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Finance Flashcards

International Finance Chapter 4

1 The world’s largest foreign exchange trading center isa) New York.b) Tokyo.c) London.d) Hong Kong. C
2 The foreign exchange market closesa) Never.b) 4:00 p.m. EST (New York time).c) 4:00 p.m. GMT (London time).d) 4:00 p.m. (Tokyo time). A
3 Most foreign exchange transactions are fora) intervention by central banks.b) interbank trades between international banks or nonbank dealers.c) retail trade.d) purchase of hard currencies. B
4 Most interbank trades area) speculative or arbitrage transactions.b) simple order processing for the retail client.c) overnight loans from one bank to another.d) brokered by dealers. A
5 At the wholesale levela) most trading takes place OTC between individuals on the floor of the exchange.b) most trading takes place over the phone.c) most trading flows over Reuters and EBS platforms.d) most trading flows through specialized “broking” firms. C
6 Intervention in the foreign exchange market is the process ofa) a central bank requiring the commercial banks of that country to trade at a set price level.b) commercial banks in different countries coordinating efforts in order to stabilize one or more currencies.c) a central bank buying or selling its currency in order to influence its value.d) the government of a country prohibiting transactions in one or more currencies. C
7 The standard size foreign exchange transactions are fora) $10 million U.S.b) $1 million U.S.c) €1 million. A
8 Consider a U.S. importer desiring to purchase merchandise from a Dutch exporter invoiced in euros, at a cost of €512,100. The U.S. importer will contact his U.S. bank (where of course he has an account denominated in U.S. dollars) and inquire about the exchange rate, which the bank quotes as €1.0242/$1.00. The importer accepts this price, so his bank will ____________the importer’s account in the amount of ____________.a) Debit, $500,000b) Credit, €512,100c) Credit, $500,000d) Debit, €512,100 A
9 The current exchange rate is £1.00 = $2.00. Compute the correct balances in Bank A’s correspondent account(s) with bank B if a currency trader employed at Bank A buys £45,000 from a currency trader at bank B for $90,000 using its correspondent relationship with Bank B.a) Bank A’s dollar-denominated account at B will fall by $90,000.b) Bank B’s dollar-denominated account at A will rise by $90,000.c) Bank A’s pound-denominated account at B will rise by £45,000.d) Bank B’s pound-denominated account at A will fall by £45,000.e) All of the above are correct E
10 The current exchange rate is €1.00 = $1.50. Compute the correct balances in Bank A’s correspondent account(s) with bank B if a currency trader employed at Bank A buys €100,000 from a currency trader at bank B for $150,000 using its correspondent relationship with Bank B.a) Bank A’s dollar-denominated account at B will fall by $150,000.b) Bank B’s dollar-denominated account at A will fall by $150,000.c) Bank A’s pound-denominated account at B will fall by €100,000.d) Bank B’s pound-denominated account at A will rise by €100,000. A
11 The spot marketa) involves the almost-immediate purchase or sale of foreign exchange.b) involves the sale of futures, forwards, and options on foreign exchange.c) takes place only on the floor of a physical exchange.d) all of the above. A
12 Using the table shown, what is the most current spot exchange rate shown for British pounds? Use a direct quote from a U.S. perspective.a) $1.61 = £1.00b) $1.60 = £1.00c) $1.00 = £0.625d) $1.72 = £1.00 B
13 Suppose that the current exchange rate is €0.80 = $1.00. The direct quote, from the U.S. perspective isa) €1.00 = $1.25.b) €0.80 = $1.00.c) £1.00 = $1.80.d) None of the above A
14 Suppose that the current exchange rate is €1.00 = $1.60. The indirect quote, from the U.S. perspective isa) €1.00 = $1.60.b) €0.6250 = $1.00.c) €1.60 = $1.00.d) None of the above B
15 Indirect exchange rate quotations from the U.S. perspective area) the price of one unit of the foreign currency in terms of the U.S. dollar.b) the price of one U.S. dollar in the foreign currency. B
16 The Bid pricea) is the price that the dealer has just paid for something, his historical cost of the most recent trade.b) is the price that a dealer stands ready to pay. c) refers only to auctions like eBay, not over the counter transactions with dealers.d) is the price that a dealer stands ready to sell at. B
17 Suppose the spot ask exchange rate, Sa($|£), is $1.90 = £1.00 and the spot bid exchange rate, Sb($|£), is $1.89 = £1.00. If you were to buy $10,000,000 worth of British pounds and then sell them five minutes later, how much of your $10,000,000 would be “eaten” by the bid-ask spread?a) $1,000,000b) $52,910.05c) $100,000d) $52,631.58 D
18 If the $/€ bid and ask prices are $1.50/€ and $1.51/€, respectively, the corresponding €/$ bid and ask prices area) €0.6667 and €0.6623.b) $1.51 and $1.50.c) €0.6623 and €0.6667.d) cannot be determined with the information given. C
19 In conversation, interbank foreign exchange traders use a shorthand abbreviation in expressing spot currency quotations. Consider a $/£ bid-ask quote of $1.9072-$1.9077. The “big figure”, assumed to be known to all traders is _____. a) 1.9077b) 1c) 1.90d) 77 C
20 In conversation, interbank foreign exchange traders use a shorthand abbreviation in expressing spot currency quotations. Consider a $/£ bid-ask quote of $1.9072-$1.9077. The currency dealer would likely quote that as _____.a) 72-77b) 77-72c) 5 pointsd) None of the above A
21 In the Interbank market, the standard size of a trade among large banks in the major currencies isa) for the U.S.-dollar equivalent of $10,000,000,000.b) for the U.S.-dollar equivalent of $10,000,000.c) for the U.S.-dollar equivalent of $100,000.d) for the U.S.-dollar equivalent of $1,000. B
22 A dealer in pounds who thinks that the exchange rate is about to increase in volatilitya) may want to widen his bid-ask spread. b) may want to decrease his bid-ask spread. c) may want to lower his ask price.d) none of the above. A
23 The dollar-euro exchange rate is $1.25 = €1.00 and the dollar-yen exchange rate is ¥100 = $1.00. What is the euro-yen cross rate?a) ¥125 = €1.00b) ¥1.00 = €125c) ¥1.00 = €0.80d) None of the above A
24 Suppose you observe the following exchange rates: €1 = $1.25; £1 = $2.00. Calculate the euro-pound exchange rate.a) €1 = £1.60b) €1 = £0.625c) €2.50 = £1d) €1 = £2.50 A
25 The AUD/$ spot exchange rate is AUD1.60/$ and the SF/$ is SF1.25/$. The AUD/SF cross exchange rate is _____.a) 0.7813b) 2.0000c) 1.2800d) 0.3500 C
26 Suppose you observe the following exchange rates: €1 = $1.50; £1 = $2.00. Calculate the euro-pound exchange rate.a) €1.3333 = £1.00b) £1.3333 = €1.00c) €3.00 = £1d) €1.25 = £1.00 A
27 Suppose you observe the following exchange rates: €1 = $1.60; £1 = $2.00. Calculate the euro-pound exchange rate.a) €1.3333 = £1.00b) £1.3333 = €1.00c) €3.00 = £1d) €1.25 = £1.00 D
28 Suppose you observe the following exchange rates: €1 = $1.50; ¥120 = $1.00. Calculate the euro-pound exchange rate.a) ¥133.33 = €1.00b) €1.00 = ¥180c) ¥80 = €1.00d) €1 = £2.50 A
29 Suppose you observe the following exchange rates: €1 = $1.45; £1 = $1.90. Calculate the euro-pound exchange rate.a) €1.3103 = £1.00b) £1.3333 = €1.00c) €2.00 = £1d) €3 = £1 A
30 What is the BID cross-exchange rate for Swiss Francs priced in euro?Hint: Find the price that a currency dealer will pay in euro to buy Swiss francs.a) €0.5386/CHFb) €0.5389/CHFc) €0.5463/CHFd) €0.5466/CHF A
31 What is the ASK cross-exchange rate for Swiss Francs priced in euro?Hint: Find the price that a currency dealer will take in euro to sell Swiss francs.a) €0.5386/CHFb) €0.5389/CHFc) €0.5463/CHFd) €0.5466/CHF D
