Quiz 1 10.

Which term relates to the cash flow which results

1. MCQ. Which one of the following is the financial from a firm's ongoing, normal business activities? -
statement that summarizes a firm's revenue and Operating Cash Flow
expenses over a period of time? - Income 11. Which one of these is most apt to be a fixed cost?
Statement - office salaries
2. The common set of standards and procedures by 12. Which one of the following statements related to
which audited financial statements are prepared is an income statement is correct? Assume accrual
known as the: - Generally Accepted Accounting accounting is used. - “The labor costs for
Principles. producing a product are expensed when the
3. MCQ. Which of the following are included in product is sold.”
current liabilities? - I & III only 13. Shareholders' equity: - represents the residual
I. note payable to a supplier in eight value of a firm.
months 14. A firm has net working capital of P640. Long-term
II. amount due from a customer next debt is P4,180, total assets are P6,230, and fixed
month assets are P3,910. What is the amount of the total
III. account payable to a supplier that is liabilities? -P5,860
due next week 15. The cash flow related to interest payments less
IV. loan payable to the bank in fourteen any net new borrowing is called the: - cash flow
months to creditors.
4. MCQ. A firm has common stock of P6,200, paid-in 16. Which one of the following is classified as an
surplus of P9,100, total liabilities of P8,400, intangible fixed asset? - trademark
current assets of P5,900, and fixed assets of 17. Which one of the following is true according to
P21,200. What is the amount of the shareholders' Generally Accepted Accounting Principles? -
equity? -P18,700 Costs of goods sold are recorded based on the
5. MCQ. Which one of the following is the financial matching principle.
statement that shows the accounting value of a 18. Which one of the following statements related to
firm's equity as of a particular date? - balance an income statement is correct? - Taxes reduce
sheet both net income and operating cash flow.
6. Net working capital is defined as: - current assets 19. Cash flow to stockholders is defined as: -
minus current liabilities. dividend payments less net new equity raised.
7. Depreciation: reduces both taxes and net income. 20. Which one of the following accounts is the most
8. Which one of the following represents the most liquid? - accounts receivable
liquid asset?
a.P100 account receivable that is discounted and
collected for P96 today
b.P100 of inventory which is sold today on credit
for P103
c.P100 of inventory that is sold today for P100
cash
d.P100 of inventory which is discounted and sold
for P97 cash today
e.P100 accounts receivable that will be collected
in full next week
9. Which one of the following is included in a firm's
market value but yet is excluded from the firm's
accounting value? - good reputation of the
company
Quiz 4 11. The desire to obtain a ________ only grows stronger as
1. Banks, investment banks, stockbrokers, mutual funds, time passes.
insurance companies, and the like bring together 12. True or False | Rational investors want to hold diversified
investors who have money to invest and businesses, portfolios in order to limit risks, so choosing a properly
individuals, and other entities that need capital for various balanced portfolio is an important issue for any investor.
purposes. 13. True or False | Increase in money supply causes the
2. A saver deposits dollars in a bank, receiving a certificate prices to rise.
of deposit; then the bank lends the money to a business 14. The company sells its stocks or bonds to the investment
in the form of a mortgage loan. Literally, there is a bank, which then sells these same securities to savers.
creation of new forms of capital—in this case, certificates The businesses’ securities and the savers’ money merely
of deposit, which are safer and more liquid than “pass through” the investment bank. This process is
mortgages and thus are better for most savers to hold. called underwriting.
This fund transfer occurs through _____________ 15. SEC regulates the trading of stocks and bonds in public
3. When new securities are involved and the corporation markets.
receives the proceeds of the sale, this transaction occurs 16. True or False | In a well-functioning economy, capital
in primary market flows efficiently from those with surplus capital to those
4. A food processor that needs soybeans in the future may who need it.
enter into a futures contract in which it agrees to buy 17. A share of Ford stock is a “pure financial asset,” while an
soybeans 6 months from now. This transaction reduces option to buy Ford shares is a derivative whose value
the risks faced by both the farmer and the food processor, depends on the price of Ford stock.
termed as ____________ 18. Financial Institution that (a) help corporations design
5. A farmer may enter into a futures contract in which he securities with features that are currently attractive to
agrees today to sell 5,000 bushels of soybeans 6 months investors, (b) buy these securities from the corporation,
from now at a price of P255 a bushel. The transaction and (c) resell them to savers. Since the investment bank
occurs in the ____________ generally guarantees that the firm will raise the needed
6. Markets where standardized contracts are traded on capital. Ans: ____________
organized exchanges. Securities that are traded in these 19. Wal-Mart were considering a proposed new store, the
markets are held by a large number of individuals. These revenues, costs, and profits for this project would be
securities must have fairly standardized contractual easier to estimate than for an Apple project related to a
features because investors that go to these markets do new voice-activated computer. Thus, Wal-Mart is thought
not generally have the time and expertise to negotiate to be less risky than Apple.
unique, non-standardized contracts. ANS: Public Markets 20. True or False | Markets are usually a good way to
7. ______________ such as the Federal Reserve System (in organize economic activity.
foreign countries), regulates banks and controls the
supply of money.
8. Apple Computer’s stock ranged from $77 to $193 per
share during a recent 12-month period, rising and falling
as good and bad news was released. Wal-Mart, which is
in a more stable industry, had a narrower price range—
from $42 to $52. Investors can predict future results for
Wal-Mart more accurately than for Apple; thus, Wal-Mart
is thought to be less risky than Apple.
9. Occur when a business sells its stocks or bonds directly
to savers, without going through any type of financial
institution. The business delivers its securities to savers,
who, in turn, give the firm the money it needs. This
procedure is used mainly by small firms, and relatively
little capital is raised by direct transfer.
10. Financial Institution that takes savings in the form of
annual premiums; invest these funds in stocks, bonds,
real estate, and mortgages; and make payments to the
beneficiaries of the insured parties. ANS: Insurance Fund