BA 10 - Accounting and Finance - Spring 2001 - Robinson

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

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Unformatted text preview: HAAS SCHOOL OF BUSINESS Module 4 Exam: [Javdv _________________“______________ Instructions 0 This is an exam—please do In Your books and notes must be You should keep the question 0 0 Do not open the exam until )7 O I You need a Scantron 882 £5 a raise your hand 0 While you are waiting 9% Name: Subject: Test No.: Date: flour: _L C .4 .3. C) (O _L .4 _.L _| _| N m: m: 1234—5678 (A, Br C,‘ This is the I you open the (l, 2, etc Your Sect; ii :2 mm _.| C (D Q. 0. ii _\ Illllllllllllllllll -i—l-I 3'27 C: SUBJECflVESCORE INSTRUCTOR USE DMD? . HEEL NOILVHOdHOO NOHLNVDS U ”JI- [iHSSBOS ON LVd STHCBAHSSBH SlHOiH 11V 9; 38:1 :a1dnvx3 I EBNVHO 0.1. A1313'ldW03 EISVHS ' 1'1 SMHVW MHVG EHVW I ;g: A‘iNfifijJMa z 'n mao‘uouueasMMM —A i c to CD '4 a: Ln 4‘. w M —l maums so 31dWVX3 umLugxmu slugad 0g], . la). an au” Jad mew auo Aluo . swlod anuaafqns alqgssad "2101 5mm - :EHfliVEj 38033 Bhllflif‘EnS 35H 01 .lOEl‘EI'IS ll||llllllllllllllllllllllll )—— NOLLOS‘HIG S‘IHJ. 033:1 -—> vavmvj sessAega-ouéii NBC] suuoa DJPDUBlS 9199—3330094 1m 3303033 01 quooauisai 1 BA-10 Sp 2001 Mod 4 1. Which is the correct formula for the balance on an account 3 years from now, with annual compound interest of 10 percent and an initial principal of $1,000? a. $1.000x3x1.1 b. $1,000 x (1.1 [3) c. $1.000 x 1.3 d. $1,000 x (1.1)3 ,..—"" 2. Many US savings bonds don’t pay “coupon interest”. If the government is offering 8 percent annual interest, roughly how much would you expect to pay today for a $100 bond matures in five years? a. $147 b. 3140 c. $100 d. $68 3. A “perpetuity” is a financial instrument which offers a stream of cash flows in the future, but has-no stated maturity date. A perpetuity is a special type of: a. Mortgage b. Net Present Value c. Annuity d. Loan amortization 4. Burton Malkiel has argued for a long time that most small investors are better off investing in Index funds, rather than actively managed mutual funds. One criticism of this approach is that if very many investors just buy “S&P 500” index funds, they will miss Out on gains from small company stocks. Malkiel suggests that the best way to address this is to: a. Simultaneously sell short S&P futures b. Buy broader market indexes funds which represent the value of several thousand securities c. Invest only in international securities cl. Invest only in real estate equities 5. If Gap pays a dividend, you will most easily see this on the: a. Income Statement b. Balance Sheet c. Statement of Cash Flows d. Does not appear on any of these 6. Financial analysts use Ratio Analysis to: a. Compare a firm with its past performance b. Compare a firm with its “peer” companies c. Compare a firm with government standards d. A and B are true e. A and C are true 0 ('7‘- l BA—10 Sp 2001 Mod 4 i 2 7. Which of the following is true about Index funds? a. They cannot protect investors from losses in a "down market” (“bear market”) b. They have lower sales and management expenses than actively managed funds c. They have lower capital gains taxes than actively managed funds d. All of the above are true 8. A type of firm which is most-likely to make the best 'uSe'ofa “Revolving Line of Credit" ‘x.--/ is one which: a. Is highly capital intensive b. Has highly seasonal sales c. Sells through the Internet only d. Does not use the Internet for direct sales .4 y When a supplier agrees to let a customer firm pay within 45 or 60 days (rather than the r l usual 30 days) this is a form of financing known as a. Long term, trade credit b. Long term, accounts receivable c. Short term, accounts receivable / d. Short term, trade credit L/ ,x" (10.)nvestors differ from one another, as your module papers have discussed. But all ' .,/ investors can be assumed to be alike in their investment profile as they want all except one of the following: a. Safety of principle . b. Liquidity: the opportunity to sell out at a moments notice —er A good return on invested capital- dr Increased return for increased risk 11. Which ofthe following is not true about the Corporation form of business? a. Hard to sell part of what you own b. Income may be subject to “double taxation” c. Merger with another business is possible [I \ d. Bank financing is easy to obtain / \\ 12. Money is a better medium of exchange than goats because goats are not “fungible”. a/fNot fungible” in this context means: a.—-Goats—a£esubieg_.!_q,dEEfiEgsuchas fungusinfec-n'ons (71M ,7 b. A seller may not consider one goat as valuable as another 4': c. A goat may die in transit d. Goats require feed and water " - -: :11 a BA—10 Sp 2001 Mod 4 \ depends on input from the Regional Reserve Banks, such as the one in San Francisco, so “\__,./ that decisions at the Fed are not dominated by a capital city (Washington) that may be out of touch with the regional economies. However, . a. The regions of the Fed are more in—tune with the 1890’s railroad econonomy The West of the USA has very few branches of the Fed b. c. There are too many branches in the West of the country— (1. e. 3 {1% One strength of the Federal Reserve system (which is envied by other countries) is that it A and B are correct A and C are correct 14. Which of the following would be a bad match of “sources and uses of funds” for a firm? a. Using factoring to finance accounts receivable LED Using a mortgage to finance accounts receivable c. Using trade credit to finance inventory