32 Find the no-arbitrage cross exchange rate. The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-yen exchange rate is quoted at $1.00 = ¥120. a) ¥192/€1.00b) €1.92/¥100c) €1.25/¥1.00d) €1.00/¥1.92 A
33 Suppose a bank customer with €1,000,000 wishes to trade out of euro and into Japanese yen. The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-yen exchange rate is quoted at $1.00 = ¥120. How many yen will the customer get?a) ¥192,000,000b) ¥5,208,333c) ¥75,000,000d) ¥5,208.33 A
34 Market microstructure refers toa) the basic mechanics of how a marketplace operates.b) the basics of how to make small (micro-sized) currency trades.c) how macroeconomic variables such as GDP and inflation are determined.d) none of the above A
35 A recent survey of U.S. foreign exchange traders measured traders perceptions about how fast news events that cause movements in exchange rates actually change the exchange rate. The survey respondents claim that the bulk of the adjustment to economic announcements regarding unemployment, trade deficits, inflation, GDP, and the Federal funds rate takes place withina) ten seconds.b) one minute.c) five minutes.d) one hour. B
36 The forward price a) may be higher than the spot price.b) may be the same as the spot price.c) may be less than the spot price.d) all of the above D
37 Relative to the spot price the forward price will be a) usually less than the spot price.b) usually more than the spot price.c) usually equal to the spot price.d) usually less than or more than the spot price more often than it is equal to the spot price. D
38 The forward marketa) involves contracting today for the future purchase of sale of foreign exchange at the spot rate that will prevail at the maturity of the contract.b) involves contracting today for the future purchase of sale of foreign exchange at a price agreed upon today.c) involves contracting today for the right but not obligation to the future purchase of sale of foreign exchange at a price agreed upon today.d) none of the above B
39 If one has agreed to buy foreign exchange forwarda) you have a short position in the forward contract.b) you have a long position in the forward contract.c) until the exchange rate moves, you haven’t made money, so you’re neither short nor long.d) you have a long position in the spot market. B
40 The current spot exchange rate is $1.55/€ and the three-month forward rate is $1.50/€. You enter into a short position on €1,000. At maturity, the spot exchange rate is $1.60/€. How much have you made or lost?a) Lost $100b) Made €100c) Lost $50d) Made $150 A
41 The current spot exchange rate is $1.55/€ and the three-month forward rate is $1.50/€. Based on your analysis of the exchange rate, you are confident that the spot exchange rate will be $1.52/€ in three months. Assume that you would like to buy or sell €1,000,000. What actions do you need to take to speculate in the forward market? a) Take a long position in a forward contract on €1,000,000 at $1.50/€. b) Take a short position in a forward contract on €1,000,000 at $1.50/€. c) Buy euro today at the spot rate, sell them forward.d) Sell euro today at the spot rate, buy them forward. A
42 Consider a trader who takes a long position in a six-month forward contract on the euro. The forward rate is $1.75 = €1.00; the contract size is €62,500. At the maturity of the contract the spot exchange rate is $1.65 = €1.00. a) The trader has lost $625.b) The trader has lost $6,250.c) The trader has made $6,250.d) The trader has lost $66,287.88 B
43 The current spot exchange rate is $1.50/€ and the three-month forward rate is $1.55/€. Based on your analysis of the exchange rate, you are confident that the spot exchange rate will be $1.62/€ in three months. Assume that you would like to buy or sell €1,000,000. What actions do you need to take to speculate in the forward market? What is the expected dollar profit from speculation?a) Sell €1,000,000 forward for $1.50/€. b) Buy €1,000,000 forward for $1.55/€. c) Wait three months, if your forecast is correct buy €1,000,000 at $1.62/€.d) Buy €1,000,000 today at $1.50/€; wait three months, if your forecast is correct sell €1,000,000 at $1.62/€. B
44 When a currency trades at a premium in the forward marketa) the exchange rate is more than one dollar (e.g. €1.00 = $1.28).b) the exchange rate is less than one dollar.c) the forward rate is less than the spot rate.d) the forward rate is more than the spot rate. D
45 When a currency trades at a discount in the forward marketa) the forward rate is less than the spot rate.b) the forward rate is more than the spot rate.c) the forward exchange rate is less than one dollar (e.g. €1.00 = $0.928).d) the exchange rate is less than it was yesterday. A
46 Swap transactionsa) involve the simultaneous sale (or purchase) of spot foreign exchange against a forward purchase (or sale) of approximately an equal amount of the foreign currency.b) account for about half of Interbank FX trading.c) involve trades of one foreign currency for another without going through the U.S. dollar.d) all of the above A
47 An exchange-traded fund (ETF) is a) the same thing as a mutual fund.b) a portfolio of financial assets in which shares representing fractional ownership of the fund are sold and redeemed by the fund sponsor. c) a portfolio of financial assets in which shares representing fractional ownership of the fund trade on an organized exchange.d) none of the above. C
48 The largest and most active financial market in the world isa) the Fleet Street Exchange in London.b) the NYSE in New York.c) the FX market.d) none of the above. C
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Finance Flashcards

finance ch 6

Working capital management is primarily concerned with the management and financing of what? current assets
A financial executive devotes the most time to what aspect of finance? working capital management
What is a common reason for the pressure of current asset buildup? rapidly expanding sales
What are “self liquidating” assets and how do they relate to permanent current assets? all the production will be sold, receivables collected, and bills paid over the time period specified.
What are some types of companies that experience seasonal sales? retail
What effect do seasonal sales have on inventory in a company that uses level production schedules? As sales decline, inventory will increase.
When actual sales are greater than forecasted sales, what happens to the level of inventory, accounts receivables, and production schedules? Production schedules might have to be revised upwardAccounts receivable will riseInventory will decline
Normally, permanent current assets should be financed by what source of financing? long-term funds
What types of assets should be financed with long-term financing? Fixed assets and permanent current assets
What would a conservatively financed firm’s financing mix look like? Use long term financing for permanent current assets, and a portion of the short term fluctuating assets, and use short term financing for all other short term assets.
Why do firms try to use more short-term financing than long-term financing? short term interest rates are generally lower than long term interest rates, and most firms do not have basic access to capital markets.
What is the term structure of interest rates, and what influences it? changes daily to reflect current competitive conditions in the money and capital market.Influenced by: inflationthe money supplyFederal Reserve activities
If money is tight, what happens to short term rates? short term rates are higher than long term rates
What effect do illiquid assets have on the borrowing decisions of a firm? heavy short term borrowing?
