyses are concerned with the format used to prepare financial statements.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
7. Horizontal, vertical, and circular analyses are the most common tools of financial statement analysis.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
8. Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
9. Another name for trend analysis is horizontal analysis.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
10. If a company has sales of $110 in 2012 and $154 in 2013, the percentage increase in sales from 2012 to 2013 is 140%.
Ans: LO: 3, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Performance Measurement
11. In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, no percentage change for that item can be computed.
Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
12. Common size analysis expresses each item within a financial statement in terms of a percent of a base amount.
Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
13. Vertical analysis is a more sophisticated analytical tool than horizontal analysis.
Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
14. Vertical analysis is useful in making comparisons of companies of different sizes.
Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
15. Meaningful analysis of financial statements will include either horizontal or vertical analysis, but not both.
Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
16. Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales must be 90%.
Ans: LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Performance Measurement
17. In the vertical analysis of the income statement, each item is generally stated as a percentage of net income.
Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
18. A ratio can be expressed as a percentage, a rate, or a proportion.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
19. A solvency ratio measures the income or operating success of an enterprise for a given period of time.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
20. The current ratio is a measure of all the ratios calculated for the current year.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
21. Inventory turnover measures the number of times on the average the inventory was sold during the period.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
22. Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
23. The rate of return on total assets will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain.
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Performance Measurement
24. From a creditor's point of view, the higher the total debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations.
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Investment Decisions
25. A current ratio of 1.2 to 1 indicates that a company's current assets exceed its current liabilities.
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Performance Measurement
26. Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."
Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
27. When the disposal of a significant segment occurs, the income statement should report both income from continuing operations and income (loss) from discontinued operations.
Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communcations, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
28. An event or transaction should be classified as an extraordinary item if it is unusual in nature or if it occurs infrequently.
Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
29. Variations among companies in the application of generally accepted accounting principles may reduce quality of earnings.
Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
30. Pro forma income usually excludes items that the company thinks are unusual or nonrecurring.
Ans: LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communcations, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
31. The three basic tools of analysis are horizontal analysis, vertical analysis, and ratio analysis.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
32. A percentage change can be computed only if the base amount is zero or positive.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
33. In vertical analysis, the base amount in an income statement is usually net sales.
Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
34. Profitability ratios measure the ability of the enterprise to survive over a long period of time.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
35. The days in inventory is computed by multiplying inventory turnover by 365.
Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
36. Extraordinary items are reported net of applicable taxes in a separate section of the income statement.
Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
MULTIPLE CHOICE QUESTIONS
37. Which one of the following is primarily interested in the liquidity of a company?
a. Federal government
b. Stockholders
c. Long-term creditors
d. Short-term creditors
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
38. Which one of the following is not a characteristic generally evaluated in analyzing financial statements?
a. Liquidity
b. Profitability
c. Marketability
d. Solvency
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
39. In analyzing the financial statements of a company, a single item on the financial statements
a. should be reported in bold-face type.
b. is more meaningful if compared to other financial information.
c. is significant only if it is large.
d. should be accompanied by a footnote.
Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
40. Short-term creditors are usually most interested in evaluating
a. solvency.
b. liquidity.
c. marketability.
d. profitability.
Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
41. Long-term creditors are usually most interested in evaluating
a. liquidity and solvency.
b. solvency and marketability.
c. liquidity and profitability.
d. profitability and solvency.
Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
42. Stockholders are most interested in evaluating
a. liquidity and solvency.
b. profitability and solvency.
c. liquidity and profitability.
d. marketability and solvency.
Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
43. A stockholder is interested in the ability of a firm to
a. pay consistent dividends.
b. appreciate in share price.
c. survive over a long period.
d. all of these.
Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
44. Comparisons of financial data made within a company are called
a. intracompany comparisons.
b. interior comparisons.
c. intercompany comparisons.
d. intramural comparisons.
Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
45. A technique for evaluating financial statements that expresses the relationship among selected items of financial statement data is
a. common size analysis.
b. horizontal analysis.
c. ratio analysis.
d. vertical analysis.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
46. Which one of the following is not a tool in financial statement analysis?
a. Horizontal analysis
b. Circular analysis
c. Vertical analysis
d. Ratio analysis
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
47. In analyzing financial statements, horizontal analysis is a
a. requirement.
b. tool.
c. principle.
d. theory.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
48. Horizontal analysis is also called
a. linear analysis.
b. vertical analysis.
c. trend analysis.
d. common size analysis.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
49. Vertical analysis is also known as
a. perpendicular analysis.
b. common size analysis.
c. trend analysis.
d. straight-line analysis.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
50. In ratio analysis, the ratios are never expressed as a
a. rate.
b. negative figure.
c. percentage.
d. simple proportion.
Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
51. The formula for horizontal analysis of changes since the base period is the current year amount
a. divided by the base year amount.
b. minus the base year amount divided by the base year amount.
c. minus the base year amount divided by the current year amount.
d. plus the base year amount divided by the base year amount.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
52. Horizontal analysis evaluates a series of financial statement data over a period of time
a. that has been arranged from the highest number to the lowest number.
b. that has been arranged from the lowest number to the highest number.
c. to determine which items are in error.
d. to determine the amount and/or percentage increase or decrease that has taken place.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
53. Horizontal analysis evaluates financial statement data
a. within a period of time.
b. over a period of time.
c. on a certain date.
d. as it may appear in the future.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
54. Assume the following sales data for a company:
2014 $1,050,000
2013 950,000
2012 800,000
2011 550,000
If 2011 is the base year, what is the percentage increase in sales from 2011 to 2013?
a. 100%
b. 90.9%
c. 72.7%
d. 52.4%
Ans: LO: 3, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Business Economics
55. Comparative balance sheets are usually prepared for
a. one year.
b. two years.
c. three years.
d. four years.
Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
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FIN 540 Week 11 Final Exam – Strayer NEW
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Chapters 24 Through 30
CHAPTER 24—BANKRUPTCY, REORGANIZATION, AND LIQUIDATION
TRUE/FALSE
1. A central question that must be addressed in bankruptcy proceedings is whether the firm's inability to meet scheduled interest payments results from a temporary cash flow problem or from a potentially permanent problem caused by falling asset values.
2. In the event of bankruptcy under the federal bankruptcy laws, debtholders have a prior claim to a firm's income and assets before both common and preferred stockholders. Moreover, in a bankruptcy all debtholders are treated equally as a single class of claimants.
3. The basic doctrine of fairness under bankruptcy provisions states that claims must be recognized in the order of their legal and contractual priority.
4. The primary test of feasibility in a reorganization is whether the firm's fixed charges after reorganization can be covered by its projected cash flows.
5. Bankruptcy plays no role in settling labor disputes and product liability suits. Such issues are outside the bounds of bankruptcy law and are covered by other statutes.
6. Bankruptcy laws have been used to help reach settlements in major product liability lawsuits. By using financial projections to show that contingent claims against the company jeopardize its existence, agreements are reached, partially satisfying claimants, and allowing the firm to continue operating.
7. Even if a firm's cash flow projections indicate that it will soon be unable to meet its interest payments, a bankruptcy case cannot begin until the firm actually defaults on a scheduled payment.
8. One of the actions that can be taken in bankruptcy under the standard of feasibility is to replace existing management with a new team if the quality of management is judged to have been substandard.
MULTIPLE CHOICE
9. Chapter 7 of the Bankruptcy Act is designed to do which of the following?
a.
Establish the rules of reorganization for firms with projected cash flows that eventually will be sufficient to meet debt payments.
b.
Ensure that the firm is viable after emerging from bankruptcy.
c.
Allow the firm to negotiate with each creditor individually.
d.
Provide safeguards against the withdrawal of assets by the owners of the bankrupt firm and allow insolvent debtors to discharge all of their obligations and to start over unhampered by a burden of prior debt.
e.
Protect shareholders against creditors.
10. Which of the following statements is most CORRECT?
a.
Federal bankruptcy law deals only with corporate bankruptcies. Municipal and personal bankruptcy are governed solely by state laws.
b.
All bankruptcy petitions are filed by creditors seeking to protect their claims against firms in financial distress. Thus, all bankruptcy petitions are involuntary as viewed from the perspective of the firm's management.
c.
Chapters 11 and 7 are the most important bankruptcy chapters for financial management purposes. If a reorganization plan cannot be worked out under Chapter 11, then the company will be liquidated as prescribed in Chapter 7 of the Act.
d.
"Restructuring" a firm's debt can involve forgiving a certain portion of the debt, but it cannot call for changing the debt's maturity or its contractual interest rate.
e.
Our bankruptcy laws were enacted in the 1800s, revised in the 1930s, and have remained unaltered since that time.
11. Which of the following statements is most CORRECT?
a.
The primary test of feasibility in a reorganization is whether every claimant agrees with the reorganization plan.
b.
The basic doctrine of fairness states that all debtholders must be treated equally.
c.
Since the primary issue in bankruptcy is to determine the sharing of losses between owners and creditors, the "public interest" is not a relevant concern.
d.
While a firm is in bankruptcy, the existing management is always allowed to retain control, though the court will monitor its actions closely.
e.
To a large extent, the decision to dissolve a firm through liquidation versus keeping it alive through reorganization depends on a determination of the value of the firm if it is rehabilitated versus the value of its assets if they are sold off individually.
12. What would be the priority of the claims as to the distribution of assets in a liquidation under Chapter 7 of the Bankruptcy Act? 1 is the highest claim, 5 is the lowest.
(1)
Trustees' costs to administer and operate the firm.
(2)
Common stockholders.
(3)
General, or unsecured, creditors.
(4)
Secured creditors, who have a claim to the proceeds from the sale of specific property pledged to secure a loan.
(5)
Taxes due to federal and state governments.
a.
5, 4, 1, 3, 2
b.
4, 1, 5, 3, 2
c.
5, 1, 4, 2, 3
d.
1, 5, 4, 3, 2
e.
1, 4, 3, 5, 2
CHAPTER 25—PORTFOLIO THEORY AND ASSET PRICING MODELS
TRUE/FALSE
1. The slope of the SML is determined by the value of beta.
2. If you plotted the returns of Selleck & Company against those of the market and found that the slope of your line was negative, the CAPM would indicate that the required rate of return on Selleck's stock should be less than the risk-free rate for a well-diversified investor, assuming that the observed relationship is expected to continue in the future.
3. If the returns of two firms are negatively correlated, then one of them must have a negative beta.
4. A stock with a beta equal to −1.0 has zero systematic (or market) risk.
5. It is possible for a firm to have a positive beta, even if the correlation between its returns and those of another firm are negative.
6. In portfolio analysis, we often use ex post (historical) returns and standard deviations, despite the fact that we are interested in ex ante (future) data.
7. If investors are risk averse and hold only one stock, we can conclude that the required rate of return on a stock whose standard deviation is 0.21 will be greater than the required return on a stock whose standard deviation is 0.10. However, if stocks are held in portfolios, it is possible that the required return could be higher on the low standard deviation stock.
8. The CAPM is a multi-period model which takes account of differences in securities' maturities, and it can be used to determine the required rate of return for any given level of systematic risk.
9. The SML relates required returns to firms' systematic (or market) risk. The slope and intercept of this line can be influenced by managerial actions.
10. The Y-axis intercept of the SML indicates the return on an individual asset when the realized return on an average (b = 1) stock is zero.
11. We will almost always find that the beta of a diversified portfolio is less stable over time than the beta of a single security.
12. Arbitrage pricing theory is based on the premise that more than one factor affects stock returns, and the factors are specified to be (1) market returns, (2) dividend yields, and (3) changes in inflation.
MULTIPLE CHOICE
13. You have the following data on three stocks:
Stock
Standard Deviation
Beta
A
0.15
0.79
B
0.25
0.61
C
0.20
1.29
As a risk minimizer, you would choose Stock ____ if it is to be held in isolation and Stock ____ if it is to be held as part of a well-diversified portfolio.
a.
A; B.
b.
B; C.
c.
C; A.
d.
C; B.
e.
A; A.
14. Which is the best measure of risk for an asset held in isolation, and which is the best measure for an asset held in a diversified portfolio?
a.
Standard deviation; correlation coefficient.
b.
Beta; variance.
c.
Coefficient of variation; beta.
d.
Beta; beta.
e.
Variance; correlation coefficient.
15. Which of the following is NOT a potential problem with beta and its estimation?
a.
Sometimes, during a period when the company is undergoing a change such as toward more leverage or riskier assets, the calculated beta will be drastically different than the "true" or "expected future" beta.
b.
The beta of "the market," can change over time, sometimes drastically.
c.
Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed.
d.
There is a wide confidence interval around a typical stock's estimated beta.
e.
Sometimes a security or project does not have a past history which can be used as a basis for calculating beta.
16. Stock A's beta is 1.5 and Stock B's beta is 0.5. Which of the following statements must be true about these securities? (Assume market equilibrium.)
a.
Stock B must be a more desirable addition to a portfolio than Stock A.
b.
Stock A must be a more desirable addition to a portfolio than Stock B.
c.
The expected return on Stock A should be greater than that on Stock B.
d.
The expected return on Stock B should be greater than that on Stock A.
e.
When held in isolation, Stock A has greater risk than Stock B.
17. For markets to be in equilibrium (that is, for there to be no strong pressure for prices to depart from their current levels),
a.
The past realized rate of return must be equal to the expected rate of return; that is, .
b.
The required rate of return must equal the realized rate of return; that is, r = .
c.
All companies must pay dividends.
d.
No companies can be in danger of declaring bankruptcy.
e.
The expected rate of return must be equal to the required rate of return; that is, = r.
18. Which of the following statements is CORRECT?
a.
The slope of the CML is (M − rRF)/bM.
b.
All portfolios that lie on the CML to the right of M are inefficient.
c.
All portfolios that lie on the CML to the left of M are inefficient.
d.
The slope of the CML is (M − rRF)/M.
e.
The Capital Market Line (CML) is a curved line that connects the risk-free rate and the market portfolio.
19. In a portfolio of three different stocks, which of the following could NOT be true?
a.
The riskiness of the portfolio is greater than the riskiness of one or two of the stocks.
b.
The beta of the portfolio is less than the betas of each of the individual stocks.
c.
The beta of the portfolio is greater than the beta of one or two of the individual stocks' betas.
d.
The beta of the portfolio cannot be equal to 1.
e.
The riskiness of the portfolio is less than the riskiness of each of the stocks if they were held in isolation.
20. You have the following data on (1) the average annual returns of the market for the past 5 years and (2) similar information on Stocks A and B. Which of the possible answers best describes the historical betas for A and B?
Years
Market
Stock A
Stock B
1
0.03
0.16
0.05
2
−0.05
0.20
0.05
3
0.01
0.18
0.05
4
−0.10
0.25
0.05
5
0.06
0.14
0.05
a.
bA> +1; bB = 0.
b.
bA = 0; bB = −1.
c.
bA< 0; bB = 0.
d.
bA< −1; bB = 1.
e.
bA> 0; bB = 1.
21. Which of the following statements is CORRECT?
a.
The typical R2 for a stock is about 0.94 and the typical R2 for a portfolio is about 0.6.
b.
The typical R2 for a stock is about 0.3 and the typical R2 for a large portfolio is about 0.94.
c.
The typical R2 for a stock is about 0.94 and the typical R2 for a portfolio is also about 0.94.
d.
The typical R2 for a stock is about 0.6 and the typical R2 for a portfolio is also about 0.6.
e.
The typical R2 for a stock is about 0.3 and the typical R2 for a portfolio is also about 0.3.
22. Which of the following statements is CORRECT?
a.
The characteristic line is the regression line that results from plotting the returns on a particular stock versus the returns on a stock from a different industry.
b.
The slope of the characteristic line is the stock's standard deviation.
c.
The distance of the plot points from the characteristic line is a measure of the stock's market risk.
d.
The distance of the plot points from the characteristic line is a measure of the stock's diversifiable risk.
e.
"Characteristic line" is another name for the Security Market Line.
23. Which of the following statements is CORRECT?
a.
Richard Roll has argued that it is possible to test the CAPM to see if it is correct.
b.
Tests have shown that the risk/return relationship appears to be linear, but the slope of the relationship is greater than that predicted by the CAPM.
c.
Tests have shown that the betas of individual stocks are stable over time, but that the betas of large portfolios are much less stable.
d.
The most widely cited study of the validity of the CAPM is one performed by Modigliani and Miller.
e.
Tests have shown that the betas of individual stocks are unstable over time, but that the betas of large portfolios are reasonably stable over time.
24. Assume an economy in which there are three securities: Stock A with rA = 10% and A = 10%; Stock B with rB = 15% and B = 20%; and a riskless asset with rRF = 7%. Stocks A and B are uncorrelated (rAB = 0). Which of the following statements is most CORRECT?
a.
The expected return on the investor's portfolio will probably have an expected return that is somewhat below 10% and a standard deviation (SD) of approximately 10%.
b.
The expected return on the investor's portfolio will probably have an expected return that is somewhat below 15% and a standard deviation (SD) that is between 10% and 20%.
c.
The investor's risk/return indifference curve will be tangent to the CML at a point where the expected return is in the range of 7% to 10%.
d.
Since the two stocks have a zero correlation coefficient, the investor can form a riskless portfolio whose expected return is in the range of 10% to 15%.
e.
The expected return on the investor's portfolio will probably have an expected return that is somewhat above 15% and a standard deviation (SD) of approximately 20%.
25. You hold a portfolio consisting of a $5,000 investment in each of 20 different stocks. The portfolio beta is equal to 1.12. You have decided to sell a coal mining stock (b = 1.00) at $5,000 net and use the proceeds to buy a like amount of a mineral rights company stock (b = 2.00). What is the new beta of the portfolio?
a.
1.1139
b.
1.1700
c.
1.2311
d.
1.2927
e.
1.3573
26. Your mother's well-diversified portfolio has an expected return of 12.0% and a beta of 1.20. She is in the process of buying 100 shares of Safety Corp. at $10 a share and adding it to her portfolio. Safety has an expected return of 15.0% and a beta of 2.00. The total value of your current portfolio is $9,000. What will the expected return and beta on the portfolio be after the purchase of the Safety stock?
rpbp
a.
11.69%; 1.22
b.
12.30%; 1.28
c.
12.92%; 1.34
d.
13.56%; 1.41
e.
14.24%; 1.48
27. Suppose that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is 3.0%, (3) the market risk premium is 5.0%, (4) Talcott Inc.'s beta is 1.00, and (5) its realized rate of return has averaged 15.0% over the last 5 years. Calculate the required rate of return for Talcot Inc.
a.
