QUESTION A corporate consultant concludes that a Disney business unit deserves heavy investment because three of its four product lines are highly profitable and have high market share. Which of the following, if true, most undermines this conclusion? A) The product lines making high profits sell goods with lower prices than the goods sold by […]
QUESTION Which of the following, if true, strengthens the case for Munschausen’s seeking to acquire capital by debt financing? A) Munschausen will have very slim profit margins in its international sales. B) Munschausen will hire many new salespeople to work internationally. C) Munschausen will have a steady stream of revenue from its international sales. D) […]
QUESTION Which of the following, if true, weakens the case for Munschausen’s seeking to acquire capital by equity financing? A) The equity capital market in Europe is currently very strong. B) Equity financiers expect a consistent return on their investments. C) Many of the companies in Germany get financing from equity capital. D) Only the […]
QUESTION A senior manager argues that the negative perception associated with mounting credit card debt will affect StarMart. Which of the following is the LEAST effective measure StarMart could take to address this potential problem? A) publicize the company’s policies in clear and easy-to-understand language B) charge no more than the typical interest rate for […]
QUESTION Tanya is arranging for a secured loan from a commercial bank so that her medical equipment company can purchase state-of-the-art computer systems throughout the company’s headquarters offices. As collateral for the loan, Tanya argues that the company should use its office building. Which of the following weakens Tanya’s argument? A) Tanya’s company owns a […]
QUESTION Why do you think it is important that one of the characteristics of money is portability? What will be an ideal response? ANSWER Answer: The portability of money is important for its practicality. In other words, because it is portable, it can easily be carried around and used on the spot. In some […]
QUESTION Aardvark is considering issuing corporate bonds in order to raise money. Which of the following, if true, strengthens the case for using corporate bonds? A) The company’s customer base has been declining. B) The company has debts that need to be paid immediately. C) The company’s main interest is in long-term solvency. D) The […]
QUESTION What are the three functions of money? What will be an ideal response? ANSWER Answer: Money acts as a medium of exchange, as a store of wealth, and as a standard of value. Explanation: Money has three functions: (1) it acts as a medium of exchange, (2) it acts as a store of […]
QUESTION What is the U.S. money supply? What will be an ideal response? ANSWER Answer: The U.S. money supply is defined as the amount of money the Federal Reserve System makes available for people to buy goods and services. The money supply is customarily referred to in two ways—as M1, the narrowest measure, or […]
QUESTION Why is it sometimes cheaper for firms to sell stock privately than publicly? What will be an ideal response? ANSWER Answer: Firms may find they can sell stock more cheaply when they sell it privately because there is less government regulation involved. Explanation: As there is more government regulation involved in selling stock […]