“Permanent current assets” means what kind of assets? some minimum level of current assets that are not self liquidating.
What are some benefits of web-based supply chain management? 1) Lower inventory, transportation, warehousing, and packaging costs2) Greater supply chain flexibility3) Improved customer service4) Higher revenues5) Increased profitability
Give some examples of RFID use. track livestocktrack inventory at retailerstrack marathon runner’s times
Give an advantage of level production. manpower and equipment are used efficiently at lower costs.
If a firm uses level production with seasonal sales, what happens to inventory as sales decline? As sales decline, inventory will increase.
What happens when actual sales are greater than forecasted sales? Production schedules might have to be revised upwardAccounts receivable will riseInventory will decline
Why is more use made of short-term financing? short term interest rates are generally lower than long term interest rates, and most firms do not have basic access to capital markets.
What combination of asset structures and financing patterns is likely to create the least volatile earnings? The most volatile earnings? Least: Liquid assets and heavy long term borrowingMost:Illiquid assets and heavy short term borrowing
How can you compensate for the risk exposure due to heavy short-term borrowing? carry highly liquid assets
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Finance Flashcards

Finance Chapter 12

Last year, T-bills returned 2 percent while your investment in large-company stocksearned an average of 5 percent. Which one of the following terms refers to the difference betweenthese two rates of return?a. risk premiumb. geometric returnc. arithmeticd. standard deviatione. variance a. risk premium
Which one of the following best defines the variance of an investment’s annual returnsover a number of years?a. The average squared difference between the arithmetic and the geometricaverage annual returns.b. The squared summation of the differences between the actual returns andthe average geometric return.c. The average difference between the annual returns and the average returnfor the period.d. The difference between the arithmetic average and the geometric averagereturn for the period.e. The average squared difference between the actual returns and the arithmetic average return. e.The average squared difference between the actual returns and thearithmetic average return.
Standard deviation is a measure of which one of the following?a. average rate of returnb. volatilityc. probabilityd. risk premiume. real returns b. volatility
ch one of the following is defined by its mean and its standard deviation?a. arithmetic nominal returnb. geometric real returnc. normal distributiond. variancee. risk premium c. normal distribution
The average compound return earned per year over a multi-year period is called the_____ average return.a. arithmeticb. standardc. variantd. geometrice. real d. geometric
The return earned in an average year over a multi-year period is called the _____average return.a. arithmeticb. standardc. variantd. geometrice. real a. arithmetic
Assume that the market prices of the securities that trade in a particular market fairlyreflect the available information related to those securities. Which one of the following terms bestdefines that market?a. riskless marketb. evenly distributed marketc. zero volatility marketd. Blume’s markete. efficient capital market e. efficient capital market
Which one of the following statements best defines the efficient market hypothesis?a. Efficient markets limit competition.b. Security prices in efficient markets remain steady as new information becomes available.c. Mispriced securities are common in efficient markets.d. All securities in an efficient market are zero net present value investments.e. Profits are removed as a market incentive when markets become efficient. d. All securities in an efficient market are zero net present value investments.
Stacy purchased a stock last year and sold it today for $3 a share more than herpurchase price. She received a total of $0.75 in dividends. Which one of the following statements iscorrect in relation to this investment?a. The dividend yield is expressed as a percentage of the selling price.b. The capital gain would have been less had Stacy not received thedividends.c. The total dollar return per share is $3.d. The capital gains yield is positive.e. The dividend yield is greater than the capital gains yield. d. The capital gains yield is positive
Which one of the following correctly describes the dividend yield?a. next year’s annual dividend divided by today’s stock priceb. this year’s annual dividend divided by today’s stock pricec. this year’s annual dividend divided by next year’s expected stock priced. next year’s annual dividend divided by this year’s annual dividende. the increase in next year’s dividend over this year’s dividend divided by this year’s dividend a. next year’s annual dividend divided by today’s stock price
Bayside Marina just announced it is decreasing its annual dividend from $1.64 per shareto $1.50 per share effective immediately. If the dividend yield remains at its pre-announcementlevel, then you know the stock price:a. was unaffected by the announcement.b. increased proportionately with the dividend decrease.c. decreased proportionately with the dividend decrease.d. decreased by $0.14 per share.e. increased by $0.14 per share. c. decreased proportionately with the dividend decrease.
Which one of the following statements related to capital gains is correct?a. The capital gains yield includes only realized capital gains.b. An increase in an unrealized capital gain will increase the capital gains yield.c. The capital gains yield must be either positive or equal to zero.d. The capital gains yield is expressed as a percentage of the sales price.e. The capital gains yield represents the total return earned by an investor. b. An increase in an unrealized capital gain will increase the capital gainsyield.
Which of the following statements is correct in relation to a stock investment?I. The capital gains yield can be positive, negative, or zero.II. The dividend yield can be positive, negative, or zero.III. The total return can be positive, negative, or zero.IV. Neither the dividend yield nor the total return can be negative. I and III only
The real rate of return on a stock is approximately equal to the nominal rate of return:a. multiplied by (1 + inflation rate).b. plus the inflation rate.c. minus the inflation rate.d. divided by (1 + inflation rate).e. divided by (1− inflation rate). c. minus the inflation rate.
As long as the inflation rate is positive, the real rate of return on a security will be ____the nominal rate of return.a. greater thanb. equal toc. less thand. greater than or equal toe. unrelated to c. less than
Small-company stocks, as the term is used in the textbook, are best defined as the:a. 500 newest corporations in the U.S.b. firms whose stock trades OTC.c. smallest twenty percent of the firms listed on the NYSE.d. smallest twenty-five percent of the firms listed on NASDAQ.e. firms whose stock is listed on NASDAQ. c. smallest twenty percent of the firms listed on the NYSE.
Which one of the following statements is a correct reflection of the U.S. markets for theperiod 1926-2007?a. U.S. Treasury bill returns never exceeded a 9 percent return in any one year during the period.b. U.S. Treasury bills provided a positive rate of return each and every year during the period.c. Inflation equaled or exceeded the return on U.S. Treasury bills every year during the period.d. Long-term government bonds outperformed U.S. Treasury bills every year during the period.e. National deflation occurred at least once every decade during the period. b. U.S. Treasury bills provided a positive rate of return each and every year during the period.
Which one of the following categories of securities had the highest average return for theperiod 1926-2007?a. U.S. Treasury billsb. large company stocksc. small company stocksd. long-term corporate bondse. long-term government bonds c. small company stocks
Which one of the following categories of securities had the lowest average risk premiumfor the period 1926-2007?a. long-term government bondsb. small company stocksc. large company stocksd. long-term corporate bondse. U.S. Treasury bills e. U.S. treasury bills
Which one of the following categories of securities has had the most volatile returns overthe period 1926-2007?a. long-term corporate bondsb. large-company stocksc. intermediate-term government bondsd. U.S. Treasury billse. small-company stocks e. small company stocks
Which one of the following statements correctly applies to the period 1926-2007?a. Large-company stocks earned a higher average risk premium than did small-company stocks.b. Intermediate-term government bonds had a higher average return than longtermcorporate bonds.c. Large-company stocks had an average annual return of 14.7 percent.d. Inflation averaged 2.6 percent for the period.e. U.S. Treasury bills had a positive average real rate of return. e. U.S. Treasury bills had a positive average real rate of return.