10.29%
b.
10.83%
c.
11.40%
d.
12.00%
e.
12.60%
28. A stock you are holding has a beta of 2.0 and the stock is currently in equilibrium. The required rate of return on the stock is 15% versus a required return on an average stock of 10%. Now the required return on an average stock increases by 30.0% (not percentage points). The risk-free rate is unchanged. By what percentage (not percentage points) would the required return on your stock increase as a result of this event?
a.
36.10%
b.
38.00%
c.
40.00%
d.
42.00%
e.
44.10%
29. Calculate the required rate of return for the Wagner Assets Management Group, which holds 4 stocks. The market's required rate of return is 15.0%, the risk-free rate is 7.0%, and the Fund's assets are as follows:
Stock
Investment
Beta
A
$ 200,000
1.50
B
300,000
−0.50
C
500,000
1.25
D
1,000,000
0.75
a.
10.67%
b.
11.23%
c.
11.82%
d.
12.45%
e.
13.10%
30. Consider the information below for Postman Builders Inc. Suppose that the expected inflation rate and thus the inflation premium increase by 2.0 percentage points, and Postman acquires risky assets that increase its beta by the indicated percentage. What is the firm's new required rate of return?
Beta:
1.50
Required return (rs)
10.20%
RPM:
6.00%
Percentage increase in beta:
20%
a.
14.00%
b.
14.70%
c.
15.44%
d.
16.21%
e.
17.02%
31. Assume that the market is in equilibrium and that stock betas can be estimated with historical data. The returns on the market, the returns on United Fund (UF), the risk-free rate, and the required return on the United Fund are shown below. Based on this information, what is the required return on the market, rM?
Year
Market
UF
2008
−9%
−14%
2009
11%
16%
2010
15%
22%
2011
5%
7%
2012
−1%
−2%
rRF: 7.00%;
rUnited: 15.00%
a.
10.57%
b.
11.13%
c.
11.72%
d.
12.33%
e.
12.95%
32. You are given the following returns on "the market" and Stock F during the last three years. We could calculate beta using data for Years 1 and 2 and then, after Year 3, calculate a new beta for Years 2 and 3. How different are those two betas, i.e., what's the value of beta 2 − beta 1? (Hint: You can find betas using the Rise-Over-Run method, or using your calculator's regression function.)
Year
Market
Stock F
1
6.10%
6.50%
2
12.90%
−3.70%
3
16.20%
21.71%
a.
7.89
b.
8.30
c.
8.74
d.
9.20
e.
9.66
PROBLEM
33. Security A has an expected return of 12.4% with a standard deviation of 15%, and a correlation with the market of 0.85. Security B has an expected return of −0.73% with a standard deviation of 20%, and a correlation with the market of −0.67. The standard deviation of rM is 12%.
a.
To someone who acts in accordance with the CAPM, which security is more risky, A or B? Why? (Hint: No calculations are necessary to answer this question; it is easy.)
b.
What are the beta coefficients of A and B? Calculations are necessary.
c.
If the risk-free rate is 6%, what is the value of rM?
34. You plan to invest in Stock X, Stock Y, or some combination of the two. The expected return for X is 10% and X = 5%. The expected return for Y is 12% and Y = 6%. The correlation coefficient, rXY, is 0.75.
a.
Calculate rp and p for 100%, 75%, 50%, 25%, and 0% in Stock X.
b.
Use the values you calculated for rp and p to graph the attainable set of portfolios. Which part of the attainable set is efficient? Also, draw in a set of hypothetical indifference curves to show how an investor might select a portfolio comprised of Stocks X and Y. Let an indifference curve be tangent to the efficient set at the point where rp = 11%.
c.
Now suppose we add a riskless asset to the investment possibilities. What effects will this have on the construction of portfolios?
d.
Suppose rM = 12%, M = 4%, and rRF = 6%. What would be the required and expected return on a portfolio with P = 10%?
e.
Suppose the correlation of Stock X with the market, rXM, is 0.8, while rYM = 0.9. Use this information, along with data given previously, to determine Stock X's and Stock Y's beta coefficients.
f.
What is the required rate of return on Stocks X and Y? Do these stocks appear to be in equilibrium? If not, what would happen to bring about an equilibrium?
35. Stock A has an expected return rA = 10% and A = 10%. Stock B has rB = 14% and B = 15%. rAB = 0. The rate of return on riskless assets is 6%.
a.
Construct a graph that shows the feasible and efficient sets, giving consideration to the existence of the riskless asset.
b.
Explain what would happen to the CML if the two stocks had (a) a positive correlation coefficient or (b) a negative correlation coefficient.
c.
Suppose these were the only three securities (A, B, and riskless) in the economy, and everyone's indifference curves were such that they were tangent to the CML to the right of the point where the CML was tangent to the efficient set of risky assets. Would this represent a stable equilibrium? If not, how would an equilibrium be produced?
CHAPTER 26—REAL OPTIONS
TRUE/FALSE
1. Real options exist when managers have the opportunity, after a project has been implemented, to make operating changes in response to changed conditions that modify the project's cash flows.
2. Real options are options to buy real assets, like stocks, rather than interest-bearing assets, like bonds.
3. The option to abandon a project is a real option, but a call option on a stock is not a real option.
4. Real options are most valuable when the underlying source of risk is very low.
5. Real options affect the size, but not the risk, of a project's expected cash flows.
MULTIPLE CHOICE
6. Whether to invest in a project today or to postpone the decision until next year is a decision facing the CEO of the Aaron Co. The project has a positive expected NPV, but its cash flows could be less than expected, in which case the NPV could be negative. No competitors are likely to invest in a similar project if Aaron decides to wait. Which of the following statements best describes the issues that Aaron faces when considering this investment timing option?
a.
The more uncertainty about the future cash flows, the more logical it is for Aaron to go ahead with this project today.
b.
Since the project has a positive expected NPV today, this means that its expected NPV will be even higher if it chooses to wait a year.
c.
Since the project has a positive expected NPV today, this means that it should be accepted in order to lock in that NPV.
d.
Waiting would probably reduce the project's risk.
e.
The investment timing option does not affect the cash flows and will therefore have no impact on the project's risk.
7. Which one of the following is an example of a "flexibility" option?
a.
A company has an option to close down an operation if it turns out to be unprofitable.
b.
A company agrees to pay more to build a plant in order to be able to change the plant's inputs and/or outputs at a later date if conditions change.
c.
A company invests in a project today to gain knowledge that may enable it to expand into different markets at a later date.
d.
A company invests in a jet aircraft so that its CEO, who must travel frequently, can arrive for distant meetings feeling less tired than if he had to fly commercial.
e.
A company has an option to invest in a project today or to wait a year.
8. Which of the following is NOT a real option?
a.
The option to buy shares of stock if its price goes up.
b.
The option to expand into a new geographic region.
c.
The option to abandon a project.
d.
The option to switch the type of fuel used in an industrial furnace.
e.
The option to expand production if the product is successful.
9. Which of the following will NOT increase the value of a real option?
a.
An increase in the volatility of the underlying source of risk.
b.
An increase in the risk-free rate.
c.
An increase in the cost of obtaining the real option.
d.
A decrease in the probability that a competitor will enter the market of the project in question.
e.
Lengthening the time in which a real option must be exercised.
10. Which of the following is most CORRECT?
a.
Real options change the risk, but not the size, of projects' expected cash flows.
b.
Real options are likely to reduce the cost of capital that should be used to discount a project's expected cash flows.
c.
Very few projects actually have real options.
d.
Real options are less valuable when there is a lot of uncertainty about the true values future sales and costs.
e.
Real options change the size, but not the risk, of projects' expected cash flows.
11. Ashgate Enterprises uses the NPV method for selecting projects, and it does a reasonably good job of estimating projects' sales and costs. However, it never considers real options that might be associated with projects. Which of the following statements is most likely to describe its situation?
a.
Its estimated capital budget is probably too large due to its failure to consider abandonment and growth options.
b.
Failing to consider abandonment and flexibility options probably makes the optimal capital budget too large, but failing to consider growth and timing options probably makes the optimal capital budget too small, so it is unclear what impact not considering real options has on the overall capital budget.
c.
Failing to consider abandonment and flexibility options probably makes the optimal capital budget too small, but failing to consider growth and timing options probably makes the optimal capital budget too large, so it is unclear what impact not considering real options has on the overall capital budget.
d.
Real options should not have any effect on the size of the optimal capital budget.
e.
Its estimated capital budget is probably too small, because projects' NPVs are often larger when real options are taken into account.
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FIN 317 Week 11 Final Exam – Strayer
FIN 317 Week 11 Final Exam – Strayer
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Chapters 7 Through 15
Part 1: Chapters 7 Through 11
Part 2: Chapters 12 Through 15
CHAPTER 7
TYPES AND COSTS OF FINANCIAL CAPITAL
True-False Questions
1. The accounting emphasis on accrued revenue and expenses and depreciation is the same emphasis as that of finance managers.
2. Traditional accounting does not focus on the implicit cost of equity that is the required capital gains to complement dividends. However, evaluation methods exist to determine this value by financial managers.
3. Formal historical accounting procedures include explicit records of debt (interest and principal) and dividend capital costs.
4. Public financial markets are markets for the creation, sale and trade of illiquid securities having less standardized negotiated features.
5. A venture’s “riskiness” in terms of poor performance or failure is usually very high during the maturity stage of its life cycle.
6. A venture’s “riskiness” in terms of poor performance or failure is usually high to moderate during the rapid-growth stage of its life cycle.
7. First-round financing during a venture’s survival stage comes primarily from venture capitalists and investment banks.
8. Startup financing usually comes from entrepreneurs, business angels, and investment bankers.
9. Commercial banks provide liquidity-stage financing for ventures in the rapid-growth stage of their life cycles.
10. A venture’s “riskiness” in terms of the likelihood of poor performance or failure decreases as it moves from its development stage through to its rapid-growth stage.
11. A nominal interest rate is an observed or stated interest rate.
12. The “real interest rate” (RR) is the interest one would face in the absence of inflation, risk, illiquidity, and any other factors determining the appropriate interest rate.
13. The risk-free interest rate is the interest rate on debt that is virtually free of inflation risk.
14. Inflation premium is the rising prices not offset by increasing quality of goods being purchased.
15. “Default-risk” is the risk that a borrower will not pay the interest and/or the principal on a loan.
16. The “prime rate” is the interest rate charged by banks to their highest default risk business customers.
17. Bond ratings reflect the inflation risk of a firm’s bonds.
18. The relationship between real interest rates and time to maturity when default risk is constant is called the term structure of interest rates.
19. The graph of the term structure of interest rates, which plots interest rates to time to maturity is called the yield curve.
20. Liquidity premiums reflect the risk associated with firms that possess few liquid assets.
21. Subordinated debt is secured by a venture’s assets, while senior debt has an inferior claim to a venture’s assets.
22. Early-stage ventures tend to have large amounts of senior debt relative to more mature ventures.
23. Investment risk is the chance or probability of financial loss on one’s venture investment, and can be assumed by debt, equity, and founding investors.
24. A venture with a higher expected return relative to other ventures will necessarily have a higher standard deviation or returns.
25. Historically, large-company stocks have averaged higher long-term returns than small-company stocks.
26. The coefficient of variation measures the standard deviation of a venture’s return relative to its expected return.
27. Closely held corporations are those companies whose stock is traded over-the-counter.
28. Typically, the stocks of closely held corporations aren’t publicly traded.
29. Organized exchanges have physical locations where trading takes place, while the over-the-counter market is comprised of a network of brokers and dealers that interact electronically.
30. Market cap is determined by multiplying a firm’s current stock price by the number of shares outstanding.
31. The excess average return of long-term government bonds over common stock is called the market risk premium.
32. The weighted average cost of capital is simply the blended, or weighted cost of raising equity and debt capital.
33. Venture capital holding period returns (all stages) for the 10-year period ending in 2012 were about the same as the returns on the S&P 500 stocks.
Multiple-Choice Questions
1. Which one of the following markets involve liquid securities with standardized contract features such as stocks and bonds?
a. private financial market
b. derivatives market
c. commodities market
d. real estate market
e. public financial market
2. Which of the following markets involve direct two-party negotiations over illiquid, non-standardized contracts such as bank loans and direct placement of debt?
a. primary market
b. secondary market
c. options market
d. private financial market
e. public financial market
3. Which of the following is an example of rent on financial capital?
a. interest on debt
b. dividends on stock
c. collateral on equity
d. a and b
e. a, b, and c
4. Which of the following describes the observed or stated interest rate?
a. real rate
b. nominal rate
c. risk-free rate
d. prime rate
e. inflation rate
5. Which of the following describes the interest rate in addition to the inflation rate expected on a risk-free loan?
a. real rate
b. nominal rate
c. risk-free rate
d. prime rate
e. inflation rate
6. Which of the following describes the interest rate on debt that is virtually free of default risk?
a. real rate
b. nominal rate
c. risk-free rate
d. prime rate
e. inflation rate
7. Which of the following describes the interest rate charged by banks to their highest quality customers?
a. real rate
b. nominal rate
c. risk-free rate
d. prime rate
e. inflation rate
8. Which of the following is not a component in determining the cost of debt?
a. inflation premium
b. default risk premium
c. liquidity premium
d. maturity premium
e. interest rate premium
9. The additional interest rate premium required to compensate the lender for the probability that a borrower will not be able to repay interest and principal on a loan is known as?
a. inflation premium
b. default risk premium
c. liquidity premium
d. maturity premium
e. investment risk premium
10. The additional premium added to the real interest rate by lenders to compensate them for a debt instrument which cannot be converted to cash quickly at its existing value is called?
a. inflation premium
b. default risk premium
c. liquidity premium
d. maturity premium
e. investment risk premium
11. The added interest rate charged due to the inherent increased risk in long-term debt is called?
a. inflation premium
b. default risk premium
c. liquidity premium
d. maturity premium
e. investment risk premium
12. Suppose the real risk free rate of interest is 4%, maturity risk premium is 2%, inflation premium is 6%, the default risk on similar debt is 3%, and the liquidity premium is 2%. What is the nominal interest rate on this venture’s debt capital?
a. 13%
b. 14%
c. 15%
d. 16%
e. 17%
13. A venture has raised $4,000 of debt and $6,000 of equity to finance its firm. Its cost of borrowing is 6%, its tax rate is 40%, and its cost of equity capital is 8%. What is the venture’s weighted average cost of capital?
a. 8.0%
b. 7.2%
c. 7.0%
d. 6.2%
e. 6.0%
14. Your venture has net income of $600, taxable income of $1,000, operating profit of $1,200, total financial capital including both debt and equity of $9,000, a tax rate of 40%, and a WACC of 10%. What is your venture’s EVA?
a. $400,000
b. $200,000
c. $ 0
d. ($180,000)
e. ($300,000)
15. The “risk-free” interest rate is the sum of:
a. a real rate of interest and an inflation premium
b. a real rate of interest and a default risk premium
c. an inflation premium and a default risk premium
d. a default risk premium and a liquidity premium
e. a liquidity premium and a maturity premium
16. Venture investors generally use which one of the following target rates to discount the projected cash flows of ventures in the “startup” stage of their life cycles:
a. 20%
b. 25%
c. 40%
d. 50%
17. Which one of the following components is not used when estimating the cost of risky debt capital?
a. real interest rate
b. inflation premium
c. default risk premium
d. market risk premium
e. liquidity premium
18. Which of the following components is not typically included in the rate on short-term U.S. treasuries?
a. liquidity premium
b. default risk premium
c. market risk premium
d. b and c
e. a, b, and c
19. The word “risk” developed from the early Italian word “risicare” and means:
a. don’t care
b. take a chance
c. to dare
d. to gamble
20. The difference between average annual returns on common stocks and returns on long-term government bonds is called a:
a. default risk premium
b. maturity premium
c. risk-free premium
d. liquidity premium
e. market risk premium
21. What has been the approximate average annual rate of return on publicly traded small company stocks since the mid-1920s?
a. 10%
b. 16%
c. 25%
d. 30%
e. 40%
22. Venture investors generally use which one of the following target rates to discount the projected cash flows of ventures in the “development” stage of their life cycles:
a. 15%
b. 20%
c. 25%
d. 40%
e. 50%
23. Corporate bonds might involve which of the following types of “premiums.”
a. inflation premium
b. default risk premium
c. liquidity premium
d. maturity premium
e. all of the above
none of the above
24. Which of the following venture life cycle stages would involve seasoned financing rather than venture financing?
a. Development stage
b. Startup stage
c. Survival stage
d. Rapid-growth stage
e. Maturity stage
25. A venture’s “riskiness” in terms of possible poor performance or failure would be considered to be “very high” in which of the following life cycle stages:
a. Startup stage
b. Survival stage
c. Rapid-growth stage
d. Maturity stage
26. Which of the following types of financing would be associated with the highest target compound rate of return?
a. public and seasoned financing
b. second-round and mezzanine financing
c. first-round financing
d. startup financing
e. seed financing
27. The cost of equity for a firm is 20%. If the real interest rate is 5%, the inflation premium is 3%, and the market risk premium is 2%, what is the investment risk premium for the firm?
a. 10%
b. 12%
c. 13%
d. 15%
28. Use the SML model to calculate the cost of equity for a firm based on the following information: the firm’s beta is 1.5; the risk free rate is 5%; the market risk premium is 2%.
a. 4.5%
b. 8.0%
c. 9.5%
d. 10.5%
29. Calculate the weighted average cost of capital (WACC) based on the following information: the capital structure weights are 50% debt and 50% equity; the interest rate on debt is 10%; the required return to equity holders is 20%; and the tax rate is 30%.
a. 7%
b. 10%
c. 13.5%
d. 17.5%
e. 20%
30. Calculate the weighted average cost of capital (WACC) based on the following information: the equity multiplier is 1.66; the interest rate on debt is 13%; the required return to equity holders is 22%; and the tax rate is 35%.
a. 11.5%
b. 13.9%
c. 15.0%
d. 16.6%
31. Calculate the after-tax WACC based on the following information: nominal interest rate on debt = 16%; cost of common equity = 30%; equity to value = 60%; debt to value = 40%; and a tax rate = 25%.
a. 10%
b. 16%
c. 19.8%
d. 22.8%
e. 30%
32. Calculate the after-tax WACC based on the following information: nominal interest rate on debt = 12%; cost of common equity = 25%; common equity = $700,000; interest-bearing debt = $300,000; and a tax rate = 25%.
a. 15%
b. 16.4%
c. 20.2%
d. 22.8%
e. 30%
33. Venture capital holding period returns (all stages) for the 20-year period ending in 2012, had a compound average return of approximately:
a. 35%
b. 28%
c. 21%
d. 14%
e. 7%
Supplemental Problems related to Chapter 7 Appendix A (and Chapter 4 Appendix A)
1. Estimate a firm’s NOPAT based on: Net sales = $2,000,000; EBIT = $600,000; Net income = $20,000; and Effective tax rate = 30%.
a. $600,000
b. $420,000
c. $150,000
d. $70,000
e. $40,000
2. Estimate a firm’s economic value added (EVA) based on: NOPAT = $400,000; amount of financial capital used = $1,600,000; and WACC = 19%.
a. $26,000
b. $36,000
c. $96,000
d. $54,000
e. $64,000
3. Find a venture’s “economic value added” (EVA) based on the following information: EBIT = $200,000; financial capital used = $500,000; WACC = 20%; effective tax rate = 30%.
a. $20,000
b. $25,000
c. $30,000
d. $40,000
e. $50,000
CHAPTER 8
SECURITIES LAW CONSIDERATIONS WHEN OBTAINING VENTURE FINANCING
True-False Questions
1. The securities Exchange act of 1934 provides for the regulation of securities exchanges and over-the-counter markets.
2. The Investment Company Act of 1940 defines investment companies and excludes them from using some of the registration exemptions originating in the 1933 Ac
3. The Investment Advisers Act of 1940 provides a definition of an investment company.
4. According to the Investment Advisers Act of 1940, a bank would not be classified as an “investment advisor”.
5. The Securities Act of 1933 is the main body of federal law governing the creation and sale of securities in the U.S.
6. The Securities Exchange Act was passed in 1933 and the Securities Act was passed in 1934.
7. The trading of securities is regulated under the Securities and Exchange Act of 1954.
8. Regulation of investment companies (including professional venture capital firms) is carried out under the Investment Company Act of 1940.
