Prices of securities that are traded on the organized exchanges are determined by A) a “bid” and “ask” negotiation process amongst brokers who hold these securities in their own account. B) the sellers of the securities. C) a continuous auction process reflecting the sentiments of buyers and sellers. D) the Securities Exchange Commission. […]
The current ratio and the acid test ratio both measure financial leverage. Indicate whether the statement is true or false ANSWER FALSE
Stock A has the following returns for various states of the economy: State of the Economy Probability Stock A’s Return Recession 9% -72% Below Average 16% -15% Average 51% 16% Above Average 14% 35% Boom 10% 85% Stock A’s expected return is A) 13.8%. B) 9.9%. C) 12.7%. D) 16.5%. ANSWER C
Ethical behavior A) is the fifth basic principles of finance. B) in the corporate world means not breaking any laws. C) is essential in business because unethical behavior destroys trust and business relationships. D) cannot be a concern to managers who are expected to maximize shareholder value. ANSWER C
Which of the following statements about the Miscellaneous-Type Vehicle Endorsement to the PAP is (are) true? I. It provides bodily injury liability coverage for any vehicle rented by the insured. II. It can be added to PAP to insurance motorcycles and motor scooters. A) I only B) II only C) both I and II D) […]
Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred: —The driver of the other car suffered $30,000 in bodily injuries. —Ken’s car sustained […]
Accounting rules specify that assets on the balance sheet must be reported at current market value, because this is the valuation most useful to potential investors. Indicate whether the statement is true or false ANSWER FALSE
Prices of securities that are traded in the Over-the-Counter Markets are determined by A) the buyers of these securities. B) a continuous modified auction process. C) a “bid” and “ask” negotiation process of broker-dealers of these securities. D) the Federal Trade Commission. ANSWER C
Ratios that examine profit relative to investment are useful in evaluating the overall effectiveness of the firm’s management. Indicate whether the statement is true or false ANSWER TRUE
The recent financial crises was exacerbated by A) managers who underestimated the real risks of their decisions and borrowed excessively. B) extremely high interest rates in the United States that stifled investment. C) a lack of financial leverage that made U.S. firms less competitive in world markets. D) managers who overestimated risk and hence did […]