Which one of the following time periods is associated with high rates of inflation?aa. 1929-1933b. 1957-1961c. 1978-1981d. 1992-1996e. 2001-2005 c. 1978-1981
Which one of the following statements concerning U.S. Treasury bills is correct for theperiod 1926-2007?a. The annual rate of return always exceeded the annual inflation rate.b. The average risk premium was 0.7 percent.c. The annual rate of return was always positive.d. The average excess return was 1.1 percent.e. The average real rate of return was zero. c. The annual rate of return was always positive.
Which one of the following is a correct ranking of securities based on their volatility overthe period of 1926-2007? Rank from highest to lowest.a. large company stocks, U.S. Treasury bills, long-term government bondsb. small company stocks, long-term corporate bonds, large company stocksc. small company stocks, long-term corporate bonds, intermediate-termgovernment bondsd. large company stocks, small company stocks, long-term government bondse. intermediate-term government bonds, long-term corporate bonds, U.S.Treasury bills c. small company stocks, long-term corporate bonds, intermediate-termgovernment bonds
What was the highest annual rate of inflation during the period 1926-2007?a. between 0 and 3 percentb. between 3 and 5 percentc. between 5 and 10 percentd. between 10 and 15 percente. between 15 and 20 percent d. between 10 and 15 percent
The excess return is computed as the:a. return on a security minus the inflation rate.b. return on a risky security minus the risk-free rate.c. risk premium on a risky security minus the risk-free rate.d. the risk-free rate plus the inflation rate.e. risk-free rate minus the inflation rate. b. return on a risky security minus the risk-free rate.
Which one of the following earned the highest risk premium over the period 1926-2007?a. long-term corporate bondsb. U.S. Treasury billsc. small-company stocksd. large-company stockse.long-term government bonds c. small-company stocks
Which one of the following was the least volatile over the period of 1926-2007?a. large-company stocksb. inflationc. long-term corporate bondsd. U.S. Treasury billse. intermediate-term government bonds d. US treasury bills
Which one of the following statements is correct?a. The greater the volatility of returns, the greater the risk premium.b. The lower the volatility of returns, the greater the risk premium.c. The lower the average return, the greater the risk premium.d. The risk premium is unrelated to the average rate of return.e. The risk premium is not affected by the volatility of returns. a. The greater the volatility of returns, the greater the risk premium.
Which of the following correspond to a wide frequency distribution?I. relatively low riskII. relatively low rate of returnIII. relatively high standard deviationIV. relatively large risk premium III and IV only
To convince investors to accept greater volatility, you must:a. decrease the risk premium.b. increase the risk premium.c. decrease the real return.d. decrease the risk-free rate.e. increase the risk-free rate. b. increase the risk premium
If the variability of the returns on large-company stocks were to increase over the longterm,you would expect which of the following to occur as a result?I. decrease in the average rate of returnII. increase in the risk premiumIII. increase in the 68 percent probability range of the frequency distribution of returnsIV. decrease in the standard deviation II and III only
Which one of the following statements is correct based on the historical record for theperiod 1926-2007?a. The standard deviation of returns for small-company stocks was double that oflarge-company stocks.b. U.S. Treasury bills had a zero standard deviation of returns because they are considered to be risk-free.c. Long-term government bonds had a lower return but a higher standard deviation on average than did long-term corporate bonds.d. Inflation was less volatile than the returns on U.S. Treasury bills.e. Long-term government bonds underperformed intermediate-term governmentbonds. c. Long-term government bonds had a lower return but a higher standarddeviation on average than did long-term corporate bonds.
What is the probability that small-company stocks will produce an annual return that ismore than one standard deviation below the average?a. 1.0 percentb. 2.5 percentc. 5.0 percentd. 16 percente. 32 percent d. 16 percent
The primary purpose of Blume’s formula is to:a. compute an accurate historical rate of return.b. determine a stock’s true current value.c. consider compounding when estimating a rate of return.d. determine the actual real rate of return.e.project future rates of return. e. project future rates of return
Which two of the following are the most likely reasons why a stock price might not reactat all on the day that new information related to the stock issuer is released?I. insiders knew the information prior to the announcementII. investors need time to digest the information prior to reactingIII. the information has no bearing on the value of the firmIV. the information was anticipated III and IV only
Which one of the following is most indicative of a totally efficient stock market?a. extraordinary returns earned on a routine basisb. positive net present values on stock investments over the long-termc. zero net present values for all stock investmentsd. arbitrage opportunities which develop on a routine basise. realizing negative returns on a routine basis c. zero net present values for all stock investments
Which one of the following statements is correct concerning market efficiency?a. Real asset markets are more efficient than financial markets.b. If a market is efficient, arbitrage opportunities should be common.c. In an efficient market, some market participants will have an advantage over others.d. A firm will generally receive a fair price when it issues new shares of stock.e. New information will gradually be reflected in a stock’s price to avoid any sudden change in the price of the stock. d. A firm will generally receive a fair price when it issues new shares of stock.
Efficient financial markets fluctuate continuously because:a. the markets are continually reacting to old information as that information is absorbed.b. the markets are continually reacting to new information.c. arbitrage trading is limited.d. current trading systems require human intervention.e. investments produce varying levels of net present values. b. the markets are continually reacting to new information.
Inside information has the least value when financial markets are:a. weak form efficient.b. semiweak form efficient.c. semistrong form efficient.d. strong form efficient.e. inefficient. d. strong form efficient
According to theory, studying historical stock price movements to identify mispricedstocks:a. is effective as long as the market is only semistrong form efficient.b. is effective provided the market is only weak form efficient.c. is ineffective even when the market is only weak form efficient.d. becomes ineffective as soon as the market gains semistrong form efficiency.e. is ineffective only in strong form efficient markets. c. is ineffective even when the market is only weak form efficient.
Which of the following statements related to market efficiency tend to be supported bycurrent evidence?I. Markets tend to respond quickly to new information.II. It is difficult for investors to earn abnormal returns.III. Short-run prices are difficult to predict accurately based on public information.IV. Markets are most likely weak form efficient. I, II and III only
If you excel in analyzing the future outlook of firms, you would prefer the financialmarkets be ____ form efficient so that you can have an advantage in the marketplace.a. weakb. semiweakc. semistrongd. stronge. perfect a. weak
You are aware that your neighbor trades stocks based on confidential information heoverhears at his workplace. This information is not available to the general public. This neighborcontinually brags to you about the profits he earns on these trades. Given this, you would tend to argue that the financial markets are at best _____ form efficient.a. weakb. semiweakc. semistrongd. stronge. perfect c. semistrong
The U.S. Securities and Exchange Commission periodically charges individuals withinsider trading and claims those individuals have made unfair profits. Given this, you would bemost apt to argue that the markets are less than _____ form efficient.a. weakb. semiweakc. semistrongd. stronge. perfect d. strong
Individuals who continually monitor the financial markets seeking mispriced securities:a. earn excess profits over the long-term.b. make the markets increasingly more efficient.c. are never able to find a security that is temporarily mispriced.d. are overwhelmingly successful in earning abnormal profits.e. are always quite successful using only historical price information as theirbasis of evaluation. b. make the markets increasingly more efficient.