9. State laws designed to protect high net-worth investors from investing in fraudulent security offerings are known as blue-sky laws.
10. Offerings and sales of securities are regulated under the Securities Act of 1933 and state blue-sky laws.
11. Blue-sky laws are federal laws designed to protect individuals from investing in fraudulent security offerings.
12. The typical business organization for a venture in its rapid-growth stage is a partnership or LLC.
13. Investor liability in a limited liability company (LLC) is limited to the owners’ investments.
14. Investor liability in a proprietorship or corporation is unlimited.
15. The life of a proprietorship is determined by the owner.
16. It is usually easier to transfer ownership in a proprietorship relative to a corporation.
17. The two basic types of exemptions from having to register securities with the SEC are security and transaction exemptions.
18. The Securities Act of 1933 provides a very narrow definition as to what constitutes a security.
19. SEC Rule 147 provides guidance on the issuer’s diligent responsibilities in assuring that offerees are in-state and that securities don’t move across state lines.
20. A private placement, or transactions by an issuer not involving any public offering, is exempt from registering the security.
21. Accredited investors are specifically protected by the Securities Act of 1933 from investing in unregistered securities issues.
22. The typical business organization for a venture in its rapid-growth stage is a partnership or LLC.
23. In SEC v. Ralston Purina (1953), the U.S. Supreme Court took an important step toward defining a public offering for the purposes of Section 4(2) of the Securities Act of 1933.
24. SEC Regulation D requires the registration of securities with the SEC.
25. An early stage venture that is not an investment company and has written compensation agreements can structure compensation-related securities issues so they are exempt from SEC registration requirements.
26. SEC Regulation D took effect in 1932 and provides the basis for “safe harbor” as a private placemen
27. Rule 504 under Regulation D has a $2 million financing limit (i.e., applies to sales of securities not exceeding $2 million).
28. A Rule 504 exemption under Regulation D has no limit in terms of the number and qualifications of investors.
29. A Regulation D Rule 505 offering cannot exceed $5 million in a twelve-month period.
30. A Regulation D Rule 505 offering is limited to 35 accredited investors.
31. A Regulation D Rule 506 offering has no limit in terms of the dollar amount of the offering but is limited to 35 unaccredited investors.
32. Regulation A, while technically considered an exemption from registration, is a public offering rather than a private placemen
33. Regulation A allows for registration exemptions on private security offerings so long as all investors are considered to be financially sophisticated.
34. Regulation A issuers are allowed to “test the waters” before preparing the offering circular (unlike almost all other security offerings).
35. Regulation A offerings are allowed up $10 million and do not have limitations on the number or sophistication of offerees.
36. The objective of the Jumpstart Our Business Startups Act of 2012 is to stimulate the initiation, growth, and development of small business companies.
37. Title II of the JOBS Act of 2012 eliminates the general solicitation and advertising restriction for Regulation D 506 offerings.
Note: Following are true-false questions relating to materials presented in Appendix B of Chapter 8.
1. The definition of an “accredited investor,” initially defined in the Securities Act of 1933, was expanded in Rule 501 of Reg D.
2. One of the monetary requirements for individuals or natural persons as accredited investors as defined in Regulation D Rule 501 is a net worth greater than $1,000,000.
3. One of the monetary requirements for individuals or natural persons as accredited investors as defined in Regulation D Rule 501 is individual annual income greater than $500,000.
4. Regulation D Rule 502 focuses, in part, on resale restrictions imposed on privately-placed securities.
5. Rule 503 of Regulation D states that a Form D should be filed with the SEC within six months after the first sale of securities.
Multiple-Choice Questions
1. Which of the following is not true regarding the Securities Act of 1933?
a. it was passed in response to abuses thought to have contributed to the financial catastrophes of the Great Depression
b. it covers securities fraud
c. it requires securities to be registered formally with the federal government
d. it set of the nature and authority of the Securities and Exchange Commission
e. it focuses on those who provide investment advice
2. The U.S. federal law that impacts the creation and sales of securities is:
a. Securities Exchange Act of 1934
b. Securities Act of 1933
c. Investment Company Act of 1940
d. Investment Advisers Act of 1940
3. The efforts to regulate the trading of securities takes place under which of the following securities laws?
a. Securities Act of 1933
b. state “blue-sky” laws
c. Securities and Exchange Act of 1934
d. Investment Company Act of 1940
e. Investment Advisers Act of 1940
4. Efforts to regulate the offerings and sales of securities take place under which of the following securities laws?
a. Securities Act of 1933
b. state “blue-sky” laws
c. Securities and Exchange Act of 1934
d. Investment Company Act of 1940
e. Investment Advisers Act of 1940
Both a and b
g. Both a and c
5. In securities law, which of the following is (are) true?
a. ignorance is no defense
b. security regulators may alter your investment agreement to the benefit of the investors
c. Securities Act of 1933 gives the SEC broad civil procedures to use in enforcement
d. Securities Act of 1933 gives the SEC some criminal procedures to use in enforcement
e. a, b, and c above
a, b, c, and d above
6. Which of the following is not a security?
a. treasury stock
b. debenture
c. put option
d. real property
e. call option
7. State securities regulations are referred to as:
a. Regulation A legislation
b. “stormy day” laws
c. “blue sky” laws
d. SEC oversight legislation
8. Which of the following is not true about registering securities with the SEC?
a. it is a time consuming process
b. it required the disclosure of accounting information
c. it is usually done with the help of an investment bank
d. it is an inexpensive process
e. it provides information to prospective investors
9. All of the following do not create any securities registration responsibilities except?
a. Treasury securities
b. Municipal bonds
c. securities issued by publicly held companies
d. securities issued by banks
e. securities issued by the government
10. Ventures that reach their survival stage of their life cycles and seek first-round financing are typically organized as:
a. proprietorships or partnerships
b. LLCs or corporations
c. corporations
d. partnerships or LLCs
e. proprietorships or corporations
11. Investor liability is “unlimited” under which of the following types of business organizational forms?
a. proprietorship
b. limited liability company (LLC)
c. corporation
d. S corporation
e. S limited liability company (SLLC)
12. Which one of the following is not a requirement for registration of securities with the SEC?
a. the name under which the issuer is doing business
b. the name of the state where the issuer is organized
c. the names of all products sold by the issuer
d. the names and addresses of the directors
e. the names of the underwriters
13. The returning of all funds to equity investors as a common “remedy” for a “fouled up” securities offering is called:
a. just action
b. fraud
c. second round financing
d. a rescission
e. mezzanine financing
14. “Security” exemptions from registration with the SEC include which of the following:
a. securities issued by banks and thrift institutions
b. government securities
c. intrastate offerings
d. securities issued by large, high quality corporations
e. a, b, and c above
f. a, b, c, and d above
15. The basic types of “transaction” exemptions for registration with the SEC are:
a. private placement exemption
b. “too big to fail” exemption
c. accredited investor exemption
d. intrastate offering exemption
e. a and c above
b and d above
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CIS 562 Week 11 Final Exam – Strayer New
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Chapters 7 Through 16
Chapter 7: Current Computer Forensics Tools
TRUE/FALSE
1. When you research for computer forensics tools, strive for versatile, flexible, and robust tools that provide technical support.
2. In software acquisition, there are three types of data-copying methods.
3. To help determine what computer forensics tool to purchase, a comparison table of functions, subfunctions, and vendor products is useful.
4. The Windows platforms have long been the primary command-line interface OSs.
5. After retrieving and examining evidence data with one tool, you should verify your results by performing the same tasks with other similar forensics tools.
MULTIPLE CHOICE
1. Computer forensics tools are divided into ____ major categories.
a.
2
c.
4
b.
3
d.
5
2. Software forensics tools are commonly used to copy data from a suspect’s disk drive to a(n) ____.
a.
backup file
c.
image file
b.
firmware
d.
recovery copy
3. To make a disk acquisition with En.exe requires only a PC running ____ with a 12-volt power connector and an IDE, a SATA, or a SCSI connector cable.
a.
UNIX
c.
Linux
b.
MAC OS X
d.
MS-DOS
4. Raw data is a direct copy of a disk drive. An example of a Raw image is output from the UNIX/Linux ____ command.
a.
rawcp
c.
d2dump
b.
dd
d.
dhex
5. ____ of data involves sorting and searching through all investigation data.
a.
Validation
c.
Acquisition
b.
Discrimination
d.
Reconstruction
6. Many password recovery tools have a feature that allows generating potential lists for a ____attack.
a.
brute-force
c.
birthday
b.
password dictionary
d.
salting
7. The simplest method of duplicating a disk drive is using a tool that does a direct ____ copy from the original disk to the target disk.
a.
partition-to-partition
c.
disk-to-disk
b.
image-to-partition
d.
image-to-disk
8. To complete a forensic disk analysis and examination, you need to create a ____.
a.
forensic disk copy
c.
budget plan
b.
risk assessment
d.
report
9. The first tools that analyzed and extracted data from floppy disks and hard disks were MS-DOS tools for ____ PC file systems.
a.
Apple
c.
Commodore
b.
Atari
d.
IBM
10. In Windows 2000 and XP, the ____ command shows you the owner of a file if you have multiple users on the system or network.
a.
Dir
c.
Copy
b.
ls
d.
owner
11. In general, forensics workstations can be divided into ____ categories.
a.
2
c.
4
b.
3
d.
5
12. A forensics workstation consisting of a laptop computer with a built-in LCD monitor and almost as many bays and peripherals as a stationary workstation is also known as a ____.
a.
stationary workstation
c.
lightweight workstation
b.
field workstation
d.
portable workstation
13. ____ is a simple drive-imaging station.
a.
F.R.E.D.
c.
FIRE IDE
b.
SPARC
d.
DiskSpy
14. ____ can be software or hardware and are used to protect evidence disks by preventing you from writing any data to the evidence disk.
a.
Drive-imaging
c.
Workstations
b.
Disk editors
d.
Write-blockers
15. Many vendors have developed write-blocking devices that connect to a computer through FireWire,____ 2.0,and SCSI controllers.
a.
USB
c.
LCD
b.
IDE
d.
PCMCIA
16. The ____ publishes articles, provides tools, and creates procedures for testing and validating computer forensics software.
a.
CFTT
c.
FS-TST
b.
NIST
d.
NSRL
17. The standards document, ____, demands accuracy for all aspects of the testing process, meaning that the results must be repeatable and reproducible.
a.
ISO 3657
c.
ISO 5725
b.
ISO 5321
d.
ISO 17025
18. The NIST project that has as a goal to collect all known hash values for commercial software applications and OS files is ____.
a.
NSRL
c.
FS-TST
b.
CFTT
d.
PARTAB
19. The primary hash algorithm used by the NSRL project is ____.
a.
MD5
c.
CRC-32
b.
SHA-1
d.
RC4
20. One way to compare your results and verify your new forensic tool is by using a ____, such as HexWorkshop, or WinHex.
a.
disk imager
c.
bit-stream copier
b.
write-blocker
d.
disk editor
21. Although a disk editor gives you the most flexibility in ____, it might not be capable of examining a ____ file’s contents.
a.
testing, compressed
c.
testing, pdf
b.
scanning, text
d.
testing, doc
COMPLETION
1. Software forensic tools are grouped into command-line applications and ____________________ applications.
2. The Windows application of EnCase requires a(n) ____________________ device, such as FastBloc, to prevent Windows from accessing and corrupting a suspect disk drive.
3. The ____________________ function is the most demanding of all tasks for computer investigators to master.
4. Because there are a number of different versions of UNIX and Linux, these platforms are referred to as ____________________ platforms.
5. Hardware manufacturers have designed most computer components to last about ____________________ months between failures.
MATCHING
Match each item with a statement below
a.
JFIF
f.
PDBlock
b.
Lightweight workstation
g.
Norton DiskEdit
c.
Pagefile.sys
h.
Stationary workstation
d.
Salvaging
i.
SafeBack
e.
Raw data
1. letters embedded near the beginning of all JPEG files
2. European term for carving
3. a direct copy of a disk drive
4. usually a laptop computer built into a carrying case with a small selection of peripheral options
5. one of the first MS-DOS tools used for a computer investigation
6. software-enabled write-blocker
7. system file where passwords may have been written temporarily
8. a tower with several bays and many peripheral devices
9. command-line disk acquisition tool from New Technologies, Inc.
SHORT ANSWER
1. What are the five major function categories of any computer forensics tool?
2. Explain the validation of evidence data process.
3. What are some of the advantages of using command-line forensics tools?
4. Explain the advantages and disadvantages of GUI forensics tools.
5. Illustrate how to consider hardware needs when planning your lab budget.
6. Describe some of the problems you may encounter if you decide to build your own forensics workstation.
7. Illustrate the use of a write-blocker on a Windows environment.
8. Briefly explain the NIST general approach for testing computer forensics tools.
9. Explain the difference between repeatable results and reproducible results.
10. Briefly explain the purpose of the NIST NSRL project.
Chapter 8: Macintosh and Linux Boot Processes and File Systems
TRUE/FALSE
1. If a file contains information, it always occupies at least one allocation block.
2. Older Macintosh computers use the same type of BIOS firmware commonly found in PC-based systems.
3. GPL and BSD variations are examples of open-source software.
4. A UNIX or Linux computer has two boot blocks, which are located on the main hard disk.
5. Under ISO 9660 for DVDs, the Micro-UDF (M-UDF) function has been added to allow for long filenames.
MULTIPLE CHOICE
1. Macintosh OS X is built on a core called ____.
a.
Phantom
c.
Darwin
b.
Panther
d.
Tiger
2. In older Mac OSs, a file consists of two parts: a data fork, where data is stored, and a ____ fork, where file metadata and application information are stored.
a.
resource
c.
blocks
b.
node
d.
inodes
3. The maximum number of allocation blocks per volume that File Manager can access on a Mac OS system is ____.
a.
32,768
c.
58,745
b.
45,353
d.
65,535
4. On older Macintosh OSs all information about the volume is stored in the ____.
a.
Master Directory Block (MDB)
c.
Extents Overflow File (EOF)
b.
Volume Control Block (VCB)
d.
Volume Bitmap (VB)
5. With Mac OSs, a system application called ____ tracks each block on a volume to determine which blocks are in use and which ones are available to receive data.
a.
Extents overflow file
c.
Master Directory Block
b.
Volume Bitmap
d.
Volume Control Block
6. On Mac OSs, File Manager uses the ____to store any information not in the MDB or Volume Control Block (VCB).
a.
volume information block
c.
catalog
b.
extents overflow file
d.
master directory block
7. Linux is probably the most consistent UNIX-like OS because the Linux kernel is regulated under the ____ agreement.
a.
AIX
c.
GPL
b.
BSD
d.
GRUB
8. The standard Linux file system is ____.
a.
NTFS
c.
HFS+
b.
Ext3fs
d.
Ext2fs
9. Ext2fs can support disks as large as ____ TB and files as large as 2 GB.
a.
4
c.
10
b.
8
d.
12
10. Linux is unique in that it uses ____, or information nodes, that contain descriptive information about each file or directory.
a.
xnodes
c.
infNodes
b.
extnodes
d.
inodes
11. To find deleted files during a forensic investigation on a Linux computer, you search for inodes that contain some data and have a link count of ____.
a.
-1
c.
1
b.
0d.
2
12. ____ components define the file system on UNIX.
a.
2
c.
4
b.
3
d.
5
13. The final component in the UNIX and Linux file system is a(n) ____, which is where directories and files are stored on a disk drive.
a.
superblock
c.
boot block
b.
data block
d.
inode block
14. LILO uses a configuration file named ____ located in the /Etc directory.
a.
Lilo.conf
c.
Lilo.config
b.
Boot.conf
d.
Boot.config
15. Erich Boleyn created GRUB in ____ to deal with multiboot processes and a variety of OSs.
a.
1989
c.
1994
b.
1991
d.
1995
16. On a Linux computer, ____ is the path for the first partition on the primary master IDE disk drive.
a.
/dev/sda1
c.
/dev/hda1
b.
/dev/hdb1
d.
/dev/ide1
17. There are ____ tracks available for the program area on a CD.
a.
45
c.
99
b.
50
d.
100
18. The ____provides several software drivers that allow communication between the OS and the SCSI component.
a.
International Organization of Standardization (ISO)
b.
Advanced SCSI Programming Interface (ASPI)
c.
CLV
d.
EIDE
19. All Advanced Technology Attachment (ATA) drives from ATA-33 through ATA-133 IDE and EIDE disk drives use the standard ____ ribbon or shielded cable.
a.
40-pin
c.
80-pin
b.
60-pin
d.
120-pin
20. ATA-66,ATA-____, and ATA-133 can use the newer 40-pin/80-wire cable.
a.
