When would the “return on equity” equal the “return on assets”? A) Whenever the debt to equity ratio is one B) Whenever the debt ratio is zero C) Whenever a firm has positive net worth D) Whenever the firm has positive net worth and positive net income ANSWER B
Date: September 19th, 2020
The inventory method that relies on deliveries coming right before they are needed is: A) Just-in-Time B) Basket C) LIFO D) FIFO ANSWER A
Date: September 19th, 2020
1 year ago $1 would buy 6.5 pesos. Today $1 buys 7.5 pesos. If the US had an inflation rate of 3%, calculate Mexico’s inflation rate. A) 3.1% B) 18.38% C) 4.2% D) 7.8% ANSWER B
Date: September 19th, 2020
The theory that exchange rates must adjust so that there is no reason for funds to flow from one country just to take advantage of better returns in another is part of: A) Purchasing power parity B) Purchasing power arbitrage C) Interest rate parity D) Interest rate arbitrage ANSWER C
Date: September 19th, 2020
The DuPont analysis calculates ROE as the product of A) leverage, market value, and turnover. B) margin, turnover, and leverage. C) profitability, liquidity, and leverage. D) activity, leverage, and debt. E) margin, profitability, and leverage. ANSWER B
Date: September 19th, 2020
Each of the following is a decision that can be avoided if a firm refuses to offer credit EXCEPT: A) Collection period B) Discounts to give fast payers C) Accounts Payable D) Who to extend credit to ANSWER C
Date: September 19th, 2020
A theory stating that changes in inflation rates between two countries cause exchange rates to adjust is A) interest rate parity. B) exchange rate parity. C) relative purchasing power parity. D) absolute purchasing power parity. E) None of the above ANSWER C
Date: September 19th, 2020
________ is the act of trading to profit from a violation of the law of one price. A) Relative purchasing power parity B) Arbitrage C) Absolute purchasing power parity D) Purchasing power arbitrage ANSWER D
Date: September 19th, 2020
ABC Co. has an average inventory of 750. The carrying cost per item is 1.25, the ordering cost is $18 per order, and they make 28 orders per year. What is the total carrying cost for ABC Co? A) $504 B) $937.50 C) $1,166.67 D) $844.50 E) $492.65 ANSWER B
Date: September 19th, 2020
A firm has accounts receivable of $150,000. During the year, total sales are $500,000, of which $300,000 are cash sales. What is the average collection period? A) 109.5 days B) 182.5 days C) 273.8 days D) 486.7 days E) None of the above ANSWER C
Date: September 19th, 2020