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Finance Flashcards

Test 2 Personal Finance Turner

How do you compare cash management alternatives to determine which is best for you?A) Take into account their tax rateB) Consider their safety or riskC) Compare returns using comparable interest ratesD) All of the above are correct D
Cash and investments that can be easily converted into cash are termed:A) liquid assetsB) capital assetsC) illiquid assetsD) depositable assetsE) None of the above are correct A
What is the name of an investment company that raises funds from investors, pools the money, and invests in stocks or bonds?A) securities fund firmB) bond brokerage firmC) stockbrokerage firmD) mutual fund firmE) none of the above are correct D
Which of the following financial institutions is a not-for-profit organization that is only open to members of that institution and tends to offer more favorable interest rates to borrowers and savers?A) saving bankB) saving and loan associationC) commercial bankD) credit unionE) None of the above are correct D
Which of the following financial institutions were originally established to provide mortgage loans to depositors?A) commercial banksB) credit unionsC) savings and loan associationsD) internet banksE) None of the above are correct C
Financial institutions that provide traditional checking and savings accounts are commonly referred to asA) personal depository institutionsB) financial brokerage companiesC) deposit-type financial institutions D) non-deposit type financial institutionsE) None of the above are correct C
What is the name for comprehensive financial service packages offered by brokerage firms?A) asset management accountsB) platinum management accountsC) consolidated management accountsD) comprehensive management accountsE) None of the above are correct A
Money market mutual funds provide an alternative to traditional liquid investments offered by financial institutions. Advantages of MMMFs include which of the following?A) check-writing privilegesB) high interest ratesC) minimal riskD) convenience–deposits made through payroll deductionsE) All of the above are correct E
A savings alternative that pays a fixed rate of interest while keeping your funds on deposit for a contracted period of time that can range from 30 days to several years is called aA) certificate of depositB) demand depositC) negotiable order of withdrawal depositD) term depositE) None of the above are correct A
Savings accounts are insured ate the _______ level.A) stateB) localC) federalD) All of the above are correctE) None of the above are correct C
What is another name for an interest-bearing account?a) CWIb) demand depositc) IBCd)NOWe) none of the above D
Of the following, which is not an advantage of a CD as a cash management alternative?a) Wide selection of maturitiesb) Convenient to purchasec) Liquidityd) Fixed insurance rate, beneficial if interest rates drope) Is insured C
Pick the advantage of a certificates of deposit from this list of possibilities.a) The interest paid is compounded dailyb) Early withdrawals after 30 days do not incur a penaltyc) They earn the APY and not the APRd) Interest rates are generally higher than typical savings accounts D
Money Market Deposit accounts enjoy one advantage over savings accounts found in commercial banks. This advantage isa) Greater liquidityb) Lower fees and smaller minimum balancesc) Unlimited check-writing privilegesd) A variable rate that is generally higher D
Money market mutual funds provide attractive competition for bank deposits because a) Their short term, higher returns are generally regarded as practically risk freeb) They are convenient to purchase and use c) They are fully insuredd) Their low fees are affordable for almost anyonee) None of the above are correct A
What is the FDIC?a) Federal Department of Insurance and Compensationb) Federal Deposit Insurance Corporationc) Federal Deposit Insurance Collectived) Federal Depository Insurance Committeee) None of the above are correct B
Many banks offer free checking accounts. What may be the opportunity costs associated with free checking?a) Low interest ratesb) Overdraft protectionc) High minimum balance requirementsd) Both A and C are correct answers D
Suppose that you go to a bank at which you have no account, give the bank some cash, and in return obtain a check drawn against that bank which you will use to pay someone else. This is called a a) Traveler’s check b) Cashier’s checkc) Certified checkd) None of the above are correct B
What is the name for an automatic loan made to your checking account whenever your account does not contain enough cash to cover the checks that you have written against it?a) Draft-free checkingb) Automatic check coverage (ACC)c) No fee checking coveraged) Overdraft protectione) None of the above are correct answers D
Barbara Stallins had her bank certify one of her personal checks as being good. Which type of check has been issued?a) Traveler’s checkb) Cashier’s checkc) Money orderd) Audited checke) Certified check E
The percentage of the credit card sale the retailer owes to the credit card company is thea) Franchise feeb) Card usage allowancec) Retailer credit acceptance feed) Merchant’s discount feee) Interest rebate fee D
Typically, the credit card issuer allows you a grace period, which meansa) You do not have to make a payment during the current monthb) You are not charged any interest during the current monthc) You must pay your balance off in full to benefit from the grace periodd) Interest charges are reduced during this timee) Both A and C apply E
Which of the following apply to getting a cash advance with a credit card?a) Cash advances are available at ATM machines b) There may be a cash advance feec) The interest rate may be higher than on regular purchasesd) You being paying interest immediatelye) All of the above E
Credit cards are a form of __________ credita) Open endedb) Revolving c) Installmentd) Both A and B abovee) Both A and C above D
Kendra always thought the grace period feature of her credit card was such a wonderful idea. Why, in essence, she is getting her purchases interest free during this time. After taking Dr. Art Keown’s Personal Finance course she learned a startling truth about grace periods.a) There are higher fees associated with grace periodsb) All credit cards carry a grace periodc) Grace periods are actually beneficial to the credit card companyd) Most bank eliminate their grace period on new purchases if you don’t pay your balance in full. D
When you use a credit card at a store, the store is generally charged a fee ranging from 1.5% to 5 %. What is the fee called?a) Merchant discount feeb) Merchant ratec) Discount rated) Merchant back-end chargee) None of the above A
Which of the following is not an advantage of credit cards?a) Allows for online shoppingb) Convenience or ease of shoppingc) Allows for consumption before the purchase is fully paid ford) Emergency usee) The finance charge that accrues on the account if not paid off in full each month E
Which of the following are important to convenience users of credit cards?a) Low annual feeb) Card benefits and perksc) Interest-free grace periodd) Only A and Be) All of the above E
Which of the following is not a single-purpose credit card?a) Searsb) Bank of America Visac) Toys R USd) Shell Oile) Macy’s B
What is the main distinguishing feature(s) for T&E cards?a) They do not offer revolving creditb) The full balance must be paid each monthc) There is no annual feed) Both A and B above e) Both A and C above D
The major differences between a premium prestige card and a regular credit card includea) Higher interest ratesb) Higher credit limitsc) Additional perks and benefitsd) Both A and B abovee) Both A and C above E
Getting a credit card while a college student is an excellent idea becausea) It helps you learn about creditb) When used correctly it allows you to build up a solid credit historyc) You can shop online and make reservationsd) It works well for emergenciese) All of the above E
One of the following lists constitutes the five Cs of credit. Select the correct one.a) Character, capacity, capital, collateral, co-insuranceb) Character, capacity, capital, collateral, characteristicsc) Character, capacity, capital collateral, conditionsd) Character, capacity, capital collateral, carefule) Character, capacity, capital, collateral, credence C
A company that gathers and sells consumers’ financial history to creditors is a a) Credit issuance firmb) Credit card companyc) Credit investigation bureaud) Credit bureaue) Credit recovery firm D
__________ is not information generally found in your credit reporta) Personal credit historyb) College attended, grades, etc.c) Your public financial historyd) Past inquiries regarding your credit reporte) Employment information B
By law you have certain rights in connection with the credit bureau. They area) The right to view your personal credit reportb) The right to point out errors found in your filec) The right to file a statement presenting your view of a disputed issued) The right to request the credit bureau to correct mistakes in your filee) All of the above E