70
c.
96
b.
83
d.
100
21. IDE ATA controller on an old 486 PC doesn’t recognize disk drives larger than 8.4 ____.
a.
KB
c.
GB
b.
MB
d.
TB
COMPLETION
1. Before OS X, Macintosh uses the ____________________, in which files are stored in directories, or folders, that can be nested in other folders.
2. The Macintosh file system has ____________________ descriptors for the end of file (EOF).
3. ____________________ is a journaling version of Ext2fs that reduces file recovery time after a crash.
4. When you turn on the power to a UNIX workstation, instruction code located in firmware on the system’s CPU loads into RAM. This firmware is called ____________________ code because it’s located in ROM.
5. CD players that are 12X or faster read discs by using a(n) _____________________ system.
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ACC 410 Week 11 Final Exam – Strayer
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Chapter 6 Through 15
Part 1: Chapter 6 Through 10
Part 2: Chapter 11 Through 15
Governmental Activities - Accounting for Capital Projects and Debt Service
TRUE/FALSE (CHAPTER 6)
1. The resources to service all long-term debts of the governmental entity are typically accounted for in debt service funds.
2. When governments establish capital projects funds, they may choose to maintain a separate fund for each major project, or they may choose to combine two or more projects in a single fund.
3. GASB Statement No. 34 does not require a budgetary comparison statement for capital projects funds as it does for the general fund and for each major special revenue fund that has a legally adopted annual budget.
4. Capital projects funds do not report long-term obligations in the fund.
5. When bonds are issued at a premium, the capital projects fund can transfer those excess resources to the debt service fund.
6. When bonds are issued at a discount, the debt service fund usually transfers an amount to the capital projects fund to make up for the deficiency.
7. In accounting for costs incurred on a major construction project in a capital projects fund, the construction outlays would be accumulated in a long-term asset account.
8. Debt service funds are maintained to account for resources accumulated to pay interest and principal on general long-term debt—that is, long-term debt associated primarily with governmental activities.
9. In contrast to the accounting for debt service fund expenditures, the interest revenue on bonds held as investments should be accrued in the period the revenue is earned.
10. Special assessments are imposed nonexchange transactions, similar to property tax levies.
11. The interest paid on debt issued for public purposes by state and local governments is generally subject to federal taxation.
12. Nongovernmental not-for-profits must account for defeasances differently than governments.
MULTIPLE CHOICE (CHAPTER 6)
1. The capital project fund of a governmental entity is accounted for using which of the following bases of accounting?
a) Budgetary basis.
b) Cash basis.
c) Modified accrual basis.
d) Accrual basis.
2. In which fund type would a governmental entity’s capital project fund be found?
a) Governmental fund type.
b) Proprietary fund type.
c) Fiduciary fund type.
d) Capital project fund type.
3. The debt service fund of a governmental entity is accounted for using which of the following bases of accounting?
a) Budgetary basis.
b) Cash basis.
c) Modified accrual basis.
d) Accrual basis.
4. In which fund type would a governmental entity’s debt service fund be found?
a) Governmental fund type.
b) Proprietary fund type.
c) Fiduciary fund type.
d) Capital project fund type.
5. With regard to the resources dedicated to the acquisition of fixed assets which will be used in general government activities, which of the following is true?
a) Governments must maintain capital project funds for resources that are legally restricted to the acquisition of fixed assets.
b) Governments may maintain capital project funds for resources that are legally restricted to the acquisition of fixed assets.
c) Governments may account for any resources dedicated (whether legally or not) to the acquisition of fixed assets in any of the governmental funds.
d) Government must account for all resources set aside for fixed asset acquisition in a capital project fund.
6. Salt City issued $5 billion of bonds at face value to fund the reconstruction of the major interstate highways in and around their city. The bond underwriters withheld $2 million for underwriting fees and remitted the balance to the City. Assuming the City maintains its books and records in a manner that facilitates the preparation of fund financial statement, how would the underwriting fee be accounted for in the capital project fund?
a) Reduce Other financing sources $2 million.
b) Reduce Bonds payable $2 million.
c) Increase Expenditures $2 million.
d) It would not be accounted for in the capital project fund.
7. Sugar City issued $2 million of bonds to fund the construction of a new city office building. The bonds have a stated rate of interest of 5% and were sold at 101. Which of the following entries should be made in the Capital Project Fund to record this event?
a) Debit Cash $2.02 million; Credit Bonds Payable $2 million and Premium on Bonds Payable $.02 million.
b) Debit Cash $2.02 million; Credit Bonds Payable $2 million and Other Financing Sources $.02 million.
c) Debit Cash $2.02 million; Credit Other Financing Sources $2.02 million.
d) Debit Cash $2.02 million; Credit Other Financing Sources $2 million and Revenue $.02 million.
Use the following information to answer questions # 8 and #9
Voters in Lincoln School District approved the construction of a new high school and approved a $10 million bond issue with a stated rate of interest of 6% to fund the construction. Bids were received and the low bid was $10 million. When the bonds were issued, they sold for face value less bond underwriting fees of $.5 million. The School Board voted to fund the balance of the construction by a transfer from the general fund.
8. The entry in the capital project fund to record the receipt of the bond proceeds would be
a) Debit Cash $9.5 million; Credit Bonds Payable $9.5.
b) Debit Cash $9.5 million; Credit Other Financing Sources $9.5.
c) Debit Cash $9.5 million and Expenditures $.5 million; Credit Bonds Payable $10 million.
d) Debit Cash $9.5 million and Expenditures $.5 million; Credit Other Financing Sources $10.
9. The entry in the capital project fund to record the additional funding for the construction would be
a) Debit Due from General Fund $.5 million; Credit Other financing Sources $.5 million.
b) Debit Due from General Fund $.5 million; Credit Revenue $.5 million.
c) Debit Cash $.5 million; Credit Due to General Fund $.5 million.
d) Debit Other Financing Sources $.5 million; Credit Due to General Fund $.5 million.
Use the following information to answer questions #10 and #11
Voters in Phillips City approved the construction of a new $10 million city hall building and approved a $10 million bond issue with a stated rate of interest of 6% to fund the construction. When the bonds were issued, they sold for 101. What are appropriate entries related to the premium?
10. In the capital project fund
a) Debit Cash $100.000; Credit Revenues $100,000 ; no other entries required.
b) Debit Cash $100,000; Credit Other Financing Sources $100,000; No other entries required.
c) Debit Cash $100,000; Credit Revenues; ALSO
Debit Other Financing Uses—Nonreciprocal Transfer $100,000; Credit Cash $100,000
d) Debit Cash $100,000; Credit Other Financing Sources—$100,000; ALSO
Debit Other Financing Uses—Nonreciprocal Transfer $100,000; Credit Cash $100,000
11. In the debt service fund
a) Debit Cash $100.000; Credit Revenues $100,000 ; no other entries required.
b) Debit Cash $100,000; Credit Other Financing Sources—Nonreciprocal Transfer $100,000; No other entries required.
c) Other Financing Sources—Nonreciprocal Transfer $100,000; credit Cash $100,000.
d) No entry in the Debt Service Fund
12. Sister City was notified by the State that they had been awarded a $6 million grant to aid in the construction of a senior citizens center. At the time of the notification what is the appropriate entry in the capital project fund (assuming that the City maintains its books and records in a manner to facilitate the preparation of the fund financial statements)?
a) No entry at the time of the notification
b) Debit Grants Receivable $6 million; Credit Revenue $6 million
c) Debit Grants Receivable $6 million; Credit Deferred Revenue $6 million.
d) Debit Grants Receivable $6 million; credit Other Financing Sources—Nonreciprocal Transfer $6 million.
13. Previously Rose City issued bonds with a face value of $10 million to construct a new city maintenance facility. Assuming that the City maintains its books and records in a manner that facilitates the preparation of the fund financial statements, what is the appropriate entry when the City receives a progress billing from the contractor?
a) Debit Building; Credit Cash
b) Debit Building; Credit Accounts Payable.
c) Debit Expenditure; Credit Accounts Payable
d) No entry is required.
14. Previously Atomic City had issued bonds with a face value of $10 million to construct a new city hall. Because the money will not be needed for several months, the city invested the bond proceeds in U.S. Government securities. Assuming that the city maintains its books and records in a manner that facilitates the preparation of the fund financial statements, what is the appropriate entry when the City receives interest on the investments?
a) Debit Cash; Credit Revenue.
b) Debit Cash; Credit Other Financing Source
c) Debit Cash; Credit Deferred Revenue
d) No entry required.
15. A City issued bonds for the purpose of financing a major capital improvement. Which fund is the most appropriate fund in which to record the receipt of the bond proceeds?
a) General Fund.
b) Special Revenue Fund.
c) Capital Project Fund.
d) Debt Service Fund.
16. Use of a Debt Service Fund is required
a) When financial resources are being accumulated for the purpose of paying for capital asset acquisition.
b) When financial resources are being accumulated for the purpose of paying principal and interest when it matures.
c) For all bonded debt service payments.
d) For all debt service payments.
17. Six years ago Hill City issued $10 million of 6% term bonds, due 30 years from the date of issue. Interest on the bonds is payable semi-annually on January 1 and July 1. Hill City has a September 30 fiscal year end. The amount of interest payable that would be included on the balance sheet for the debt service fund of Hill City at September 30 would be
a) $ -0-
b) $150,000
c) $300,000
d) $600,000
18. Sue City has outstanding $5 million in general term bonds used to finance the construction of the new City Library. Sue City has a June 30 fiscal year-end. Interest at 6% is payable each January 1 and July 1. The principal of the bonds is due 10 years in the future. The City budgeted the July 1, 1999 interest payment in the budget for the fiscal year ended June 30, 1999. On June 30, cash was transferred from the General Fund to the Debt Service Fund to make the required payment. The maximum amount of interest payable that may be included on the balance sheet of the debt service fund of Sue City at June 30 would be
a) $ -0-
b) $150,000.
c) $300,000.
d) $3,000,00.
Use the following information to answer questions #19 and #20
Calhoun County makes annual transfers from the general fund to the debt service fund to pay principal and interest on long-term debt.
19. When the County makes the transfer the entry in the debt service fund should be
a) Debit Cash; Credit Revenue.
b) Debit Cash; Credit Other Financing Sources.
c) Debit Cash; Credit Interest Payable.
d) Debit Cash with Fiscal Agent; Credit Other Financing Sources.
20. In the debt service fund, what is the appropriate entry when the principal payment is made?
a) Debit Bonds Payable; Credit Cash.
b) Debit Expenditures; Credit Cash.
c) Debit Other Financing Uses—Nonreciprocal Transfer; Credit Cash.
d) No entry is required.
Use the following information to answer questions #21 and #22.
The citizens of a specific area of the City of Arlington approved the construction of sidewalks in their residential neighborhood and approved a $1 million bond issue to finance construction of those sidewalks. The citizens agreed to tax themselves for 20 years in an amount sufficient to pay principal and interest on the bonds. The City will oversee the construction of the sidewalks and act as agent for servicing the debt. The City does not guarantee the debt nor does it assume any legal or moral obligation for the bonds.
21. The proceeds of the bond issue should be recorded in which fund of the City of Arlington?
a) Agency Fund.
b) Special Assessment Fund.
c) Capital Project Fund.
d) Debt Service Fund.
22. When the City collects the special tax, the proceeds of that tax should be accounted for in which fund of the City of Arlington?
a) Agency Fund.
b) Special Assessment Fund.
c) Capital Project Fund.
d) Debt Service Fund.
Use the following information to answer questions #23 - #25.
The citizens of a specific area of the City of Arlington approved the construction of sidewalks in their residential neighborhood and approved a $1 million bond issue to finance construction of those sidewalks. The citizens agreed to a special tax on their property for 20 years in an amount sufficient to pay principal and interest on the bonds. The City will oversee the construction of the sidewalks and act as agent for servicing the debt. If the special tax is not sufficient to make the principal and interest payments, the City will assume the obligations.
23. The proceeds of the bond issue should be recorded in which fund of the City of Arlington?
a) Agency Fund.
b) Special Assessment Fund.
c) Capital Project Fund.
d) Debt Service Fund.
24. When the City collects the special tax, the proceeds of that tax should be accounted for in which fund of the City of Arlington?
a) Agency Fund
b) Special Assessment Fund.
c) Capital Project Fund.
d) Debt Service Fund.
25. When the City of Arlington levies the special assessment tax, the best entry would be
a) Debit Taxes Receivable; Credit Revenues.
b) Debit Taxes Receivable; Credit Deferred Revenues.
c) Debit Taxes Receivable; Credit Liability.
d) Debit Taxes Receivable; Credit Fund Balance.
26. Adams County has outstanding $10 million in bonds issued by the County to construct a sewer system in a specific area of the county. The taxpayers in that area voted for the construction and the bonds and agreed to tax themselves to pay the principal and interest on the bonds. The County contracted for the construction and issued the bonds but the City assumed no legal or moral obligation for the bonds. If the special tax payments are not sufficient to make the required principal and interest payments, the County will not make up the difference. The $10 million of bonds should appear in which fund financial statements or schedule?
a) Capital Project Fund.
b) Special Assessment Fund.
c) Schedule of Long-term Obligations.
d) The bonds need not appear on the face of the financial statements of Adams County.
27. Harbor City issued 6% tax-exempt bonds and used the proceeds to acquire federal government securities yielding 7%. After paying the interest on the tax-exempt bonds, the City cleared 1%. This is an example of
a) An illegal act.
b) Poor fiscal management.
c) Arbitrage.
d) Debt refunding.
28. The City of St. Joe had outstanding $5 million of 6% bonds with a call provision. Due to changes in the prevailing interest rates, the City issued new bonds at 4.5% and used the proceeds to call the 6% bonds. This is an example of
a) Debt retirement.
b) Debt refunding.
c) In-substance defeasance.
d) Economic defeasance.
29. A governmental entity has elected to issue new debt and use the proceeds to redeem existing debt because there is an economic gain in doing so. There is, however, an ‘accounting loss’ associated with these events. An accounting loss is defined as
a) The present value of the principal and interest payments on the new debt less the present value of the principal and interest payments on the old debt.
b) The present value of the principal and interest payments on the old debt less the present value of the principal and interest payments on the new debt.
c) The cash paid to redeem the old debt less the book value of the old debt.
d) The face value of the new debt less the cash paid to redeem the old debt.
30. The City of Williamsburg decided to defease old 6% bonds carried in its Electric Enterprise Fund with new 4.5% bonds. As a result of the defeasance, the City incurred an accounting loss. This loss should be recognized
a) As an adjustment to retained earnings since it is applicable to prior periods.
b) In the year of the defeasance.
c) Over the remaining life of the old bonds or the new bonds, whichever is shorter.
d) It should not be recognized.
PROBLEMS (CHAPTER 6)
1. The voters of Salt Lake City authorized the construction of a new north-south expressway for a total cost of no more that $75 million. The voters also approved the issuance of $50 million of 5% general obligation bonds. The balance of the necessary funds will come from the following sources: $15 million from a federal grant and $10 million from a state grant. The City controls expenditures in capital project funds through project management The City does not formally incorporate budgetary entries in the capital project fund but it does use encumbrance accounting for control purposes. REQUIRED: Assuming the City maintains its books and records in a manner that facilitates the preparation of the fund financial statements, prepare journal entries, in the Capital Project Fund, for the following transactions.
(a) The City issued $50 million of 5% general obligation bonds at 101.
(b) The City transferred the premium to the appropriate fund.
(c) The City incurred bid-related expenditures of $1,000.
(d) The City signed a contract with the lowest competent bidder for $48 million.
(e) The city received notice from the State that the grant had been approved and the proceeds will be forwarded to the City in the State’s current fiscal year.
(f) The City received the federal grant in full.
(g) The City received a progress billing from the contractor for $10 million. The City pays the billing.
2. The City of Eugene has the following balances in the accounts of its capital project fund at year-end. All accounts have normal balances. All amounts are in millions of dollars.
REQUIRED: (a) Prepare an operating statement for the capital project fund.
(b) Prepare a Balance Sheet for the capital project fund.
Cash $ 68
Deferred Revenue $ 5
Expenditures $ 10
Fund Balance—Unreserved $ 14
Grants Receivable $ 10
Other Financing Sources $ 50
Other Financing Uses $ 1
Revenues $ 20
3. In 1999, the voters of Southside City authorized the construction of a new swimming pool for a total cost of no more that $5 million. The voters also approved the issuance of $5 million of 5% general obligation serial bonds to be repaid by a special property tax . Interest on these bonds is payable annually on June 30. On June 30, 1999, the City sold the bonds at 101 and signed contracts for the construction of the swimming pool. Each June 30, beginning in 2000, $250,000 of the bonds mature. If the property tax is not sufficient to make the necessary principal and interest payments the City is obligated to transfer the necessary monies from the general fund to the debt service fund. The City does not formally incorporate budgetary entries in the debt service fund but it does use encumbrance accounting for control purposes. The City has a June 30 fiscal year end.
REQUIRED: Assuming the City maintains it books and records in a manner that facilitates the preparation of the fund financial statements, prepare journal entries, in the Debt Service Fund, for the following transactions.
(a) The City immediately transferred the premium to the Debt Service Fund. The Debt Service Fund may not use the premium to pay principal or interest until the year 2019.
(b) On June 30, Southside City invests the premium in a 10-year 5% Certificate of Deposit at a local financial institution. The Certificate pays interest annually on June 30. The interest is automatically reinvested in the Certificate.
(c) Property taxes in the amount of $300,000 were collected by June 30, 2000. Another $50,000 is expected to be collected by August 31.
(d) The city transferred, to the debt service fund, the cash necessary to make the June 30, 2000 payments. The checks will be mailed on July 1.
(e) The city recognized the interest earned on the Certificate of Deposit.
(f) The city recognizes the appropriate liabilities in the debt service fund.
ESSAYS (CHAPTER 6)
1. The citizens of a defined geographical area of the City of Sale authorized a special assessment to be levied on their property to finance the reconstruction of the sewer system infrastructure that serves the area. The City will solicit bids, oversee reconstruction, issue the debt in the name of the City, and service the debt. The City does not guarantee the debt but the City will collect the special assessments and make principal and interest payments to the bondholders. Discuss the appropriate accounting for the construction phase and the debt service phase of this project. Justify the required accounting and financial reporting for these two phases of this project.