d. Selling bonds to finance an acquisition , -‘W 15. In general, most investors don’t require that common stocks pay a yen/{gait dividend, because: ' a. The firm can make better use of returned earnings than the investor b. Retaining earnings gives the investor a choice of when to pay taxes—paying dividends requires taxes to be paid at once c. Investors can choose when to sell the stock if they want money back d. All of the above are true 16. The interest rate on 10—year Treasury debt is about 4.77 percent, but on 30—year is about 5.27. The best explanation of this is that: a. The Treasury anticipates higher inflation 10 ._ 30 years from now, than in the next 10 years b. Investors are concerned that there is risk that inflation may be higher in the 10 — 30 year time frame, as compared to now— 10 years from now. c. Investors are concerned that there is a great chance that the US government will go bankrupt in the 10 — 20 year time frame /\‘~ d_lnvestors want a greater return than they can get on similar corporate bonds. [Ii 17. \You bought a 10 year Treasury note with a 5 percent coupon for $1,000 last week. On ; 1the radio driving home you hear: “Benchmark 10-year interests continued their downward trend and were sharply lower today ..." i a. You are sad because you’ve just lost money ‘ ”b You are happy because you can probably go into the market and sell your note for ”4 more than $1,000 tomorrow You are indifferent because whenever you sell your note, y0u’ll get $1,000 anyway d. None of the above is true. 9 ( {/24. .f‘Contribution” is defined as: l _ .7 t.- “u" i 3 - . fl .._ i EL Fixed cost — variable cost i/ BA—10 Sp 2001 Mod 4 4 18/)ln general, the stock market give the highest PE ratio to: Companies that have a small chance of “hitting it big” Companies that keep their earnings equal from one period to the next Companies with a consistent pattern of sustained growth Companies that pay the highest dividends l! "1' ’, [3-9 ,0”? 9.A PG&E retiree has all of his / her savings invested in PGBLE stock. This is called a Lack of diversification b. Good portfolio management c. “Putting your money where your mouth is” (1. Over investment of capital 20. You have hired a DJ for y0ur sorority ball, and are selling tickets for $15 each. You allow $5 fora «In» costs, such as what each person will drink. The D] charges $450 for the night, which is a cost, and your breakeven point is: a. Fixed, variable, 30 tickets b. Variable, fixed, 30 tickets ‘4 i. , c. Sunk, fixed, 45 tickets d. "Variable, fixed, 45 tickets 21. Auditing of public companies (“firms”) is an important part of regular financial markets. CPA auditors have come under criticism recently for many accounting scandals: Involving pay—offs from the firms to the auditors Involving over-statement of revenue by the firms Involving over—statement of expenses by the firms Involving pay-offs by the firms to regulators FLOP"? 2.2. The New York Stock Exchange differs from the NASDAQ in that: a. It is no longer accepting the listing of new companies b. All transactions take place only at the post of the specialist in each stock c. The NYSE refuses to install computers d. Like the Paris and Frankfurt exchanges it has abandoned its trading floor. 23. Most firms have a risk—management program in place that may include insurance or self- insurance. But no firm can purchase insurance to cover: a. Speculative risk (Business risk) '3. Property loss risk (2. Liability loss risk d. Business interruption risk Selling price —- variable cos - ,/ _ c'. Selling price —- average cost '\ (:1. Fixed cost — profit \“‘ {/ 5 BA—1O Sp 2001 Mod 4 25. If you take money out of a money market account to loan to your younger brother who promises to pay you back the same amount of 7710729! at the end of the summer, you have incurred what type of cost? a. Sunk cost b. Fraternal cost c. Opportunity cost d. Average cost ~ ~~"‘ 26. In ArmalAccountz‘rzg you recognize income: a. When a sale is made b. When a check is received by the firm c. When the check successfully “clears” and the money is posted on the firms bank account d. When expenses are paid for 27. The “Fundamental Accounting Equation” is: a. Assets + Liabilities '—" Shareholders Equity b. Assets = Liabilities + Shareholders Equity c. Liabilities = Assets + Shareholders Equity d. Shareholders Equity = Liabilities — Assets 28. What distinguishes “Current" Assets from “Fixed” Assets? a. Fixed Assets are all machinery b. Current Assets are cash, or can be converted into cash within 12 months c. Current Assets are cash only _d. Fixed Assets are buildings only /' ’x 29. Which of these is trues-’2 UMMV‘ link; a The par value of i , essentially meaningless b. The par value ofa bond is irrelevant c. The par value ofa bond is important d. A and B are true e. A and C are true 30. “Aizfivity Ratios” are a measure of: a. Profitability b. Liquidity c. Sustainability d. Efficiency BA-10 Sp 2001 Mod 4 6 31. PG&E has declared bankruptcy. Assume, for the moment that this applies to the whole firm (and not just the “retail" subsidiary). If the firm owes $16 billion and has $4 billion in the bank, a. Shareholders get to split the $4 billion . b. Shareholders will get '/4 the par value of their shares C. Shareholders are likely to get nothing d. Shareholders will get paid before bondholders." u 32. This is version D; bubble in -D- for this question and write “D” in the identification section of your Scantron. Ifjou do not awn/er [bit questiau,_y0u [are tbepaint. ...
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