Your credit score affectsa) Your mortgage rateb) The amount of junk mail offering additional credit cards that you receivec) The size of your credit lined) The rate you pay on your credit cardse) All of the above are correct answers E
The process of mathematically evaluating your creditworthiness to obtain credit is calleda) Credit evaluationb) Credit statisticsc) Credit historyd) Credit scoringe) Credit references D
Which of the five Cs of credit would your actual home be in relation to your mortgage?a) Capitalb) Collateralc) Capacityd) Charactere) Conditions B
Wally currently has a balance of $14500 on his credit cards and he is having a hard time making the minimum payments on them. He has missed several payments and is now paying the default Apr of 29.99%. He and his wife own a nice home with $40000 in equity. They have $7,500 in a certificate of deposit with a 4% APR. He has come to you in tears asking f0r advice. What would you tell him to do?a) Take out a second loan on the houseb) Seek out a non-profit credit counseling companyc) Cash out his CD and pay down his credit cardsd) Become a convenience user, and maintain just one carde) All of the above E
A short-term loan that provides funding until a longer-term loan can be secured is called a(n)a) Gap loanb) Straddle loanc) Bridge loand) Amortized loane) None of the above C
A(n) ___________ loan calls for the repayment of both the interest and the principal at regular intervals and is commonly referred to as loan amortization.a) Simple interestb) Personalc) Termd) Installmente) None of the above D
A ________ is tied to a market interest rate, such as the prime rate or the six-month Treasury bill rate.a) Variable-rate loanb) Convertible-rate loanc) Flexible-rate loand) Prime-rate loane) None of the above A
Variable-rate loansa) Always adjust every monthb) Are never a better option than fixed-rate loansc) Usually have rate caps that prevent them from varying too muchd) All of the above C
Alice has fallen behind on her signature loan. She recently received a notice from the lender that her wages were going to be garnished to pay off debt. What is the loan clause that allows the lender to take this action against Alice because she was in default?a) Recovery clauseb) Recourse clausec) Default claused) Deficiency payments clausee) None of the above B
What is the loan clause stating that if you default on a secured loan, the lender can repossess whatever is secured, as well as bill you for the difference if that repossession does not cover what you owe?a) Deficiency payment clauseb) Insurance clausec) Default claused) Recourse clausee) None of the above A
Joshua recently purchased a new home. His lender required him to purchase credit life insurance on the loan in the event that he died before the mortgage is paid off. What is the loan clause that allows his lender to require him to purchase this additional insurance?a) Default contingency clauseb) Insurance agreement clausec) Recourse claused) Early payment clausee) None of the above B
Suppose you borrowed the money you needed to purchase an automobile and then failed to make a scheduled payment by the due date. Technically, youa) Are usually not given a chance to make good on the overdue paymentb) Are bankruptc) Are in defaultd) None of the above C
The “Repo man” recently repossessed your car for failure to make payments. You still owed $5000 on the loan, but since it was always broken you were glad to be rid of it anyway. The bank sold the car at wholesale auction for $3000. The bank also paid the “Repo man” $200 and paid attorney fees of $300. Based on the deficiency payments clause in your loan, what are you liable for?a) $0; repossession means the bank must “eliminate” the debtb) $500c) $2000d) $2500e) None of the above D
What is the name of the formal document that outlines the legal obligations of both the lender and the borrower?a) Claimb) Debenturec) Tortd) Notee) Default D
The loan contract is a formal document called a(n) ________ and may contain a(n) __________ specifying who retains control over the item being purchased in the case of default.a) Note, security agreementb) Agreement, indenturec) Indenture, security agreementd) Agreement, insurance clausee) Note, legal transaction A
Student loans are a smart source of financing for school because you pay part of the interest charges and the rest is subsidized bya) The state governmentb) The bank or lenderc) The federal governmentd) The educational institution C
If you own a home with a market value of $175000 and you have an outstanding balance on your mortgage of $60000, your home equity isa) $97,750b) $57500c) $235000d) $115000 D
Home equity/second mortgage loans have two important advantages over most other types of loans, they area) Tax deductibility of interest and lower interest ratesb) Tax deductibility of payments and longer termsc) Increase in future financing flexibility and no recourse claused) No risk borrower and less amortizatione) None of the above A
In driving around town one day, you noticed most of the payday loan companies were located close to the college and the local military base and there were none out in the newer neighborhoods. Why do you think this is so?a) Payday lenders tend to focus on less experienced borrowers who typically don’t make a lot of moneyb) The rent on these locations is less expensivec) Because their terms are so affordable people with low incomes really take advantage of themd) There are zoning laws that require these types of locations for these types of services A
A Loan that is paid back in a single lump sum payment at the due date of the loan is commonly called a(n)a) Balloon loanb) Secured loanc) Installment loand) Fully amortized loane) None of the above A
Which of the following statements regarding the risk-return relationship is most accurate?a) Lower credit scores are associated with lower APRs.b) Longer loan length is associated with lower APRs.c) Higher credit scores are associated with lower APRs.d) Shorter loan length is associated with higher APRs.e) Both B and D are correct C
What can a couple seeking to get out of debt do?a) Seek help from a reputable credit counselorb) Avoid future use of credit card debt, expect on emergency basisc) Use savings to pay off current debtd) See if their creditors will restructure their loanse) All of the above are correct E
Which of these are possible options for most people who cannot pay their bills?a) Declare Chapter 7 personal bankruptcyb) Obtain a debt consolidation loanc) Get help from a credit counselord) Declare Chapter 13 personal bankruptcye) All of the above are possible options E
What is the type of loan where the entire interest charge is subtracted from the loan principal before you receive the money, and at maturity you repay the entire principal?a) Simple interest methodb) Add-on methodc) Partial amortization methodd) Discount methode) None of the above D
Of the following possible sources of credit, which typically has the lowest borrowing rates?a) Savings and loansb) Personal finance companyc) Commercial banksd) Credit union D
With a(n) _______ installment loan, interest charges are calculated using the original balance, and these charges are the added to the loan.a) Discount methodb) Add-on methodc) Partial amortization methodd) Simple interest methode) None of the above B
Which of the following statements would most correctly complete the following sentence? As the interest rate on a loan increasesa) The payment amount would increase (other things held constant)b) The loan maturity would decrease (other things held constant)c) The payment amount would decrease (other things held constant)d) The amortization would increase (other things held constant)e) None of the above A
Which of the following does not require you to have a good credit rating to issue you a loan?a) Savings and loanb) Commercial bankc) Your familyd) All of the above require a good credit rating to issue a loan C
What is the name of the interest rates banks charge to their most credit worthy customers?a) Main rateb) Prime ratec) Premier rated) Blue chip ratee) None of the above B
How can you benefit from the following smart buying steps?a) Smart buying helps you maintain your budgetb) Smart buying allows you to buy what you want when you want itc) Smart buying allows a higher standard of living because you make smarter purchasesd) Both A and C are correct D
Suppose that you are the end of your automobile lease. The leasing company has just informed you that the car’s market value is greater than its residual value and they will be sending you a refund. What type of lease did you have?a) Residual leaseb) Walk-away leasec) Close-end leased) Open-end leasee) None of the above D
You have been having significant problems with your new car. Every time you turn around something is breaking or not working properly. Fortunately, the “lemon laws” are there to help. Which of the following is not one of the criteria for application of lemon laws?a) You must return the vehicle to the original dealershipb) Your car has been out of service for at least 30 days during the first year after purchasec) You have made at least four attempts to solve the problemd) You have under 12,000 miles on your car A