2. What is arbitrage? What are its potential uses and/or abuses? How are potential abuses regulated?
Chapter 7
Governmental Activities - Capital Assets and Investments in Marketable Securities
TRUE/FALSE (CHAPTER 7)
1. General capital assets are distinguished from the capital assets of proprietary funds and fiduciary funds.
2. General capital assets are excluded from governmental funds, themselves, because of the funds measurement focus (current financial resources).
3. In governmental funds, the capital asset costs are reported as expenses when the assets are acquired.
4. At the government-wide level, governments must depreciate inexhaustible assets, such as land, works of art, or historical treasures.
5. Governments do not have to depreciate infrastructure assets if they can demonstrate they are preserving them in a specified condition.
6. Unlike businesses, governments should not capitalize interest on general capital assets that they construct themselves.
7. Most infrastructure assets are the responsibility of the federal government, not state and local governments.
8. Prior to the issuance of GASB Statement No. 34, state and local governments provided virtually no information as to most of their infrastructure.
9. Governments invest in marketable securities for much the same reason that businesses do—to earn a return on cash that would otherwise be unproductive.
10. Governments are prohibited from entering into reverse repurchase agreements.
MULTIPLE CHOICE (CHAPTER 7)
1. The objectives of financial reporting for fixed assets should be to provide information
a) About a governmental entity’s physical resources.
b) That can be used to assess the service potential of a governmental entity’s physical resources.
c) To help users assess a government’s long- and short-term capital needs.
d) All of the above.
2. A governmental entity may record long-term assets in which of the following funds or account groups?
a) General Fund
b) Internal Service Fund.
c) Capital Project Fund
d) Debt Service Fund.
3. General fixed assets are excluded from governmental funds because
a) The measurement focus of governmental funds is on current financial resources.
b) They are not used to generate revenues.
c) The basis of accounting is accrual.
d) None of the above.
4. The City of Shiloh sold a used police car. The police car, which had a historical cost of $17,000 and a fair value of $12,000, was sold for $5,000. Assuming that the City maintains its books and records in a manner to facilitate the preparation of the fund financial statements, what is the appropriate entry in the General Fund to record this sale?
a) Debit Cash $5,000; Credit Revenue $5,000.
b) Debit Cash $5,000 and Loss on Sale $7,000; Credit Automotive Equipment $12,000.
c) Debit Cash $5,000; Credit Other Financing Sources—Sale of Asset $5,000.
d) Debit Cash $5,000; Credit Automotive Equipment $5,000.
5. Which of the following costs will be included in the cost of land on the government-wide financial statements?
a) Purchase price (invoice amount).
b) Cost of demolishing existing structures that cannot be used.
c) Closing costs.
d) All of the above.
6. Donated assets are reported at
a) Historical cost to the donor.
b) Book value in the hands of the donor.
c) Fair value on date of donation.
d) Zero value because they were not purchased.
7. To elect not to capitalize works of art and similar assets, a government must see that the assets meet all of the following criteria except:
a) The assets must be held for public exhibition, education, or research in furtherance of public service, rather than for financial gain.
b) The assets must be protected, kept unencumbered, cared for and preserved.
c) The assets must be subject to an organizational policy that requires the proceeds form sales of the collection items be used to acquire very similar items for the collection.
d) The assets must be subject to an organizational policy that requires the proceeds from sales of the collection items be used to acquire other items for the collection.
8. If a government capitalizes works of art and similar assets, which of the following statements is true relative to depreciation on the works of art and similar assets?
a) Donated assets cannot be depreciated.
b) All works of art must be depreciation, not just exhaustible.
c) All exhaustible assets must be depreciated.
d) The government may elect to omit all depreciation.
9. Which of the following is NOT an infrastructure asset?
a) Roads.
b) Sidewalks.
c) Buildings.
d) Bridges.
10. If a government receives a donation of a work of art, the government must recognize revenue
a) Only if it elects to capitalize its collection.
b) Only if it elects NOT to capitalize its collection.
c) On all donations of works of art.
d) It cannot recognize revenue from donations.
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FIN 320 Week 11 Final Exam – Strayer
FIN 320 Week 11 Final Exam – Strayer
Click on the Link Below to Purchase A+ Graded Course Material
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Chapters 9, 10, 12 Through 15 And 17 Through 22
9
Student: ___________________________________________________________________________
1.
Testing many different trading rules until you find one that would have worked in the past is called _______.
A.
data mining
B.
perceived patterning
C.
pattern searching
D.
behavioral analysis
2.
Models of financial markets that emphasize psychological factors affecting investor behavior are called _______.
A.
data mining
B.
fundamental analysis
C.
charting
D.
behavioral finance
3.
The trin statistic is a ______ indicator.
A.
sentiment
B.
flow of funds
C.
market structure
D.
fundamental
4.
The put/call ratio is a ______ indicator.
A.
sentiment
B.
flow of funds
C.
market structure
D.
fundamental
5.
Relative strength is ______ indicator.
A.
a fundamental
B.
an economic
C.
a technical
D.
an international
6.
Short interest is a ______ indicator.
A.
sentiment
B.
flow of funds
C.
market structure
D.
fundamental
7.
Moving averages are ______ indicators.
A.
sentiment
B.
flow of funds
C.
trend
D.
fundamental
8.
Market breadth is a ______ indicator.
A.
sentiment
B.
flow of funds
C.
technical
D.
fundamental
9.
The cumulative tally of the number of advancing stocks minus declining stocks is called the ______________.
A.
market breadth
B.
market volume
C.
trin ratio
D.
relative strength ratio
10.
A high amount of short interest is typically considered as a __________ signal, and contrarians may consider it as a _________ signal.
A.
bearish; bullish
B.
bullish; bearish
C.
bearish; false
D.
bullish; false
11.
Technical analysis focuses on _____________________.
A.
finding opportunities for risk-free investing
B.
finding repeating trends and patterns in prices
C.
changing prospects for earnings growth of particular firms or industries
D.
forecasting technical regulatory changes
12.
Behavioralists point out that even if market prices are ____________, there may be _______________.
A.
distorted; limited arbitrage opportunities
B.
distorted; fundamental efficiency
C.
allocationally efficient; limitless arbitrage opportunities
D.
distorted; allocational efficiency
13.
According to market technicians, it is time to sell stock in a head-and-shoulders formation when ___________.
A.
the price index pierces the left shoulder
B.
the price index pierces the right shoulder
C.
the price index pierces the head
D.
none of these options takes place
14.
When a stock price breaks through the moving average from below, this is considered to be ______.
A.
the starting point for a new moving average
B.
a bearish signal
C.
a bullish signal
D.
none of these options
15.
When the stock price falls below a moving average, a possible conclusion is that _____.
A.
market momentum has become positive
B.
market momentum has become negative
C.
there is no regular pattern for this stock's market momentum
D.
professional analysts' opinions are invalid until the stock price rises again
16.
Following a period of falling prices, the moving average will _____.
A.
be below the current price
B.
be above the current price
C.
be equal to the current price
D.
become more volatile than it had been before prices fell
17.
A moving average of stock prices _________________.
A.
always lies above the most recent price
B.
always lies below the most recent price
C.
is less volatile than the actual prices
D.
is more volatile than the actual prices
18.
When the housing bubble burst in 2007, it set off the worst financial crisis _____.
A.
in 25 years.
B.
in 40 years.
C.
in 50 years.
D.
in 75 years.
19.
A support level is ___________________.
A.
a level beyond which the market is unlikely to rise
B.
a level below which the market is unlikely to fall
C.
an equilibrium price level justified by characteristics such as earnings and cash flows
D.
the peak of a market wave or cycle
20.
According to Kondratieff, the macro economy moves in a series of waves that recur at intervals of approximately _________________.
A.
18 months
B.
4 years
C.
8 years
D.
50 years
21.
According to Elliot's wave theory, stock market behavior can be explained as _________________.
A.
a series of medium-term wave cycles with no short-term trend
B.
a series of long-term wave cycles with no short-term trend
C.
a series of superimposed long-term and short-term wave cycles
D.
sine and cosine functions
22.
Conventional finance theory assumes investors are _______, and behavioral finance assumes investors are _______.
A.
rational; irrational
B.
irrational; rational
C.
greedy; philanthropic
D.
philanthropic; greedy
23.
The only way for behavioral patterns to persist in prices is if ______________.
A.
markets are not weak-form efficient
B.
there are limits to arbitrage activity
C.
there are no significant trading costs
D.
market psychology is inconsistent over time
24.
In the context of a point and figure chart, a horizontal band of Xs and Os is a _____________.
A.
buy signal
B.
sell signal
C.
congestion area
D.
trend reversal
25.
Even though indexing is growing in popularity, only about _____ of equity in the mutual fund industry is held in indexed funds. This may be a sign that investors and managers __________.
A.
5%; are excessively conservative
B.
15%; overestimate their ability
C.
20%; suffer from framing biases
D.
25%; engage in mental accounting
26.
If investors are too slow to update their beliefs about a stock's future performance when new evidence arises, they are exhibiting _______.
A.
representativeness bias
B.
framing error
C.
conservatism
D.
memory bias
27.
If investors overweight recent performance in forecasting the future, they are exhibiting _______.
A.
representativeness bias
B.
framing error
C.
memory bias
D.
overconfidence
28.
Trading activity and average returns in brokerage accounts tend to be _________.
A.
uncorrelated
B.
negatively correlated
C.
positively correlated
D.
positively correlated for women and negatively correlated for men
29.
Your two best friends each tell you about a person they know who successfully started a small business. That's it, you decide; if they can do it, so can you. This is an example of _____________.
A.
mental accounting
B.
framing bias
C.
conservatism
D.
representativeness bias
30.
Which of the following is not a sentiment indicator?
A.
Confidence index
B.
Short interest
C.
Odd-lot trading
D.
Put/call ratio
31.
Which of the following is considered a sentiment indicator?
A.
A 200-day moving average
B.
Short interest
C.
Credit balances in brokerage accounts
D.
Relative strength
32.
An investor holds a very conservative portfolio invested for retirement, but she takes some extra cash she earned from her year-end bonus and buys gold futures. She appears to be engaging in ___________.
A.
overconfidence
B.
representativeness
C.
forecast errors
D.
mental accounting
33.
Which of the following analysts focus more on past price movements of a firm's stock than on the underlying determinants of its future profitability?
A.
Credit analysts
B.
Fundamental analysts
C.
Systems analysts
D.
Technical analysts
34.
A trin ratio of greater than 1 is considered a __________.
A.
bearish signal
B.
bullish signal
C.
bearish signal by some technical analysts and a bullish signal by other technical analysts
D.
trend reversal signal
35.
Contrarian investors consider a high put/call ratio a __________.
A.
bearish signal
B.
bullish signal
C.
trend confirmation signal
D.
signal to enter the options market
36.
The ratio of the average yield on 10 top-rated corporate bonds to the average yield on 10 intermediate-grade bonds is called the __________.
A.
bond price index
B.
confidence index
C.
relative strength index
D.
trin ratio
37.
An investor needs cash to pay some hospital bills. He is willing to use his dividend income to pay the bills, but he will not sell any stock to do so. He is engaging in ___________.
A.
overconfidence
B.
representativeness
C.
forecast errors
D.
mental accounting
38.
Bill and Shelly are friends. Bill invests in a portfolio of hot stocks that almost all his friends are invested in. Shelly invests in a portfolio that is totally different from the portfolios of all her friends. Both Bill's and Shelly's stocks fall 15%. According to regret theory, _________________________________________.
A.
Bill will have more regret over the loss than Shelly
B.
Shelly will have more regret over the loss than Bill
C.
Bill and Shelly will have equal regret over their losses
D.
Bill's and Shelly's risk aversion will increase in the future
39.
The most common measure of __________ is the spread between the number of stocks that advance in price and the number of stocks that decline in price.
A.
market breadth
B.
market volume
C.
odd-lot trading
D.
short interest
40.
Jill is offered a choice between receiving $50 with certainty or possibly receiving the proceeds from a gamble. In the gamble a fair coin is tossed, and if it comes up heads, Jill will receive $100; if the coin comes up tails, she will receive nothing. Jill chooses the $50 instead of the gamble. Jill's behavior indicates __________________.
A.
regret avoidance
B.
overconfidence
C.
that she has a diminishing marginal utility of wealth
D.
prospect theory loss aversion
41.
When the market breaks through the moving average line from below, a technical analyst would probably suggest that it is a good time to ___________.
A.
buy the stock
B.
hold the stock
C.
sell the stock
D.
short the stock
42.
If you believed in the reversal effect, you should __________.
A.
buy bonds this period if you held stocks last period
B.
buy stocks this period that performed poorly last period
C.
buy stocks this period that performed well last period
D.
do nothing if you held the stock last period
43.
According to technical analysts, a shift in market fundamentals will __________.
A.
be reflected in stock prices immediately
B.
lead to a gradual price change that can be recognized as a trend
C.
lead to high volatility in stock market prices
D.
leave prices unchanged
44.
According to market technicians, a trin statistic of less than 1 is considered a __________.
A.
bearish signal
B.
bullish signal
C.
volume decline
D.
signal reversal
45.
It is difficult to test the Kondratieff wave theory because _________.
A.
it applies to only Russian stocks
B.
its main proponent found contrary research results
C.
only two independent data points are generated each century
D.
the stock market is too volatile to generate smooth waves
46.
A _________ is a value above which it is difficult for the market to rise.
A.
book value
B.
resistance level
C.
support level
D.
confidence level
47.
_____________ is a tool that can help identify the direction of a stock's price.
A.
Prospect theory
B.
Framing
C.
A moving average
D.
Conservatism
48.
If the utility you derive from your next dollar of wealth increases by less than a loss of a dollar reduces it, you are exhibiting __________.
A.
loss aversion
B.
regret avoidance
C.
mental accounting
D.
framing bias
49.
In technical analysis, __________ is a value below which the market is relatively unlikely to fall.
A.
book value
B.
resistance level
C.
support level
D.
the Dow line
50.
A possible limit on arbitrage activity that may allow behavioral biases to persist is _______.
A.
technical trends in prices
B.
momentum effects
C.
fundamental risk
D.
trend reversals
n
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ACC 564 Exam and Quizzes – Strayer New
ACC 564 Exam and Quizzes – Strayer New
ACC 564 Quiz 1, Quiz 2, Quiz 3, Quiz 4, Final Exam, Midterm Exam
ACC 564 Week 11 Final Exam: Chapters 1 through 10, 11 through 13, 15 through 17, and 20 through 22
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This Test bank can also be use for other classes, if your assigned Textbook is AIS 12e by Romney
Accounting Information System test Bank (Quiz Bank)
Accounting Information Systems, 12e (Romney/Steinbart)
Chapter 1 Accounting Information Systems: An Overview
1) Which of the following statements below shows the contrast between data and information?
A) Data is the output of an AIS.
B) Information is the primary output of an AIS.
C) Data is more useful in decision-making than information.
D) Data and information are the same.
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
2) Information is
A) basically the same as data.
B) raw facts about transactions.
C) potentially useful facts when processed in a timely manner.
D) data that has been organized and processed so that it's meaningful.
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
3) The value of information can best be defined as
A) how useful it is to decision makers.
B) the benefits produced by possessing and using the information minus the cost of producing it.
C) how relevant it is.
D) the extent to which it maximizes the value chain.
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
4) An accounting information system (AIS) processes ________ to provide users with ________.
A) data; information
B) data; transactions
C) information; data
D) data; benefits
Answer:
Page Ref: 10
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
5) Information that reduces uncertainty, improves decision makers' ability to make predictions, or confirms or corrects their prior expectations, is said to be
A) complete.
B) relevant.
C) reliable.
D) timely.
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
6) Information that is free from error or bias and accurately represents the events or activities of the organization is
A) relevant.
B) reliable.
C) verifiable.
D) timely.
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
7) Information that does not omit important aspects of the underlying events or activities that it measures is
A) complete.
B) accessible.
C) relevant.
D) timely.
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
8) When two knowledgeable people acting independently each produce the same information, this information is said to be
A) complete.
B) relevant.
C) reliable.
D) verifiable.
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
9) Data must be converted into information to be considered useful and meaningful for decision-making. There are six characteristics that make information both useful and meaningful. If information is free from error or bias and accurately represents the events or activities of the organization, it is representative of the characteristic of
A) relevancy.
B) timeliness.
C) understandability.
D) reliability.
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
10) An accounting information system must be able to perform which of the following tasks?
A) collect transaction data
B) process transaction data
C) provide adequate controls
D) all of the above
Answer:
Page Ref: 10
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic
11) Which of the following is not an example of a common activity in an AIS?
A) buy and pay for goods and services
B) sell goods and services and collect cash
C) summarize and report results to interested parties
D) recording of sales calls for marketing purposes
Answer:
Page Ref: 8
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic
12) Which of the following is not one of the components of an AIS?
A) Internal controls and security measures
B) People
C) Procedures and instructions
D) Hardware
Answer:
Page Ref: 10
Objective: Learning Objective 5
Difficulty : Easy
AACSB: Analytic
13) One group that relies on both the adequate collection and transformation of data for decision-making purposes for an organization is
A) management.
B) interested outsiders.
C) competitors.
D) the government.
Answer:
Page Ref: 12
Objective: Learning Objective 3
Difficulty : Easy
AACSB: Analytic
14) The primary objective of accounting is to
A) implement strong internal controls.
B) provide useful information to decision makers.
C) prepare financial statements.
D) ensure the profitability of an organization.
Answer:
Page Ref: 12
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic
15) The American Institute of Certified Public Accountants (AICPA) has recognized the importance of AIS and the major impact information technology has on the area of accounting. To recognize individual CPAs who have met educational and experiential requirements in this area, the group formally created the designation known as
A) the Certified Management Accountant.
B) the Certified Information Technology Professional.
C) the Certified Internal Auditor.
D) the Certified Data Processing Professional.
Answer:
Page Ref: 11
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic
16) The AIS must include controls to ensure
A) safety and availability of data.
B) marketing initiatives match corporate goals.
C) information produced from data is accurate.
D) both A and C
Answer:
Page Ref: 10
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic
17) A change in the AIS that makes information more easily accessible and widely available within an organization is most likely to first influence the
A) organizational culture.
B) customer base.
C) external financial statement users.
D) production activity.
Answer:
Page Ref: 13
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic
18) The process of creating value for customers is the result of nine activities that form a
A) value chain.
B) profitable operation.
C) successful business.
D) support system.
Answer:
Page Ref: 13
Objective: Learning Objective 8
Difficulty : Easy
AACSB: Analytic
19) The value chain concept is composed of two types of activities known as
A) primary and support.
B) primary and secondary.
C) support and value.
D) technology and support.
