BA 10 - Accounting and Finance - Fall 2001 - Robinson

BA 10 - Accounting and Finance - Fall 2001 - Robinson -...

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Unformatted text preview: Accowo‘nMo- AND FINANCE FALL zool Business Administration 10 B A 1 0 The Corporation and the International Business Environment HAAS SCHOOL OF BUSINESS October 2001 Module 3 Exam: Accounting 8: Finance David Robinson Make sure your family name comes first! Instructions 0 This is an exam—please do not talk 0 Your books and notes must be put completel raise your hand i 0 While you are waiting to_ . gin, enter the following on your Scantron: Name: LAST, First M. Sunken 1234-5678 your Student Identification Number TestNo.: {A, B, C. or D} This is the test version—you won’t know this until you open the test Date: (1, 2, etc} This module number Houn Your Section number: (101 m 114) mm Time m --—_n- Im— -Tue _—— -Tue _—_ 105 Tue Litt, Darren _L _|. EH “‘4 0) ii (D (D O. D. 00 —L C m E (D CL _'_' 3: E: -Ifi .3 A —l-l 3 3 c : -1-I _| :1' E 1 _L_L_L_L_L_A AAA—LAO th—IO'D .4 3' C H BA-‘IO F 2001 Mod 3 i 1 One of the strengths of the Federal Reserve is that the governors come from different parts of the country, and not just from Washington, DC. However, a Too many of the regional banks of the Fed are on the East Coast, and not enough on the West Coast to represent the current US population distribution b There are far too many branches of the Fed, so it is impossible to reach consensus in meetings c The location of branches of the Fed has constantly changed since the Fed was founded in the early 20‘h Century d Most of the branches of the bank are in Texas and California due to gold and oil wealth The Canadian theatre production company Livent chose to capitalize some expenses for advertising, as opposed to treating them as current period expenses. In the short term, this had the effect of: a Overstating their income '1 -- "1 "s b Understating their income c Ovelrstating their Revenue d Understating their Revenue a», _ . ‘.-4 g‘ V w? arm—“E , y The Federal government is giving seriOus consideration to “retiring” all outstanding 30» year bonds by issuing 10-year bonds instead. If they issued 10-year bonds in place of the 30 year bonds: a It would cost more interest each year b It would cost less interest each year c It would have no effect on the am0unt ofinterest the government would have to pay each year d The interest paid each year would only decrease if they used cash to pay the 30 year bonds off. Financial analysts have usually made estimates of a stock’s future price (called a “price target”) based on a multiple of the firm’s expected earnings, but during the bubble in NASDAQ stock prices in the year 2000, many analysts abandoned this metric and went instead with a price target based on: a The company’s own PR release estimate of stock price b Estimates reported by the NYSE c The analyst’s guess at what investors might be willing to pay (1 Treating the stock as a “risk free” investment “Spiders," “Cubes,” and “Diamonds” are examples of " Exchange Traded Funds Electronic Communications Networks Stock options Bond funds Q—OU‘N 2 BA-‘IO F 2001 Mod 3 6. In the 1930’s the SEC began requiring all firms that publicly sold stocks and bonds to have annual audits by CPA’s. Which of the following is true? a The CPA firms make more money from other services, such as consulting, than from auditing b Auditing often doesn’t uncover management fraud c The CPA firms often get sued if an accounting problem emerges after the audit d All of the above are true 7. A “breakeven analysis” determines: a The quantity ofa product which must be sold before a seller can earn a profit b The Net Present Value ofa product c The variable cost of a product d None of the above 8. Who formulates the Generally Accepted Acc0unting Principles (GAAP)? a The General Services Administration b The Financial Accounting Standards Board (FASB) c The US Treasury d The Federal Reserve 9. A Balance Sheet reports . a A summary ofa firm’s trading activity over a period of time, such as a quarter ,.r‘b The flows of cash in and out of the firm, from investing, operating and financing c A snapshot ofa firm’s financial condition at one point in time cl None of the above 10. Current assets are defined as: a Cash b Cash and checking acc0unt balances C Cash and assets that could be converted to cash within 12 months d Cash and investments in other firms 11. A firm has a patent; the value would be reflected: a As a Current asset on the balance sheet b As an intangible asset on the balance sheet c As a current asset on the balance sheet d Would not be shown on the balance sheet lZinn the Income Statement, the CEO’s salary would be shown as part of: g a \ Selling, general and administrative expenses _ b" Operating expense c Cost ofgoods sold d All of the above BA-1O F 2001 Mod 3 3 13. Eamz'ngrper Mane is net earnings aFter taxes divided by the number of shares outstanding and it is considered a: a EFficiency (or Activity) ratio b Long- term Solvency ratio c Profitability ratio d Short—term Solvency ratio 14. A bank is considering loaning money to a poster company to Fund inventory For the holiday season sales rush. It is most likely to calculate: fl) The Current Ratio "”b The Debt/Equity Ratio c The Earnings/ Share Ratio , el’ The Inventory Turns Ratio 15. Which oF the Following is not a desirable Function oFmangy ‘ a Portability b Divisibility c Durability d Inflation 16. IF a decision is made to rebuild the World Trade Center Towers, some the Funds would most likely come From pension Funds. These long-term investors are considered: a Commercial banks b Investment banks c Non~deposit Institutions or Non~deposit Lenders d Credit Unions 17. Your bank has a sign that says: Barb account is insured :9) to $100,000. IF the bank Fails, who pays up? a The SEC b The FDIC c The Federal Reserve d Prudential Insurance Co. 18. One surprising Function that the Federal Reserve still conducts on behalf 0F member banks is: a Clearing checks between member banks by sending them to the branch of the Federal Reserve closest to your own bank b Selling BART tickets c To exchange dollar bills into gold bullion, upon request d None 0F these 4 BA-10 F 2001 Mod 3 19. Financial programs often refer to a group of stocks as “blue-chip” stocks. The term “blue chip” a Is essentially meaningless b Refers to one of the shares originally listed on the NYSE when it was first founded c pRefers to hi—tech stocks d," Refers to well-established companies with a history of stable dividend payouts 20. The index which most reflects the behavior of“blue-chip” stocks is: a The Dow—Jones Industrial Average (DJIA) b The Standard and Poors 500 (S851) 500) c The Russel 2000 d The NASDAQ Index 21. Xerox has recently replaced it’s auditing firm, KPMG, with another accounting firm. Although management undoubtedly initiated this change, as a public company, this change has to be approved: a By the FDIC b By a vote of the shareholders c By the firm’s banks d By the firm’s bondholders 22. Webvan stopped trading in july, and the company is bankrupt. If you had invested $1,000 in WBVN and heard that it was going to pay secured creditors “9 cents on the dollar” you would expect to most likely receive what from the Bankruptcy court: a $90 b $900 C 31,000 d Nothing 23. Which of the following is not a source of long-term funds for a firm? a Bond sales b Commercial paper c Sale of common stock d Retained earnings 24. If you pay a Moscow cab—driver in US$ rather than rubles, the cab—driver is likely to be ateful, but may keep the money at home, rather than saving it in a bank. This action: a) Limits the growth of the Russian economy b Tends to make the Russian economy grow faster than it would otherwise c Will lead to high short—term inflation _ d Will have no effect on the economy 25. Your firm has two projects proposed, but can only fund one. It shOuld choose: a The one with the highest NPV b The one with the lowest NPV c The one which costs least this year cl The one which pays off the most cash this year BA-10 F 2001 Mod 3 5 26. Cesaria-Evora sold out two concerts at Cal last week. If she has no immediate need for the money she earned, and asked your advice for 3. Suitable investment, you would need to know: a Her risk tolerance b Her time horizon (how soon she might need the money) G) Both a and b d Neither a or b 27. The Price/Earnings ratio ofa stock tends to go up when: a The company fails to deliver growth in earnings b Investors expect growth in earnings in the future c Investors expect earnings to stay pretty much the same as they’ve been in the past d The company’s earnings fall compared with the previOus period 28. Most firms only have one type of common stock but big companies are quite likely to have many different categories of bonds (with different maturity dates, interest rates and so on). According to a recent Wall Streetjournal article discussed in class, ordinary small investors (like you and me) have difficulty in finding a current price for corporate bonds because: a Most of them are traded on the AMEX b Most of them are never traded in the secondary market @ Most of them aren’t listed on the exchanges and only trade “over the Counter” Most of them are listed on the NYSE 29. If Starbucks started to pay a dividend, it would be most easy for you to see this on: a The Statement of Cash Flows b The Balance Sheet c The Income Statement d None of these 30. You hold 100 shares of MSFT (Microsoft Common Stock), worth about $6,000. There are about 5.4 Billion shares of MSFT issued. Microsoft has a Market Capitalization of $313 Billion, and has $36.2 Billion (yes, Bil/ion) in cash (likely a bit more than you have in checking). If the majority of investors believe that Bill Gates and his team are better at using this cash than they could be themselves, what would happen if Microsoft started using this cash to buy back its own shares on the NASDAQ? (Note, it is perfectly legal for a company to buy its own shares). a The price of MSFT would likely go down on the NASDAQ because the firm now has less cash . b The price of MSFT would likely go up, because there are now fewer shares so your proportional ownership of the c0mpany is greater c The price of MSFT would likely go up, because you now own less of the company d The price of MSFT would likely go down because there are fewer shares trading. 31. This is version C; bubble in —C- for this question andwrite “C” in the identification section of your Scantron. Ifyou do rial amwer t/Ji; querlion,_y0u [are 1/93 point. ...
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