Which of the following factors plays a role in determining the monthly lease payment of a car?a) The agreed-upon price of a vehicleb) The value of the vehicle at the end of the leasec) The length of the leased) The capitalized cost based on your trade-ine) All of the above E
Another name for a closed-end lease is a(n)a) End-purchase leaseb) Terminal leasec) Take-out leased) Walk-away leasee) None of the above D
In auto sales a ______ is an amount of money, generally in the 2% to 3% range, that the manufacturer gives the dealer for selling an automobile.a) Holdbackb) Kickbackc) Markupd) Rebatee) None of the above A
Suppose that you were thinking about leasing a new vehicle. Which of the following should not be an important consideration?a) I like to get a new car every few yearsb) I drive less than 15,000 miles annuallyc) I dislike the hassle of trading-in or selling carsd) It’s the only way I can afford the vehicle that I wante) I dislike the hassle of maintenance D
You disagree with Ed “Shifty” Smith, a car salesperson, on the price of an open-end lease. He says the depreciation charge is only $6000. What is the actual depreciation charge for a car now worth $23,000 that is expected to drop in value to $15,000 in two years?a) $7000b) $7500c) $8000d) $11500e) $15500 C
Over the past decade the number of new car sales are down and the number of new car leases are up. What is probably the main reason why this is true?a) The manufacturers prefer it when people lease instead of purchaseb) The salesman makes a higher commission when cars are leasedc) New cars are getting so expensive that the average person can’t afford to buy themd) Both A and B are correct C
What kind of valuable information can you find online at websites such as Edmunds.com or Autosite.com concerning smart buying for automobiles?a) The trade-in value on your current automobileb) The dealer cost and dealer holdback for the automobile you are interested inc) The final price you will pay for the automobile at the dealershipd) Only A and B are correcte) All of the above D
If you are considering purchasing a used car you shoulda) Ask questions about the mechanical history of the car, including whether it has been in any accidentsb) Do some research so you’ll know a fair price for the vehicle you’re looking forc) Have the car inspected by a mechanic before you purchase itd) All of the above D
Which should you consider when house hunting?a) The school districtb) The selling pricec) The neighborhoodd) All of the above D
What drawbacks might a co-op have over a house for a family of eight who are relocating to a new area and need to purchase a home?a) More expensive to operate and maintainb) More expensive to purchasec) No ownership of shares in the corporationd) Less freedom to make changes and less privacy D
Which of the following is not an advantage of living in a condo?a) Building equity for resale and investmentb) Limited maintenancec) Direct ownership of a specific unitd) Freedom from neighbors D
Which one of the following is not a key to finding housing that fits your needs?a) Future needsb) Locationc) Insurance costsd) Deciding what features you are looking fore) Present needs C
Which of the following housing alternatives puts the responsibility for maintenance and repairs on the occupant?a) A rental unitb) Homeownershipc) Condod) A co-op B
All of the following are advantages of renting versus buying a home excepta) Control over remodeling and decorating decisionsb) Not responsible for home repairs or maintenancec) Mobilityd) No risk of falling housing pricese) No property tax A
What is not a benefit normally associated with home ownership?a) A potential source of collateral for future loansb) Ability to build equity and net worthc) Tax advantages for those who qualifyd) Flexibility to respond to employment opportunities D
Private mortgage insurance typically is not needed with a down payment of 20% or larger. Why? a) Buyers who invest large down payments are more motivated to make their mortgage paymentsb) Buyers who have large down payments don’t choose the extra insurancec) Not true, all mortgage loans require PMId) All of the abovee) None of the above A
You are a newlywed, and you and your spouse have just found your dream home. Problem is, you do not have 20% for a down payment on the house. You will probably need to obtaina) APRb) EARc) PMId) PTI e) None of the above C
You are considering the purchase of an acre of land out in the country to build your future house on. You pay for an investigation of the public record to determine the current legal owner of the property. This is called a(n)a) Title searchb) Appraisal searchc) Escrow searchd) Legal entity searche) None of the above A
You have just obtained a mortgage to purchase your home. The ______ that you paid to obtain the loan are charges that must be paid at the time of the sale and serve to raise the effective cost of the loana) Escrow feesb) Pointsc) Security feesd) Closing feese) None of the above B
You are in the process if purchasing a new home. Expenses that the buyer and seller incur when finalizing the transfer of the ownership of the house are calleda) End costsb) Transfer feesc) Closing costsd) Finalization costse) None of the above C
You have an annual gross income of $36,000. Using the28/36 rule for maximum mortgage payment (PITI) estimation, what is your maximum PITI payment using your monthly gross income as a guide (28%)?a) $840b) $880c) $1080d) $680e) $640 A
With private mortgage insurance, many lenders will allow you to borrow more than 80% of the appraised value of the home. What is the purpose of this action?a) It protects the lender in the event the borrower is unable to make mortgage paymentsb) It protects the borrower from foreclosurec) It is required by federal and state lawd) The insurance will pay to damages to the home during the course of the mortgage A
Select the one cost that is not involved in home ownershipa) Points/discount pointsb) Closing/settlement costsc) Down paymentd) Loan origination feee) Rental deposit E
Bob and Marilyn Hartin know the bank will carefully evaluate their situation before lending them the money for the mortgage for their new home. Which is not a consideration?a) The number of children they haveb) Their ability to payc) Their level of debtd) Their financial historye) Appraised home value A
Name the items that are deposited in an escrow accounta) Property taxes, property insuranceb) PMI premiums, homeowner’s association duesc) Utility payments, homeowner’s association duesd) Liens, closing costs, pointse) Principal, interest, title fee, insurance A
Which of the following is not a recurring housing cost?a) Maintenance and operating costsb) Mortgage paymentsc) Pointsd) Homeowner’s insurancee) PITI C
A deposit included with an offer to buy that assures the seller that the buyer is serious about buying the house is calleda) Earnest moneyb) Home depositc) Buyer’s assuranced) Assurance deposite) None of the above A
The two primary advantages of a 15 year mortgage over a 30 year mortgage area) Lower interest rate and lesser interest charges over the life of the loanb) Easier qualification criteria and more affordable initiallyc) Greater financial flexibility and no prepayment penaltiesd) Lower payments and prepayment privilegese) None of the above A
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Finance Flashcards

Management test 1

Donna, vice president of finance, and Bob, vice president of human resources, are ____ managers. functional
Gregson Production is keenly aware of the need to daily strive to produce goods and services more effectively than its competitors. Therefore, to achieve this standard, Gregson’s management strives to ____. maintain quality and efficiency
Lower-level managers typically make less than $10 million in their lifetime, but they do earn fairly good incomes compared with most workers.(T,F) True
When building a new residential development or mall, a national real estate organization typically does not remove many trees, basing its decision on the belief that natural resources are limited, and we need to not compromise the ability of future generations to meet their own needs. This management philosophy is known as ___. sustainability
New York Times columnist Thomas Friedman noted that globalization has leveled the competitive playing fields between industrial and emerging-market countries. This phenomenon proposes that ____. the world is flat
The owners of a local restaurant routinely try to develop new menu items and seek better ways of helping their customers; this is an example of ___. innovation
Robert is a district manager who oversees several store managers in a national chain of restaurants. Robert reports directly to the vice president of stores and marketing, a member of top management. Robert is a middle manager.(T,F) True
When Greg meets regularly with his workers to provide encouraging words so that they work hard to achieve the company’s goals, he is engaged in the management function of controlling.(T,F) False
Efficiency and effectiveness means to use resources—people, money, raw materials, and the like—wisely and cost effectively.(T,F) False
The management functions are sometimes called the six management parts.(T,F) False
Mintzberg proposed that managers utilize written communication more than verbal communication.(T,F) False