Answer:
Page Ref: 13-14
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic
20) Which of the following is a primary activity in the value chain?
A) infrastructure
B) technology
C) purchasing
D) marketing and sales
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Easy
AACSB: Analytic
21) In value chain analysis, what is the activity of arranging the delivery of products to customers called?
A) outbound logistics
B) inbound logistics
C) shipping
D) delivery
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic
22) An AIS provides value by
A) improving products or services through information that increases quality and reduces costs.
B) providing timely and reliable information to decision makers.
C) creating new products.
D) both A and B
Answer:
Page Ref: 11
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic
23) In Chapter 1, Figure 1-4 shows the factors that influence the design of AIS. The diagram shows a bi-directional arrow between the organizational culture and the AIS. The reason for this two-way interchange between organizational culture and AIS is
A) that the AIS should not influence the values of the organizational culture.
B) because the organization's culture influences the AIS, and likewise the AIS influences the organization's culture by controlling the flow of information within the organization.
C) due to the transfer of managers between the two corporate elements.
D) the AIS impacts the organization's key strategies.
Answer:
Page Ref: 13
Objective: Learning Objective 7
Difficulty : Easy
AACSB: Analytic
24) An example of inbound logistics would consist of
A) the activities that transform inputs into final products or services.
B) the activities that help customers to buy the organization's products or services.
C) the activities that provide post-sale support to customers.
D) the activities that consist of receiving, storing, and distributing the materials used as inputs by the organization to create goods and/or services it sells.
Answer:
Page Ref: 13
Objective: Learning Objective 8
Difficulty : Easy
AACSB: Analytic
25) A good example of how an AIS is used to share knowledge within an organization is
A) the use of a corporate database to help staff identify the relevant experts who can help with a particular client.
B) the use of laptop computers to access a network for messaging worldwide.
C) the monitoring of production equipment to watch for defects.
D) the use of point-of-sale data to determine hot-selling items.
Answer:
Page Ref: 11
Objective: Learning Objective 6
Difficulty : Moderate
AACSB: Analytic
26) One activity within the value chain is research and development. This activity can be identified as a
A) firm infrastructure activity.
B) human resources activity.
C) technology activity.
D) purchasing activity.
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic
27) When the AIS provides information in a timely and accurate manner, it stands as an example of
A) improved decision making.
B) improving the quality and reducing the costs of products or services.
C) improving efficiency.
D) all of the above
Answer:
Page Ref: 11
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic
28) Accounting information plays major roles in managerial decision making by
A) identifying situations requiring management action.
B) reducing uncertainty.
C) providing a basis for choosing among alternative actions.
D) all of the above
Answer:
Page Ref: 12
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic
29) A well-designed AIS can improve the decision-making function within the organization. Which statement below would describe a limitation, rather than a benefit, of an efficient AIS?
A) An AIS reduces uncertainty, and therefore accounting information can provide a basis for choosing among alternative courses of action.
B) An AIS identifies situations requiring management action.
C) An AIS provides to its users an abundance of information without any filtering or condensing of such information.
D) An AIS provides information about the results of previous decisions which provides decision makers with feedback that can be used in future decision making.
Answer:
Page Ref: 12
Objective: Learning Objective 6
Difficulty : Easy
AACSB: Analytic
30) Jill Fredson is in charge of the mail room at Gammon University. Every Friday morning she receives a report via email that summarizes the number of outgoing and incoming pieces of mail by source and destination department. Every Friday afternoon, Jill deletes the report without reading it because it has no bearing on mail room operations. Which of the following characteristics of useful information is absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E) Understandable
F) Verifiable
G) Accessible
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
31) Inventory information is provided in real time by a firm's accounting information system. The accuracy of this information is questionable, however, since the production manager often reports stock outs of components that the system indicates are in stock. Which of the following characteristics of useful information is absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E) Understandable
F) Verifiable
G) Accessible
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
32) Joe Marzetti has been the controller of Fairview Tires for 25 years. Ownership of the firm recently changed hands and the new owners are conducting an audit of the financial records. The audit has been unable to reproduce financial reports that were prepared by Marzetti. While there is no evidence of wrongdoing, the auditors are concerned that the discrepancies might contribute to poor decisions. Which of the following characteristics of useful information is absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E) Understandable
F) Verifiable
G) Accessible
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
33) In 2003, Custer Manufacturing implemented a Web-based information system that allows all employees to access mission-critical information. The intention was to increase production efficiency. Unfortunately, it had the opposite effect, as deliveries fell behind schedule and costs increased. Jeff Akspen, the director of information technology services, asked Joyce Jenkins to come in and talk with him about the system. Joyce is a long-time employee of Custer, and her opinion is valued by her peers and by her supervisor. "So Joyce, how's it going down there in the shop?""Not so good, Jeff. Used to be we got a weekly pick list so we knew how to plan production. Now, we got that computer system. Most of us can't figure out how to use it to do our jobs. Is there some way to print out a pick list?"Jeff thought for a while before responding. "Well, Joyce, to tell you the truth, I'm not so sure how to do it myself, but there must be a way. We'll bring in the consultants that helped us build the system. Maybe they can help." Which of the following characteristics of useful information is absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E) Understandable
F) Verifiable
G) Accessible
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
34) Razzmataz, Wisconsin, is a popular tourist destination. During the winter months, the population dwindles to a meager few, but when summer comes, the size of the town surges. Chuck Hewitt is the town sanitation engineer. When the size of the town surges, so do his responsibilities. Among them is management of the sewage processing volume.In an interview with the local paper, Chuck complained that a report on tourist population that he uses to adjust processing volume refers to data that was collected five days ago and it takes him a week to make adjustments.Which of the following characteristics of useful information is absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E) Understandable
F) Verifiable
G) Accessible
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
35) A frantic Stro Frinzel called the home office from Des Moines."You have got to help me. I am about to close a great sale, but I have to be able to guarantee delivery by the fourteenth. I can't get through to the company Web site to verify delivery!""Thank you for calling. Your call is very important to us. However, all of our lines are currently in use. Please try again later."Which of the following characteristics of useful information is absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E) Understandable
F) Verifiable
G) Accessible
Answer: G
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
36) Message left on an answering machine: "Hi Bob! Just got into town. How about dinner this evening if you're available. Call me!"Which of the following characteristics of useful information is absent in the situation described above?
A) Relevant
B) Reliable
C) Complete
D) Timely
E) Understandable
F) Verifiable
G) Accessible
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
37) Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.Which of the following functions in the value chain is Monday performing?
A) Inbound logistics
B) Operations
C) Outbound logistics
D) Marketing and sales
E) Service
Answer:
Page Ref: 13
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic
38) Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.Which of the following functions in the value chain is Friday performing?
A) Inbound logistics
B) Operations
C) Outbound logistics
D) Marketing and sales
E) Service
Answer:
Page Ref: 13
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic
39) Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.Which of the following functions in the value chain is Wednesday performing?
A) Inbound logistics
B) Operations
C) Outbound logistics
D) Marketing and sales
E) Service
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic
40) Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.Which of the following functions in the value chain is Thursday performing?
A) Inbound logistics
B) Operations
C) Outbound logistics
D) Marketing and sales
E) Service
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Easy
AACSB: Analytic
41) Robinson Crusoe has formed a business that sells carved gourmet coconuts. He has hired five employees. The most senior is Friday, who manages the carving process. Monday is the newest employee. She collects the coconuts. Tuesday, as you might expect, takes calls from curstomers, oops, I mean customers, who are unhappy with their coconuts. Wednesday tosses finished coconuts into the sea, whereupon they drift to the wholesaler. Thursday sends smoke signals to the wholesaler extolling the virtues of the latest production run of nuts that are drifting across the bay.Which of the following functions in the value chain is Tuesday performing?
A) Inbound logistics
B) Operations
C) Outbound logistics
D) Marketing and sales
E) Service
Answer:
Page Ref: 14
Objective: Learning Objective 8
Difficulty : Moderate
AACSB: Analytic
42)
Refer to the chart above. At what point, measured in terms of the net cost of information, does information overload begin?
A) 0
B) 5
C) 10
D) 12
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
43) Tri-Anything, Limited, is a British company operating in New York state. It offers stylized, boutique public relations services to upscale retailers in quaint New England towns. A major source of revenue is a weekly newsletter that reports on current and projected tourist travel and spending patterns. Preparation of the newsletter requires study and analysis of weather conditions, economic activity, and travel costs. It is available at an annual subscription rate of $299.99. There are currently 190 subscribers. Preparation and distribution of the newsletter costs $12,000 annually. The value of information to subscribers is:
A) $236.83
B) $44,998.10
C) Less than $63.16
D) At least $300.00
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
44) Many modern accounting software packages offer separate transaction cycle modules. What is the reason for this?
A) Every organization does not need to implement all of the available transaction cycle modules.
B) Most businesses do not need the revenue cycle module as part of their AIS.
C) The nature of a given transaction cycle is the same irrespective of the type of organization.
D) A properly designed AIS does not use the concept of separate business transaction cycles to process transactions.
Answer:
Page Ref: 9
Objective: Learning Objective 5
Difficulty : Moderate
AACSB: Analytic
45) The business owners obtain financing from outside investors, which results in an inflow of cash into the company. This transaction is considered to be part of which cycle?
A) the revenue cycle
B) the payroll cycle
C) the production cycle
D) the financing cycle
Answer:
Page Ref: 7-8
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
46) Which of the following is not a transaction cycle?
A) revenue
B) expenditure
C) human resources
D) general ledger and reporting
Answer:
Page Ref: 7-9
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic
47) Which of the following statements is false?
A) Retail stores do not have a production cycle.
B) Financial institutions have installment-loan cycles.
C) A service company does not have an inventory system.
D) Every organization should implement every transaction cycle module.
Answer:
Page Ref: 9
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
48) Transaction cycles can be summarized on a high level as "give-get" transactions. An example of "give-get" in the expenditure cycle would be
A) give cash, get cash.
B) give cash, get goods.
C) give cash, get labor.
D) give goods, get cash.
Answer:
Page Ref: 7
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
49) Transaction cycles can be summarized on a high level as "give-get" transactions. An example of "give-get" in the revenue cycle would be
A) give cash, get goods.
B) give goods, get cash.
C) give cash, get labor.
D) give cash, get cash.
Answer:
Page Ref: 7
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
50) Groups of related business activities such as the acquisition of merchandise and payment of vendors are called
A) transaction cycles.
B) economic cycles.
C) business events.
D) transactions.
Answer:
Page Ref: 6-7
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
51) Which of the following is a true statement?
A) Business strategy directly influences AIS, but not information technology.
B) Information technology directly influences organizational culture, but not business strategy.
C) Organizational culture directly influences business strategy, but not AIS.
D) AIS directly influences information technology, but not business strategy.
Answer:
Page Ref: 13
Objective: Learning Objective 7
Difficulty : Difficult
AACSB: Analytic
52) The transaction cycle that includes the events of hiring employees and paying them is known as the
A) revenue cycle.
B) expenditure cycle.
C) human resources cycle.
D) financing cycle.
Answer:
Page Ref: 7-8
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
53) The transaction cycle approach leads to efficient processing of a large number of transactions because
A) transaction cycles are easier to computerize.
B) a large number of transactions within a given cycle can be categorized into a relatively small number of distinct types.
C) the transaction cycle approach represents the natural order of business.
D) transaction cycles are easy to understand.
Answer:
Page Ref: 7
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic
54) Which of the following is not an example of how an AIS adds value to an organization?
A) All employees at a hospital can access and update patient records from any computer terminal in the hospital.
B) A customer service representative can find a customer's account data, purchase history, payment history, and salesperson's name while on the phone with the customer, to resolve issues quickly.
C) Suppliers are able to access sales data directly from the point-of-sale system of a retailer and deliver inventory automatically when needed.
D) Client tax files are encrypted and made available on the CPA firm's network to any employee with an access code.
Answer:
Page Ref: 11
Objective: Learning Objective 6
Difficulty : Difficult
AACSB: Analytic
55) Rolleigh Corp. identifies growth by new product development and product improvement as the number one corporate goal. An employee at Wrigley's, one of Rolleigh's wholly-owned subsidiaries, developed an innovation to an existing product that would directly address a shortcoming in the similar product offered by Rolleigh's closest competitor. Wrigley's current Return on Investment (ROI) is 15%, but the product innovation is expected to generate ROI of only 12%. Awarding bonuses to subsidiary managers based on ROI could result in:
A) goal conflict
B) information overload
C) goal congruence
D) decreased value of information
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Difficult
AACSB: Analytic
56) Which of the following tradeoffs between characteristics of useful information is least objectionable?
A) Incomplete information received on a timely basis
B) Irrelevant information received in an understandable format
C) Unreliable information easily accessible
D) Verifiable information received in unreadable format
Answer:
Page Ref: 5
Objective: Learning Objective 1
Difficulty : Moderate
AACSB: Analytic
57) Paid time-off policies, job descriptions, and procedures manuals are examples of information needed to support key decisions in what business process?
A) Hire and train employees
B) Acquire inventory
C) Sell merchandise
D) Collect payment from customers
Answer:
Page Ref: 6
Objective: Learning Objective 2
Difficulty : Easy
AACSB: Analytic
58) Which of the following is not a key decision to be made when starting a business?
A) How to estimate the allowance for uncollectible accounts
B) Whether to advertise on TV, radio, or newspaper
C) How to raise capital
D) Whether to accept American Express
Answer:
Page Ref: 5
Objective: Learning Objective 2
Difficulty : Moderate
AACSB: Analytic
59) Paying federal payroll taxes is part of which transaction cycle?
A) Human resources/payroll
B) Expenditure
C) Financing
D) Revenue
Answer:
Page Ref: 8
Objective: Learning Objective 4
Difficulty : Moderate
AACSB: Analytic
60) Who of the following would not be involved in the revenue cycle?
A) Accounts payable clerk
B) Customer
C) Cashier
D) Credit manager
Answer:
Page Ref: 7-8
Objective: Learning Objective 4
Difficulty : Easy
AACSB: Analytic
61) Which of the following is not one of the three basic types of data about a specific sales transaction that should be captured by an Accounting Information System?
A) Name of the employee who completed the sale
B) Daily sales quota
C) Product sold
D) Date
Answer:
Page Ref: 4
Objective: Learning Objective 1
Difficulty : Easy
AACSB: Analytic
62) Who of the following is not a stakeholder with whom an accounting information system typically communicates directly?
A) Wall Street industry analyst
B) Venture capitalist
C) Company that supplies raw materials
D) Company that purchases finished goods for resale to consumers
Answer:
Page Ref: 6
Objective: Learning Objective 3
Difficulty : Moderate
AACSB: Analytic
63) Define the concept of a system.
64) Define data, information, and how the value of information is determined.
65) Define an accounting information system.
66) Identify the components of an accounting information system.
67) What is the CITP designation and why is it important to AIS?
68) Differentiate between an AIS course and other accounting courses.
69) What is the purpose behind the five primary activities in the value chain?
70) How can an AIS add value to the organization?
71) How can a well-designed AIS improve the efficiency and effectiveness of a company's value chain?
72) Discuss the concept of a system and the issues of goal conflict and goal congruence.
73) Discuss the seven characteristics of useful information.
74) Explain what an AIS is, describe the basic tasks it performs in an organization, and give some examples of the types of accounting transactions it processes.
75) Discuss the components of a supply chain.
76) How can an AIS become part of the firm's value chain and add value to the business?
77) How can the value of the information produced by an accounting information system be determined? What would a measurement and verification expert think about quantification and verification of such information?
78) Why have accounting software packages been designed with separate transaction modules?
79) How are "Give and Take" transactions classified in business today and what impact does this have on AIS?
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MGT 500 Final Exam – Strayer New
MGT 500 Final Exam – Strayer New
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MGT 500 Week 11 Final Exam Solution – Perfect Score
Chapter 1—Innovative Management for a Changing World
TRUE/FALSE
1. The nature of management is to control and dictate others in an organization.
ANS: PTS: 1 DIF: 2 REF: 3-4
NAT: AACSB Analytic | Motivation Concepts TYP: F
2. Managers need a new approach that relies less on command and control and more on communication and coordination, in the new world of work.
ANS: PTS: 1 DIF: 2 REF: 4
NAT: AACSB Communication | Environmental Influence TYP: F
3. In today’s turbulent and hypercompetitive global environment, managers must help their companies innovate more than ever.
ANS: PTS: 1 DIF: 2 REF: 4
NAT: AACSB Analytic | Creation of Value TYP: F
4. The late famed management theorist Peter Drucker is often credited with creating the modern study of management.
ANS: PTS: 1 DIF: 2 REF: 5
NAT: AACSB Analytic | Leadership Principles TYP: F
5. Managers get things done by coordinating and motivating other people.
ANS: PTS: 1 DIF: 2 REF: 6
NAT: AACSB Analytic | Leadership Principles TYP: F
6. The attainment of organizational goals through planning, organizing, leading and controlling reflects the essence of the management process.
ANS: PTS: 1 DIF: 1 REF: 6
NAT: AACSB Analytic | Leadership Principles TYP: F
7. Where the organization wants to be in the future and how to get there defines controlling.
ANS: PTS: 1 DIF: 1 REF: 7
NAT: AACSB Analytic | Leadership Principles TYP: F
8. Organizing means defining goals for future organizational performance and deciding on the tasks and resources needed to attain them.
ANS: PTS: 1 DIF: 2 REF: 7
NAT: AACSB Analytic | Leadership Principles TYP: F
9. Leading is the use of influence to motivate employees to achieve organizational goals.
ANS: PTS: 1 DIF: 1 REF: 8
NAT: AACSB Analytic | Leadership Principles TYP: F
10. The use of influence to motivate employees to achieve organizational goals defines organizing.
ANS: PTS: 1 DIF: 1 REF: 8
NAT: AACSB Analytic | Leadership Principles TYP: F
11. How an organization goes about accomplishing a plan is a key part of the management function of controlling.
ANS: PTS: 1 DIF: 1 REF: 8
NAT: AACSB Analytic | Leadership Principles TYP: F
12. Using influence to motivate employees describes the management function of leading.
ANS: PTS: 1 DIF: 1 REF: 8
NAT: AACSB Analytic | Leadership Principles TYP: F
13. The use of influence to motivate employees to achieve the organization's goals refers to controlling.
ANS: PTS: 1 DIF: 1 REF: 8
NAT: AACSB Analytic | Leadership Principles TYP: F
14. Organizing means creating a shared culture and values.
ANS: PTS: 1 DIF: 2 REF: 8
NAT: AACSB Analytic | Leadership Principles TYP: F
15. Controlling involves monitoring employee's activities and taking corrective action as necessary.
ANS: PTS: 1 DIF: 1 REF: 8
NAT: AACSB Analytic | Leadership Principles TYP: F
16. An organization is a social entity that is goal directed and deliberately structured.
ANS: PTS: 1 DIF: 1 REF: 9
NAT: AACSB Analytic | Creation of Value TYP: F
17. In the definition of an organization, deliberately structured means being made up of two or more people and designed to achieve some outcomes.
