UD-UGBA-10-Practice Midterm #3-2009S

UD-UGBA-10-Practice Midterm #3-2009S - Accounting Finance 1...

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Accounting & Finance © David Robinson, 2008 Do not copy or distribute 1. Critics of the Sarbanes-Oxley law have claimed that the new regulations are so onerous (=burdensome) that they will destroy the US stock market. Andy Serwer in F ORTUNE looked at the evidence and concluded: a. The law has had overall positive effects b. The law has resulted in US companies shifting their stock listings to overseas exchanges c. The stock market dropped substantially once the law went into effect d. Corporate malfeasance (= wrongdoing) continued unabated even when the law was passed Ans. A ® 75 2. After the Enron melt-down, bankers who had loaned large sums to the firm to support its shady schemes claimed they had no part in the problem. As is customary in these cases, Merrill Lynch issued a statement denying wrongdoing, and: a. Avoided any penalty in the matter b. Settled with the SEC for a fine of tens of millions of dollars to avoid prosecution c. Appealed to the US Supreme Court to support its contention that it was not at fault d. Sued Enron officials to recover money that Merrill had lost on the deals Ans. B ® 84 3. Why does Andy Kessler hate dividends? a. They signal that a company is close to bankruptcy b. When a company pays dividends it acknowledges it doesn’t have any good internal investment opportunities c. They only serve to signal rapid growth in new technologies d. Companies only pay high dividends to avoid paying Corporate Income Tax Ans. B ® 88 4. What is true about company CEOs and their projections about future earnings? a. The projections are surprisingly accurate b. Few CEOs feel any pressure to meet their own estimates c. The projections are required as part of quarterly reporting d. The percentage of CEOs who do this has fallen sharply in recent years Ans. D ® 90
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Accounting & Finance © David Robinson, 2008 Do not copy or distribute 5. Our GSIs are all MBA students. When considering whether to go to school full-time or carrying on working, they had to consider the cost of tuition and fees and: a. The cost of groceries b. The opportunity cost c. The cost of entertainment d. The deferred cost Ans. B L1 discussed; there is no such thing as “deferred cost” in this situation and groceries and entertainment are (essentially) unchanged by going to school making “Opportunity Cost” the best answer. Difficult. 6. For Spring break, you are renting a condo in Hawaii and you are considering taking just your significant other (1 other person) or six friends. The week’s rental fee for the condo is: a. A deferred cost b. A fixed cost c. A variable cost d. The total variable cost Ans. B L1 gimme 7. Wal-mart has a business strategy that depends on very high unit volume of sales because its: a. Selling prices are close to its fixed costs b. Fixed costs are negligible c. Selling prices are close to its variable costs d. Variable costs are unknowable Ans. C L1 and similar at Q1 (Cost/volume/profit slide WM discussed in class) 8. Managerial accounting often looks at industry specific measures and in retail one important
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UD-UGBA-10-Practice Midterm #3-2009S - Accounting Finance 1...

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