Mintzberg concluded that managers play three broad types of roles: interpersonal, analytical, and critical.(T,F) False
When Paul, a new restaurant owner, is determining which products to offer on his menu, he is involved in the management function of planning.(T,F) True
Within her company, Maria utilizes a management style that varies according to the individual and environmental situation, with a strategy for minimizing errors by managing each stage of production. She has also set up a system with inputs, outputs, transformation processes, and feedback. Maria’s management perspective is best described as _____. Contemporary
The human relations movement was based on increasing sales by utilizing improved marketing and customer service techniques with customers.(T,F) False
Ann is the owner of a family-owned grocery store. The culture and belief of Ann and the previous owners, her grandfather and father, is to hire good people you believe in and then trust them with responsibility so that they grow into valuable employees. Ann and the previous owners are an example of ___ managers. Theory Y
Abraham Maslow’s listing of physiological, safety, love, esteem, and self-actualization needs, and his belief that some of these needs must be satisfied before others, was proposed in his _________. hierarchy of human needs
Behavioral science includes the fields of psychology, marketing, accounting, and geology.(T,F) False
Quantitative management emphasizes the use of accounting to provide the needed internal controls related to inventory.(T,F) False
Don feels that inefficiency is the cause of increased costs in his production facility. Therefore, he is interested in making improvements in his factory by utilizing all components of a system, which include design, inputs, production processes, outputs, sales, and feedback.(T,F) False
Managers in a plumbing company have been having problems with employees starting cliques. To develop more of a team culture, the CEO suggested utilizing Mary Parker Follett’s belief: companies should _____. operate as a community, with employees working in harmony
Max Weber believed that a company that is a bureaucracy never achieves a competitive advantage because it is inefficient and is plagued with management problems.(T,F) False
Sofia, a restaurant manager, has been observing and analyzing the work process of each task because she would like to increase the productivity of employees in the restaurant. This is an example of ____ management. Scientific
The macroenvironment, which includes sociocultural, demographic, political-legal and international forces, cannot easily be controlled by organizations.(T,F) True
While setting up their corporation, Ming and Jie implement a system of governing their organization so that the interests of corporate owners and other stakeholders are protected. This is an example of a _____. Corporate governance
The system of governing a company so that the interests of corporate owners and other stakeholders are protected is known as corporate governance.(T,F) True
The notion that corporations are expected to go above and beyond following the law and making a profit to help society known is ____. corporate social responsibility
Tom, the CEO of a large landscaping company, has been studying an article in a business publication that instructs managers how to increase profits through boosting worker efficiency. This is the aim of corporate social responsibility, which states that it is the responsibility of corporations to be profitable even if the other goals in the community are not met.(T,F) False
Having some clients who are less knowledgeable about investing and seem to be more trusting of their firm, the management of a financial advising organization has decided to use cash from newer investors to pay off older ones. The actions of management are an example of ____. a Ponzi Scheme
The board of directors are elected by the employees.(T,F) False
Paul and Anna Jones are wealthy entrepreneurs who are very interested in helping children who have been abused. Their goal is to donate a percentage of their company profits to helping these children. The Jones’s actions are an example of _____. Philanthropy
A distributor is a person or an organization that helps another company sell its goods and services to customers. Distributors are considered external stakeholders.(T,F) True
When individuals or groups are in the process of purchasing a company, this action is known as being a stakeholder.(T,F) False
The shared set of beliefs, values, knowledge, and patterns of behavior common to its people is a nation’s _____. culture
International Fabric buys products for its customers from over 30 countries. The retailer is an example of a company that ____. imports
The American research committee that promoted one world government and one world economy was known as the GLOBE project.(T,F) False
Luis, the owner of a shoe factory in Panama, is unhappy due to a tax that the U.S. government has implemented on shoes exported there to protect U.S. shoe companies. This is an example of a tariff.(T,F) True
The United States has prohibited the import of products from Iran due to the political situation in that nation. This ban is an example of a(n) ____. Embargo
A multinational corporation is a(n) ____. business firm with operations in several countries
In discussing Americans as global citizens, Keith Reinhard from the nonprofit group Business for Diplomatic Action said, “Globally, Americans are viewed by the world as quiet humanitarians striving for equality and accord.”(T,F) False
Franchising allows restaurants internationally to pay a fee plus a percentage of the profits in return for using a company’s name and assistance with management, marketing, and the training of managers and nonmanagement employees.(T,F) True
Dave’s Furniture in South Carolina produces high-quality furniture and ships its products to customers in over 40 countries. This is an example of ____. Exporting
Maquiladoras are manufacturing plants allowed to operate in Mexico with special privileges in return for employing Mexican citizens.(T,F) True
Management scholar Henry Mintzberg found that in their workday, managers ____. have work that is characterized by fragmentation, brevity, and variety
Sally has a high-paying management position with a Fortune 500 company, but she is tired of working for corporate America. So Sally has decided to start a business, and she knows she will be successful as an entrepreneur because entrepreneurs typically ___. have a high need for achievement
The work time for most managers typically consists of long periods during the day that are uninterrupted.(T,F) False
One of the easier components of management is time and task management.(T,F) False
One of challenges of management is that problems and scenarios are seldom similar, so managers are not able to use past products and accomplishments as indicators of future success.(T,F) False
Over the last 10 years, business crime has all but disappeared, thanks to technological oversight.(False) False
Shoshanna, the regional manager of a global sales organization, gives freedom to the sales representatives on the amount spent on gifts for prospective Asian and European customers. Shoshanna is managing for ____. Ethical Standards
The belief that quality stemmed from “constancy of purpose,” and that managers should stress teamwork, be helpful rather than simply give orders, and make employees feel comfortable about asking questions was proposed by _____. W. Edwards Fleming
Susan, a movie theater manager, has observed that as workers feel some company policies are not fair, the employees have not been working as hard as in the past. This reduction in effort is known as ____. soldiering
A-Plus Manufacturing has a policy of using statistical sampling to locate errors by testing just some (rather than all) of the items in a particular production run. This strategy of minimizing errors is known as synergy.(T,F) False
That organizations should be operated as “communities,” with managers and subordinates working together in harmony, is one of the proposals of ____. Mary Parker Follet
Sal, a production manager, knows that some of his employees are upset with the new corporate policy, and as a result, are participating in soldiering. To eliminate soldiering Sal can ___. carefully select workers according to their abilities and give workers training
A problem with the classical viewpoint is that it does not consider overall company and global problems and goals.(T,F) False
The beliefs that there are few really new ideas and that true is better than new are two of the foundational principles of ___. Evidence based management
After returning home from a trade show, Mr. Jones, the president of a manufacturing company, spoke to his employees in a production meeting about a new approach that should increase their production bonus by improving their performance. To do so, Mr. Jones discussed a goal of “zero defects.” This is an example of ____. quality assurance
The father of scientific management is _____. Frederick Taylor
Don, the owner of a fishing business, attended an entrepreneurship workshop that discussed the triple bottom line, which measures an organization’s ____ performance. social, environmental, and financial