ANS: PTS: 1 DIF: 1 REF: 9
NAT: AACSB Analytic | Creation of Value TYP: F
18. Efficiency refers to the degree to which the organization achieves a stated objective.
ANS: PTS: 1 DIF: 1 REF: 9
NAT: AACSB Analytic | Creation of Value TYP: F
19. Efficiency can be calculated as the amount of resources used to produce a product or service.
ANS: PTS: 1 DIF: 1 REF: 9
NAT: AACSB Analytic | Creation of Value TYP: F
20. To perform effectively, all managers must possess conceptual, human, and technical skills, though the degree of each skill necessary at different levels of an organization may vary.
ANS: PTS: 1 DIF: 2 REF: 10
NAT: AACSB Analytic | HRM TYP: F
21. All managers have to pay attention to costs and according to research, the best way to improve organizational effectiveness is by severe cost cutting.
ANS: PTS: 1 DIF: 2 REF: 10
NAT: AACSB Analytic | Strategy TYP: F
22. Human skill is the cognitive ability to see the organization as a whole system and the relationships among its parts.
ANS: PTS: 1 DIF: 2 REF: 10
NAT: AACSB Reflective Thinking | Leadership Principles TYP: F
23. Only the top managers in organizations need conceptual skills since it involves planning.
ANS: PTS: 1 DIF: 2 REF: 10
NAT: AACSB Analytic | HRM TYP: F
24. A manager's ability to work with and through other people and to work effectively as a group member is called human skills.
ANS: PTS: 1 DIF: 1 REF: 11
NAT: AACSB Analytic | HRM TYP: F
25. Technical skills are most important at lower organizational levels while human skills become more important as managers move up the organizational hierarchy.
ANS: PTS: 1 DIF: 2 REF: 11
NAT: AACSB Analytic | HRM TYP: F
26. Technical skills are utilized in the understanding and proficiency of general tasks.
ANS: PTS: 1 DIF: 1 REF: 11
NAT: AACSB Analytic | HRM TYP: F
27. One of the biggest mistakes during turbulent times is managers' failure to comprehend and adapt to the rapid pace of change in the world around them.
ANS: PTS: 1 DIF: 2 REF: 12
NAT: AACSB Analytic | Leadership Principles TYP: F
28. Managers use conceptual, human, and technical skills to perform the four management functions of planning, organizing, leading, and controlling in all organizations.
ANS: PTS: 1 DIF: 2 REF: 13
NAT: AACSB Analytic | HRM TYP: F
29. First-line managers are responsible for setting organizational goals, defining strategies for achieving them, monitoring and interpreting the external environment, and making decisions that affect the entire organization.
ANS: PTS: 1 DIF: 2 REF: 14
NAT: AACSB Analytic | Strategy TYP: F
30. Middle managers are responsible for setting organizational goals, defining strategies for achieving them, and making decisions that affect the entire organization.
ANS: PTS: 1 DIF: 2 REF: 14
NAT: AACSB Analytic | Creation of Value TYP: F
31. Antonio is head of the advertising department at Terrific Tortillas, Inc. He can be described as a general manager.
ANS: PTS: 1 DIF: 3 REF: 14
NAT: AACSB Analytic | Creation of Value TYP: A
32. Juan, as a manager, is generally concerned with the near future and is expected to establish good relationships with peers around the organization, encourage teamwork, and resolve conflicts. Juan can be described as a middle manager.
ANS: PTS: 1 DIF: 3 REF: 14
NAT: AACSB Analytic | Creation of Value TYP: A
33. Given the significantly reduced importance of the middle manager's jobs in today's workplace, these levels have been eliminated in organizations.
ANS: PTS: 1 DIF: 2 REF: 14
NAT: AACSB Analytic | Creation of Value TYP: F
34. First line managers are the managers who have the responsibility for making the significant strategic policy decisions, often with staff managers assisting them in these decisions.
ANS: PTS: 1 DIF: 2 REF: 14
NAT: AACSB Analytic | Creation of Value TYP: F
35. Staff managers are responsible for the manufacturing and marketing departments that make or sell the products or services.
ANS: PTS: 1 DIF: 2 REF: 15
NAT: AACSB Analytic | Creation of Value TYP: F
36. According to research, managers most enjoy activities such as leading others, networking, and leading innovation.
ANS: PTS: 1 DIF: 1 REF: 16
NAT: AACSB Analytic | Leadership Principles TYP: F
37. Manager least enjoy activities such as controlling subordinates and managing time pressures.
ANS: PTS: 1 DIF: 2 REF: 16
NAT: AACSB Analytic | Leadership Principles TYP: F
38. A general manager is responsible for a self-contained division.
ANS: PTS: 1 DIF: 2 REF: 15
NAT: AACSB Analytic | Leadership Principles TYP: F
39. The individual performer is a generalist and coordinates a broad range of activities.
ANS: PTS: 1 DIF: 2 REF: 17
NAT: AACSB Analytic | Leadership Principles TYP: F
40. The manager is a specialist and a "doer."
ANS: PTS: 1 DIF: 2 REF: 17
NAT: AACSB Analytic | Leadership Principles TYP: F
41. Becoming a successful manager means thinking in terms of building teams and networks, becoming a motivator and organizer within a highly interdependent system of people and work.
ANS: PTS: 1 DIF: 1 REF: 17
NAT: AACSB Analytic | HRM TYP: F
42. Manager's Shoptalk in Chapter 1 asks you to consider issues such as the increased workload and the challenge of supervising former peers to help you decide if you really want to become a manager.
ANS: PTS: 1 DIF: 2 REF: 18
NAT: AACSB Analytic | Leadership Principles TYP: F
43. Managerial activity is often characterized by routine, continuity, and lengthy time-frame.
ANS: PTS: 1 DIF: 1 REF: 19
NAT: AACSB Analytic | HRM TYP: F
44. A manager forwards information to other organization members in the disseminator role.
ANS: PTS: 1 DIF: 1 REF: 20-21
NAT: AACSB Analytic | Leadership Principles TYP: F
45. In the spokesperson role, a manager forwards information to other organization members.
ANS: PTS: 1 DIF: 2 REF: 21
NAT: AACSB Analytic | Leadership Principles TYP: F
46. The interpersonal roles performed by managers include figurehead, leader, and liaison.
ANS: PTS: 1 DIF: 1 REF: 21
NAT: AACSB Analytic | Leadership Principles TYP: F
47. The informational roles that managers perform include monitor, disseminator, and spokesperson.
ANS: PTS: 1 DIF: 1 REF: 21
NAT: AACSB Analytic | Leadership Principles TYP: F
48. The monitor role involves the initiation of change.
ANS: PTS: 1 DIF: 2 REF: 21
NAT: AACSB Analytic | Leadership Principles TYP: F
49. In the figurehead role, the manager performs ceremonial and symbolic duties.
ANS: PTS: 1 DIF: 2 REF: 21
NAT: AACSB Analytic | Leadership Principles TYP: F
50. The disturbance handler role involves the initiation of change, thinking about the future and how to get there.
ANS: PTS: 1 DIF: 2 REF: 21
NAT: AACSB Analytic | Leadership Principles TYP: F
51. Fortunately for managers, the disseminator and spokesperson roles are identical.
ANS: PTS: 1 DIF: 1 REF: 21
NAT: AACSB Reflective Thinking | HRM TYP: F
52. Managers in small businesses tend to emphasize roles different from those of managers in large corporations.
ANS: PTS: 1 DIF: 1 REF: 23
NAT: AACSB Analytic | HRM TYP: F
53. Not-for-profit organizations, such as The Red Cross and the Girl Scouts, represent a major application of management talent.
ANS: PTS: 1 DIF: 1 REF: 23
NAT: AACSB Analytic | HRM TYP: F
54. We might expect managers in nonprofit organizations to place more emphasis on the roles of spokesperson, leader, and resource allocator.
ANS: PTS: 1 DIF: 1 REF: 24
NAT: AACSB Analytic | Leadership Principles TYP: F
55. Managers in not-for-profit organizations, according to research, should place less emphasis on the roles of spokesperson, leader, and resource allocator.
ANS: PTS: 1 DIF: 2 REF: 24
NAT: AACSB Analytic | HRM TYP: F
56. One of the most striking changes affecting organizations and management is technology.
ANS: PTS: 1 DIF: 2 REF: 24
NAT: AACSB Analytic | Environmental Influence TYP: F
57. In the new workplace, the valued worker is one who learns quickly, shares knowledge, and is comfortable with risk, change, and ambiguity.
ANS: PTS: 1 DIF: 2 REF: 26
NAT: AACSB Analytic | HRM TYP: F
58. The primary characteristic of the new workplace is that it is centered on loyal and homogeneous employees.
ANS: PTS: 1 DIF: 2 REF: 26
NAT: AACSB Analytic | Environmental Influence TYP: F
59. The new workplace is organized around networks rather than rigid hierarchies, and work is often virtual.
ANS: PTS: 1 DIF: 2 REF: 26
NAT: AACSB Analytic | Environmental Influence TYP: F
60. Organizations are increasingly shifting significant chunks of what were once considered core functions to outsiders via outsourcing, joint ventures, and other complex alliances.
ANS: PTS: 1 DIF: 1 REF: 24
NAT: AACSB Analytic | Creation of Value TYP: F
61. In the new workplace, managers should focus on developing teamwork, collaboration, and teamwork.
ANS: PTS: 1 DIF: 1 REF: 26
NAT: AACSB Analytic | HRM TYP: F
62. Success in the new workplace depends on the strength and quality of independent employees.
ANS: PTS: 1 DIF: 1 REF: 26
NAT: AACSB Analytic | HRM TYP: F
63. Organizations are learning to value stability and efficiency over change and speed because of changes in technology, globalization, and diversity.
ANS: PTS: 1 DIF: 2 REF: 24-25
NAT: AACSB Technology | Environmental Influence TYP: F
64. Companies can survive over the long run without innovation as long as they are successful imitators.
ANS: PTS: 1 DIF: 2 REF: 4
NAT: AACSB Analytic | Creation of Value TYP: F
65. Despite the need for companies to control costs in today’s economy, innovation has become the new imperative.
ANS: PTS: 1 DIF: 2 REF: 5
NAT: AACSB Analytic | Creation of Value TYP: F
66. Recognizing the value of employees involves the organizing role of management.
ANS: PTS: 1 DIF: 2 REF: 6
NAT: AACSB Analytic | Leadership Principles TYP: F
67. Resources such as efficiency and effectiveness are used by managers to attain organizational goals.
ANS: PTS: 1 DIF: 2 REF: 7
NAT: AACSB Analytic | Creation of Value TYP: F
68. Allocating resources across the organization is part of the organizing management function.
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ACC 206 Week 11 Final Exam – Strayer
ACC 206 Week 11 Final Exam – Strayer
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Chapter14 Through 19
CORPORATIONS:DIVIDENDS,RETAINEDEARNINGS,ANDINCOMEREPORTING
CHAPTERSTUDYOBJECTIVES
1.Preparetheentriesforcashdividendsandstockdividends.
2.Identifytheitemsreportedinaretainedearningsstatement.
3.Prepareandanalyzeacomprehensivestockholders'equitysection.
4.Describetheformandcontentofcorporationincomestatements.
5.Computeearningspershare.
TRUE-FALSESTATEMENTS
1. Dividendsmaybedeclaredandpaidincashor stock.
2. Cashdividends arenotaliability ofthecorporationuntiltheyaredeclaredbytheboardof directors.
3. Theamountofacashdividendliabilityisrecordedonthedateofrecordbecauseitison that datethatthepersonsor entitieswhowillreceivethedividendare identified.
4. A10%stockdividendwillincreasethenumberofsharesoutstandingbutthebookvalue pershare willdecrease.
5. A3for1commonstocksplitwillincreasetotalstockholders'equitybutreducetheparor stated valuepershareofcommonstock.
6. Retainedearningsrepresentstheamount of cashavailablefordividends.
7. Netincomeofacorporationshouldbeclosedtoretainedearningsandnetlossesshould be closed to paid-incapitalaccounts.
8. A debitbalanceintheRetained Earningsaccountis identifiedasadeficit.
9. AcorrectioninincomeofapriorperiodinvolveseitheradebitorcredittotheRetained Earningsaccount.
10. Priorperiodadjustmentsto incomearereportedinthecurrentyear'sincomestatement.
11. Retainedearningsthat are restrictedareunavailablefordividends.
12. Restrictedretainedearnings areavailableforpreferredstockdividendsbutunavailablefor commonstockdividends.
13. Aretainedearningsstatementshowsthesameinformationasacorporationincome statement.
14. Adetailedstockholders'equitysectioninthebalancesheetwilllistthenamesof individualswhoare eligibletoreceivedividendsonthedateofrecord.
15. CommonStockDividendsDistributableisshownwithinthePaid-inCapitalsubdivisionof thestockholders'equitysectionof thebalancesheet.
16. Returnoncommonstockholders’equityiscomputedbydividingnetincomebyending stockholders’ equity.
17. Manycompaniesprepareastockholders’equitystatementinsteadofpresentinga detailed stockholders’ equity sectioninthebalancesheet.
18. Amajordifferenceamongcorporations,proprietorships,andpartnershipsisthata corporation's incomestatementreportsincometaxexpense.
19. A corporationincursincometaxexpense onlyifitpaysdividendsto stockholders.
Corporations:Dividends,RetainedEarnings,andIncomeReporting 14-5
20. Incometaxexpenseusuallyappearsasaseparatesectiononacorporationincome statement.
21. Earningspershareiscalculatedbydividingnetincomebytheweightedaveragenumber ofshares ofpreferredstock and commonstockoutstanding.
22. Preferreddividendspaidareaddedbacktonetincomeincalculatingearningspershare for commonstockholders.
23. Earningspershareindicatesthenetincomeearnedbyeachshareofoutstanding commonstock.
24. Earningsper shareis reportedfor both preferredandcommonstock.
25. Mostcompaniesarerequiredtoreportearningspershareonthefaceoftheincome statement.
Additional True-FalseQuestions
26. A dividendbasedonpaid-incapitalis termeda liquidatingdividend.
27. CommonStockDividendsDistributableisreportedasadditionalpaid-incapitalinthe stockholders' equitysection.
28. Apriorperiodadjustmentisreportedasanadjustmentofthebeginningbalanceof RetainedEarnings.
29. Incometaxexpenseandtherelatedliabilityforincometaxespayablearerecordedwhen taxes are paid.
30. Earningsper shareis reportedonlyforcommonstock.
MULTIPLECHOICEQUESTIONS
31. Eachof thefollowingdecreasesretainedearningsexcepta a.cashdividend.
b.liquidatingdividend. c.stockdividend.
d.All of thesedecreaseretainedearnings.
32. Eachof thefollowingdecreasestotal stockholders'equityexcepta a.cashdividend.
b.liquidatingdividend. c.stockdividend.
d.Allof thesedecreasetotalstockholders'equity.
33. Whichoneofthefollowingisnotnecessaryinorderforacorporationtopayacash dividend?
a.Adequatecash
b.Approvalof stockholders
c.Declarationof dividendsbytheboardof directors d.Retainedearnings
34. Ifa corporationdeclaresa dividendbasedupon paid-in capital,it isknownasa a.scrip dividend.
b.propertydividend. c.paiddividend.
d.liquidatingdividend.
35. Thedateonwhichacashdividendbecomesabindinglegalobligationison the a.declarationdate.
b.date of record. c.paymentdate.
d.lastdayofthefiscalyear-end.
36. The effectofthedeclarationofacashdividendbytheboardof directorsis to
Increase
a.Stockholders'equity b. Assets
c. Liabilities d. Liabilities
Decrease
Assets Liabilities
Stockholders'equity Assets
37. Thecumulativeeffectofthedeclarationandpaymentofacashdividendonacompany's financial statementsis to
a.decreasetotal liabilitiesandstockholders'equity. b.increasetotalexpensesandtotal liabilities.
c.increasetotal assetsand stockholders'equity. d.decreasetotalassetsandstockholders'equity.
Corporations:Dividends,RetainedEarnings,andIncomeReporting 14-7
38. CommonStock DividendsDistributableisclassifiedasa(n) a.assetaccount.
b.stockholders'equityaccount. c.expenseaccount.
d.liabilityaccount.
39. The effectofastockdividend isto
a.decreasetotalassetsandstockholders'equity. b.change thecompositionofstockholders'equity. c.decreasetotal assetsandtotal liabilities.
d.increasethebook valuepershareofcommonstock.
40. Ifacorporationdeclaresa10%stockdividendonitscommonstock,theaccounttobe debited onthedateofdeclaration is
a.CommonStock DividendsDistributable. b.CommonStock.
c.Paid-inCapitalinExcessofPar. d.RetainedEarnings.
41. Whichoneofthefollowingeventswouldnotrequireaformaljournalentryona corporation's books?
a.2for 1 stocksplit
b.100%stockdividend c.2%stockdividend
d.$1 persharecashdividend
42. Stockdividendsandstocksplitshavethefollowingeffectsonretainedearnings:
StockSplits a. Increaseb. Nochange c. Decreased. Nochange
StockDividendsNochange
Decrease Decrease Nochange
43. Dividendsarepredominantlypaidin a.scrip.
b.property. c.cash.
d.stock.
44. Ifastockholderreceivesadividendconsistingofapromissorynote,thestockholderhas received a
a.stockdividend. b.cashdividend.
c.contingentdividend. d.scripdividend.
45. Of thefourdividendstypes,thetwomostcommontypesinpracticeare a.cashandscrip.
b.cashand property. c.cashandstock.
d.propertyandstock.
14-8
46. Regulardividendsaredeclared outof
a.Paid-inCapitalinExcessofPar Value. b.TreasuryStock.
c.CommonStock.
d.RetainedEarnings.
47. A corporationiscommittedto alegalobligationwhen it declares a.acashdividend.
b.eitheracashdividendorastockdividend. c.astockdividend.
d.astocksplit.
