If one firm in a given industry declares bankruptcy, the market may lower the values of other firms in a given industry because the reveals new, negative information about the status of the industry as a whole. This phenomenon is called: a. the contagion effect. b. the intra-industry wealth transfer effect. c. irrational behavior. d. […]
The reorder point is the point at which a firm receives orders. Indicate whether the statement is true or false ANSWER FALSE
Since its objective is to minimize inventory investment, a Just-in-Time (JIT) system uses no, or very little, safety stocks. Indicate whether the statement is true or false ANSWER TRUE
A is an agreement among the few dominant firms in an industry to coordinate production and, as alleged, to cut prices temporarily in order to drive out or acquire smaller competitors, after which they could raise prices substantially. a. syndicate b. trust c. non-compete clause d. cut-throat accord ANSWER B
The Financial Accounting Standards Board (FASB) has recently voted to eliminate (i) accounting for mergers, and henceforth will allow only the (ii). (i) (ii) a. purchase method pool of interest b. amalgamation consolidation c. pooling of interest purchase method d. consolidation amalgamation ANSWER C
The basic strategies that should be employed by a business firm in managing cash includes ________. A) paying accounts payable as early as possible B) turning over inventory as quickly as possible, avoiding stockouts C) operating in a fashion that requires maximum cash D) extending the credit period allowed to customers ANSWER B
For minimizing the cash conversion cycle, a firm should ________. A) grant longer credit terms to customers to maintain healthy business relations B) pay off accounts payables as fast as possible to gain credibility C) turn over inventory as quickly as possible without stockouts D) increase mail managing, processing, and clearing time when collecting from […]
TRUE or FALSE: A merger announcement induces a substantial positive abnormal return on the acquiring firm’s stock (approximately 20%, on average), while the target firm’s stockholders are either unaffected or sustain small losses, on average. a. TRUE b. FALSE ANSWER B
Perhaps the best circumstance that would lead to gains for the shareholders of both the bidder and the target in a takeover is when a well-managed firm takes over a poorly managed firm. Thus, the greatest gains in those takeovers in which the bidder has a (i) Tobin’s q ratio (is well managed) and the […]
The bidder in a takeover generally should take advantage of temporary anonymity to purchase shares of the target before its intentions are publicly known and the target firm’s price rises. Such initial purchases establish a _. a. foothold b. leghold c. armhold d. toehold ANSWER D