48. Whichofthefollowingisnot asignificantdate withrespectto dividends? a.Thedeclarationdate
b.The incorporationdate c.Therecorddate
d.Thepaymentdate
49. Onthedividendrecorddate,
a.a dividendbecomesa currentobligation. b.noentryisrequired.
c.anentrymaybe requiredifit isastockdividend. d.DividendsPayableis debited.
50. Whichofthefollowingstatementsregarding thedateofacashdividenddeclaration isnot accurate?
a.Thedividendcan berescindedonceit hasbeendeclared. b.Thecorporationiscommittedto alegal,bindingobligation.
c.Theboard of directorsformallyauthorizesthecashdividend. d.A liabilityaccountmustbe increased.
51. DividendsPayableisclassifiedas a a.long-termliability.
b.contrastockholders'equityaccountto RetainedEarnings. c.currentliability.
d.stockholders'equityaccount.
52. Indicatetherespectiveeffectsofthedeclarationofacashdividendonthefollowing balance sheet sections:
Total Assets a. Increaseb. Nochange c. Decrease d. Decrease
Total LiabilitiesDecrease Increase IncreaseNochange
Total Stockholders'EquityNochange
Decrease Decrease Increase
53. Whichofthefollowingstatements aboutdividendsisnotaccurate? a.Manycompanies declareandpaycashquarterlydividends.
b.Lowdividendsmaymeanhigh stockreturns.
c.Theboard of directorsis obligatedtodeclaredividends. d.A legaldividendmaynot beafeasibleone.
Corporations:Dividends,RetainedEarnings,andIncomeReporting 14-9
54. Thecumulativeeffectofthedeclarationandpaymentofacashdividendonacompany's balance sheet isto
a.decreasecurrent liabilitiesand stockholders'equity. b.increasetotalassetsandstockholders'equity.
c.increasecurrentliabilitiesandstockholders'equity. d.decreasestockholders' equityandtotalassets.
55. Thedeclarationanddistributionof a stockdividendwill a.increasetotalstockholders'equity.
b.increasetotalassets. c.decreasetotal assets.
d.havenoeffectontotalassets.
56. ABC,Inc.has1,000sharesof4%,$100parvalue,cumulativepreferredstockand50,000 sharesof$1parvaluecommonstockoutstandingatDecember31,2008.Whatisthe annual dividend on thepreferred stock?
a.$40pershare b.$4,000intotal c.$400intotald.$.40pershare
57. Agler,Inc.has10,000sharesof6%,$100parvalue,cumulativepreferredstockand 100,000sharesof$1parvaluecommonstockoutstandingatDecember31,2008.Ifthe board ofdirectors declaresa$50,000dividend,the
a.preferredshareholderswillreceive1/10thofwhatthecommonshareholderswill receive.
b.preferredshareholders willreceivetheentire$50,000.
c.$50,000willbeheldasrestrictedretainedearningsandpaidoutatsomefuturedate.d.preferredshareholderswill receive$25,000and the commonshareholders will receive
$25,000.
58. Manner,Inc.has5,000sharesof6%,$100parvalue,noncumulativepreferredstockand 20,000sharesof$1parvaluecommonstockoutstandingatDecember31,2008.There werenodividendsdeclaredin2007.Theboardofdirectorsdeclaresandpaysa$55,000 dividendin2008.Whatistheamountofdividendsreceivedbythecommonstockholders in 2008?
a.$0
b.$30,000 c.$55,000 d.$25,000
59. Lopez,Inc.has2,000sharesof6%,$50parvalue,cumulativepreferredstockand50,000 sharesof$1parvaluecommonstockoutstandingatDecember31,2007,andDecember 31,2008.Theboardofdirectorsdeclaredandpaida$4,000dividendin2007.In2008, $20,000ofdividendsaredeclaredandpaid.Whatarethedividendsreceivedbythe preferredandcommonshareholdersin2008?
Preferred a. $12,000 b. $10,000 c. $8,000d. $6,000
Common $8,000 $10,000 $12,000 $14,000
14-10
60. Norton, Inc.has10,000sharesof6%,$100 par value,noncumulativepreferredstockand 100,000sharesof$1parvaluecommonstockoutstandingatDecember31,2008,and December31,2009. Theboard ofdirectors declared andpaida$50,000dividend in2008. In2009,$100,000ofdividendsaredeclaredandpaid.What arethedividendsreceivedby thepreferredandcommonshareholdersin 2009?
Preferred a.$0
b.$60,000 c.$50,000 d.$100,000
Common $100,000 $40,000 $50,000 $0
61. Theboardof directorsmustassignapersharevalueto a stockdividenddeclaredthat is a.greaterthantheparor statedvalue.
b.lessthanthe parorstated value. c.equaltotheparor statedvalue.
d.atleastequaltothe parorstatedvalue.
62. Corporationsgenerallyissuestock dividendsinorderto a.increasethemarketpricepershare.
b.exceedstockholders'dividendexpectations. c.increasethemarketabilityof thestock.
d.decreasetheamountofcapitalinthe corporation.
63. A stockholderwhoreceivesastockdividendwould a.expectthemarketpricepershareto increase. b.own moreshares ofstock.
c.expectretainedearningstoincrease.
d.expecttheparvalueof the stocktochange.
64. Whenstockdividendsaredistributed,
a.CommonStock DividendsDistributableisdecreased. b.RetainedEarningsisdecreased.
c.Paid-inCapitalin ExcessofPar Valueisdebitedifitis a smallstockdividend. d.noentryis necessaryifit isalargestock dividend.
65. A smallstockdividendisdefinedas
a.lessthan30%butgreaterthan25%of thecorporation's issuedstock. b.between50%and100%ofthecorporation's issuedstock.
c.morethan30%ofthecorporation's issuedstock.
d.lessthan20–25% of thecorporation'sissuedstock.
66. Thepershareamountnormallyassignedbytheboardofdirectorstoalargestock dividend is
a.themarketvalueof thestock onthedate of declaration.
b.theaveragepricepaidbystockholdersonoutstandingshares. c.thepar or stated valueof thestock.
d.zero.
Corporations:Dividends,RetainedEarnings,andIncomeReporting 14-11
67. Thepershareamountnormallyassignedbytheboardofdirectorstoasmallstock dividend is
a.themarketvalue of thestock onthedateof declaration.
b.theaveragepricepaidbystockholdersonoutstandingshares. c.thepar or stated valueof thestock.
d.zero.
68. Identifytheeffectthedeclarationofastockdividendhasontheparvaluepershareand book valuepershare.
Par Valueper Share a. Increase
b. Noeffect c. Decrease d. Noeffect
Book ValueperShareDecrease Increase Decrease Decrease
69. Thedeclarationof astockdividendwill a.increasepaid-incapital.
b.changethetotal of stockholders'equity. c.increasetotal liabilities.
d.increasetotalassets.
70. Whichofthefollowingshowthepropereffectofastocksplitandastockdividend?
Item
a. Totalpaid-incapitalb. Totalretainedearnings
c.Totalpar value(common) d. Parvaluepershare
StockSplit Increase
Decrease Decrease Decrease
StockDividend Increase Decrease IncreaseNochange
71. A stocksplit
a.mayoccurinthe absenceof retainedearnings. b.willincreasetotalpaid-incapital.
c.will increasethetotalparvalueof thestock.
d.willhavenoeffectontheparvaluepershareof stock.
72. OutstandingstockoftheApexCorporationincluded20,000sharesof$5parcommon stockand5,000sharesof6%,$10parnoncumulativepreferredstock.In2007,Apex declaredandpaiddividendsof$2,000.In2008,Apexdeclaredandpaiddividendsof $6,000.Howmuchof the 2008dividendwasdistributedtopreferredshareholders?
a.$4,000 b.$7,000 c.$3,000
d.Noneof theabove
73. OutstandingstockoftheBellCorporationincluded20,000sharesof$5parcommonstock and10,000sharesof6%,$10parnoncumulativepreferredstock.In2007,Belldeclared andpaiddividendsof$4,000.In2008,Belldeclaredandpaiddividendsof$12,000.How muchofthe2008 dividendwasdistributedtopreferredshareholders?
a.$8,000b.$14,000 c.$6,000
d.Noneof theabove
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Text
FIN 535 Week 11 Final Exam – Strayer New
FIN 535 Week 11 Final Exam – Strayer New
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Chapters 8 Through 21
Chapter 8—Relationships among Inflation, Interest Rates, and Exchange Rates
1. Assume a two-country world: Country A and Country B. Which of the following is correct about purchasing power parity (PPP) as related to these two countries?
a.
If Country A's inflation rate exceeds Country B's inflation rate, Country A's currency will weaken.
b.
If Country A's interest rate exceeds Country B's inflation rate, Country A's currency will weaken.
c.
If Country A's interest rate exceeds Country B's inflation rate, Country A's currency will strengthen.
d.
If Country B's inflation rate exceeds Country A's inflation rate, Country A's currency will weaken.
2. Given a home country and a foreign country, purchasing power parity (PPP) suggests that:
a.
a home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate.
b.
a home currency will appreciate if the current home interest rate exceeds the current foreign interest rate.
c.
a home currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate.
d.
a home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate.
3. The international Fisher effect (IFE) suggests that:
a.
a home currency will depreciate if the current home interest rate exceeds the current foreign interest rate.
b.
a home currency will appreciate if the current home interest rate exceeds the current foreign interest rate.
c.
a home currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate.
d.
a home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate.
4. Because there are a variety of factors in addition to inflation that affect exchange rates, this will:
a.
reduce the probability that PPP shall hold.
b.
increase the probability that PPP shall hold.
c.
increase the probability the IFE will hold.
d.
B and C
5. Because there are sometimes no substitutes for traded goods, this will:
a.
reduce the probability that PPP shall hold.
b.
increase the probability that PPP shall hold.
c.
increase the probability the IFE will hold.
d.
B and C
6. According to the IFE, if British interest rates exceed U.S. interest rates:
a.
the British pound's value will remain constant.
b.
the British pound will depreciate against the dollar.
c.
the British inflation rate will decrease.
d.
the forward rate of the British pound will contain a premium.
e.
today's forward rate of the British pound will equal today's spot rate.
7. Given a home country and a foreign country, the international Fisher effect (IFE) suggests that:
a.
the nominal interest rates of both countries are the same.
b.
the inflation rates of both countries are the same.
c.
the exchange rates of both countries will move in a similar direction against other currencies.
d.
none of the above
8. Given a home country and a foreign country, purchasing power parity suggests that:
a.
the inflation rates of both countries will be the same.
b.
the nominal interest rates of both countries will be the same.
c.
A and B
d.
none of the above
9. If interest rates on the euro are consistently below U.S. interest rates, then for the international Fisher effect (IFE) to hold:
a.
the value of the euro would often appreciate against the dollar.
b.
the value of the euro would often depreciate against the dollar.
c.
the value of the euro would remain constant most of the time.
d.
the value of the euro would appreciate in some periods and depreciate in other periods, but on average have a zero rate of appreciation.
10. If the international Fisher effect (IFE) did not hold based on historical data, then this suggests that:
a.
some corporations with excess cash can lock in a guaranteed higher return on future foreign short-term investments.
b.
some corporations with excess cash could have generated profits on average from covered interest arbitrage.
c.
some corporations with excess cash could have generated higher profits on average from foreign short-term investments than from domestic short-term investments.
d.
most corporations that consistently invest in foreign short-term investments would have generated the same profits (on average) as from domestic short-term investments.
11. Under purchasing power parity, the future spot exchange rate is a function of the initial spot rate in equilibrium and:
a.
the income differential.
b.
the forward discount or premium.
c.
the inflation differential.
d.
none of the above
12. According to the international Fisher effect, if U.S. investors expect a 5% rate of domestic inflation over one year, and a 2% rate of inflation in European countries that use the euro, and require a 3% real return on investments over one year, the nominal interest rate on one-year U.S. Treasury securities would be:
a.
2%.
b.
3%.
c.
−2%.
d.
5%.
e.
8%.
13. According to the international Fisher effect, if investors in all countries require the same real rate of return, the differential in nominal interest rates between any two countries:
a.
follows their exchange rate movement.
b.
is due to their inflation differentials.
c.
is zero.
d.
is constant over time.
e.
C and D
14. Assume that U.S. and British investors require a real return of 2%. If the nominal U.S. interest rate is 15%, and the nominal British rate is 13%, then according to the IFE, the British inflation rate is expected to be about ____ the U.S. inflation rate, and the British pound is expected to ____.
a.
2 percentage points above; depreciate by about 2%
b.
3 percentage points above; depreciate by about 3%
c.
3 percentage points below; appreciate by about 3%
d.
3 percentage points below; depreciate by about 3%
e.
2 percentage points below; appreciate by about 2%
15. Assume U.S. and Swiss investors require a real rate of return of 3%. Assume the nominal U.S. interest rate is 6% and the nominal Swiss rate is 4%. According to the international Fisher effect, the franc will ____ by about ____.
a.
appreciate; 3%
b.
appreciate; 1%
c.
depreciate; 3%
d.
depreciate; 2%
e.
appreciate; 2%
16. Assume that the U.S. and Chile nominal interest rates are equal. Then, the U.S. nominal interest rate decreases while the Chilean nominal interest rate remains stable. According to the international Fisher effect, this implies expectations of ____ than before, and that the Chilean peso should ____ against the dollar.
a.
lower U.S. inflation; depreciate
b.
lower U.S. inflation; appreciate
c.
higher U.S. inflation; depreciate
d.
higher U.S. inflation; appreciate
17. According to the international Fisher effect, if Venezuela has a much higher nominal rate than other countries, its inflation rate will likely be ____ than other countries, and its currency will ____.
a.
lower; strengthen
b.
lower; weaken
c.
higher; weaken
d.
higher; strengthen
18. If interest rate parity holds, then the one-year forward rate of a currency will be ____ the predicted spot rate of the currency in one year according to the international Fisher effect.
a.
greater than
b.
less than
c.
equal to
d.
answer is dependent on whether the forward rate has a discount or premium
19. The Fisher effect is used to determine the:
a.
real inflation rate.
b.
real interest rate.
c.
real spot rate.
d.
real forward rate.
20. Latin American countries have historically experienced relatively high inflation, and their currencies have weakened. This information is somewhat consistent with the concept of:
a.
interest rate parity.
b.
locational arbitrage.
c.
purchasing power parity.
d.
the exchange rate mechanism.
21. Assume that the inflation rate in Singapore is 3%, while the inflation rate in the U.S. is 8%. According to PPP, the Singapore dollar should ____ by ____%.
a.
appreciate; 4.85
b.
depreciate; 3,11
c.
appreciate; 3.11
d.
depreciate; 4.85
22. The inflation rate in the U.S. is 3%, while the inflation rate in Japan is 10%. The current exchange rate for the Japanese yen (¥) is $0.0075. After supply and demand for the Japanese yen has adjusted in the manner suggested by purchasing power parity, the new exchange rate for the yen will be:
a.
$0.0076.
b.
$0.0073.
c.
$0.0070.
d.
$0.0066.
23. Assume that the U.S. inflation rate is higher than the New Zealand inflation rate. This will cause U.S. consumers to ____ their imports from New Zealand and New Zealand consumers to ____ their imports from the U.S. According to purchasing power parity (PPP), this will result in a(n) ____ of the New Zealand dollar (NZ$).
a.
reduce; increase; appreciation
b.
increase; reduce; appreciation
c.
reduce; increase; depreciation
d.
reduce; increase; appreciation
24. The following regression analysis was conducted for the inflation rate information and exchange rate of the British pound:
Regression results indicate that a0 = 0 and a1 = 2. Therefore:
a.
purchasing power parity holds.
b.
purchasing power parity overestimated the exchange rate change during the period under examination.
c.
purchasing power parity underestimated the exchange rate change during the period under examination.
d.
purchasing power parity will overestimate the exchange rate change of the British pound in the future.
25. Which of the following is indicated by research regarding purchasing power parity (PPP)?
a.
PPP clearly holds in the short run.
b.
Deviations from PPP are reduced in the long run.
c.
PPP clearly holds in the long run.
d.
There is no relationship between inflation differentials and exchange rate movements in the short run or long run.
26. The interest rate in the U.K. is 7%, while the interest rate in the U.S. is 5%. The spot rate for the British pound is $1.50. According to the international Fisher effect (IFE), the British pound should adjust to a new level of:
a.
$1.47.
b.
$1.53.
c.
$1.43.
d.
$1.57.
27. If nominal British interest rates are 3% and nominal U.S. interest rates are 6%, then the British pound (£) is expected to ____ by about ____%, according to the international Fisher effect (IFE).
a.
depreciate; 2.9
b.
appreciate; 2.9
c.
depreciate; 1.0
d.
appreciate; 1.0
e.
none of the above
28. There is much evidence to suggest that Japanese investors invest in U.S. Treasury securities when U.S. interest rates are higher than Japanese interest rates. These investors most likely believe in the international Fisher effect.
a. True
b. False
29. Which of the following is not true regarding IRP, PPP, and the IFE?
a.
IRP suggests that a currency's spot rate will change according to interest rate differentials.
b.
PPP suggests that a currency's spot rate will change according to inflation differentials.
c.
The IFE suggests that a currency's spot rate will change according to interest rate differentials.
d.
All of the above are true.
30. The relative form of purchasing power parity (PPP) accounts for the possibility of market imperfections such as transportation costs, tariffs, and quotas in establishing a relationship between inflation rates and exchange rate changes.
a. True
b. False
31. According to the international Fisher effect (IFE), the exchange rate percentage change should be approximately equal to the differential in income levels between two countries.
a. True
b. False
32. Research indicates that deviations from purchasing power parity (PPP) are reduced over the long run.
a. True
b. False
33. The IFE theory suggests that foreign currencies with relatively high interest rates will appreciate because the high nominal interest rates reflect expected inflation.
a. True
b. False
34. If the IFE theory holds, that means that covered interest arbitrage is not feasible.
a. True
b. False
35. If interest rate parity holds, and the international Fisher effect (IFE) holds, foreign currencies with relatively high interest rates should have forward discounts and those currencies would be expected to depreciate.
a. True
b. False
36. Interest rate parity can only hold if purchasing power parity holds.
a. True
b. False
37. If interest rate parity holds, then the international Fisher effect must hold.
a. True
b. False
38. Which of the following theories suggests that the percentage change in spot exchange rate of a currency should be equal to the inflation differential between two countries?
a.
purchasing power parity (PPP).
b.
triangular arbitrage.
c.
international Fisher effect (IFE).
d.
interest rate parity (IRP).
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