Str 581 final exam answers set 2
- 1. STR581 Strategic Planning and Implementation – Final Exam Click here to view answers or check my blog 100 Correctly Answered Questions Section 2 100. Occurs when inaccurate information can falsely exist. A. free-rider problem B. adverse selection C. moral hazard D. The Principle of Valuable Ideas 101. Which principle states that extraordinary returns are achievable with new ideas? A. The Principle of Valuable Ideas B. The Principle of Risk-Return Trade-Off C. The Principle of Incremental Ideas D. The Notional Principle 102. Which of the following statements is true? A. The difference between the value of one action and the value of the best alternative is called an opportunity cost. B. An agent-manager can never make bad decisions. C. A security is a claim issued by a firm that pays owners interest but not dividends. D. A call option analyzes conflicts of interest and behavior in a principal-agent relationship. 103. Generally accepted accounting principles (GAAP) refers to A. the extent to which something can be sold for cash quickly and easily without loss of value. B. the length of an asset’s life when it is issued. C. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. D. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes. 104. Remaining maturity refers to: A. the amount of time remaining until its maturity. B. the length of an asset’s life when it is issued. C. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. D. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes.
- 2. 105. The annual report refers to A. the extent to which something can be sold for cash quickly and easily without loss of value. B. a report issued annually by managers to primarily convey information about select working capital ratios. C. the length of time remaining until an asset’s maturity. D. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes. 106. The firm’s assets in the balance sheet refer to: A. the extent to which something can be sold for cash quickly and easily without loss of value. B. the productive resources in the firm’s operations. C. the statement of a firm's financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders' equity). 107. Book value (or Net book value) refers to: A. the net amount shown in the accounting statements. B. the length of an asset’s life when it is issued. C. the statement of a firm's financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders' equity). D. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity. 108. Original maturity refers to: A. the net amount (net book value) for something shown in quarterly accounting statements. B. the length of an asset’s life when it is issued. C. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. D. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity. FIN/571 Corporate Finance Final Exam Progress: (0/57) 109. Preferred stock payment obligations are typically __________. A. viewed like debt obligations. B. issued with a maturity date. C. valued as an annuity. D. none of these 110. Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements is true? A. The current yield was a lot greater than 9% when the bond was first issued B. The current yield was a lot less than 9% when the bond was first issued C. The market value of the bond is less than $1,000 D. The market value of the bond is more than $1,000 111. If the yield to maturity for a bond is less than the bond's coupon rate, then the market value of the bond is __________. A. less than the par value. B. greater than the par value. C. cannot tell D. equal to the par value. 112. According to the CAPM, the expected return for a portfolio is determined by the portfolio's. A. variance. B. beta. C. standard deviation. D. none of these 113. Certain countries have restrictions. In practice, U.S. investors have NOT invested very much internationally. Possible factors include __________. A. lower transaction costs. B. expropriation risk. C. firm-specific risk. D. all of these 114. Certain countries have restrictions. In practice, U.S. investors have NOT invested very much internationally. Possible factors include __________. A. non-listing of foreign securities
- 3. on U.S. stock exchanges. B. foreign tax considerations. C. efficiency in converting currencies. D. all of these 115. Dimensions of risk include ___________. A. the certainty of a negative outcome B. uncertainty about the future outcome C. uncertainty about yesterday’s outcome D. the impossibility of the same return 116. One problem with using negative values for w1 (the proportion invested in the riskless asset) to represent a borrowed amount is that the implied borrowing rate of interest is the same as __________. A. the current rate of interest B. the prime rate of interest C. the nominal rate of interest D. the lending rate of interest 117. The Principle of __________ implies that the expected return for an asset equals its required return. A. Risk-Return Trade- B. Capital Market Efficiency C. Signaling D. Comparative Advantage FIN/571 Corporate Finance Final Exam Progress: (0/57) 118. __________ says to calculate the incremental after-tax cash flows connected with working capital decisions. A. The Principle of Incremental Benefits B. The Signaling Principle C. The Options Principle D. The Principle of Time Value of Money 119. Stony Products has an inventory conversion period (ICP) of about 60.83 days. The receivables collection period (RCP) is 36.50 days. The payables deferral period (PDP) is about 30.42 days. What is Stony's cash conversion cycle (CCC)? A. about 69 days B. about 66 days C. about 67 days D. about 68 days 120. Firms make short-term financial decisions just about every day solving such questions as __________. A. Where should we borrow? B. Where should we invest our cash? C. How much liquidity should we have? D. all of these 121. __________ says to calculate the incremental after-tax cash flows connected with working capital decisions. A. The Options Principle B. The Signaling Principle C. The Principle of Incremental BenefitsD. The Principle of Time Value of Money 122. Main sources of short-term funds include __________. A. trade credit and commercial paper B. futures and bank loans C. bonds and trade credit D. none of these 123. Which of the following statements is (are) true? A. The "dating 120" or the "60 extra" mean that the clock does not start until 120 or 60 days after the invoice date. B. Prox or proximate refers to the next month. C. Invoices with "10th prox" must be paid by the 10th of the next month. D. all of these 124. Which (if any) of the following statements is false? A. The invoice is a written statement about goods that were ordered, along with their prices and the payment dates. In other words, the invoice is simply the bill for purchases. B. For the 4/10, net 40 credit terms, you are offering a total credit period of 30 days from the date of the invoice, a discount period of 10 days, and a 4% discount if paid on or before the discount period expires. C. When a firm is
- 4. using invoice billing, the invoice that accompanies shipment is a separate bill to be paid. D. none of these 125. Most credit sales are made on an open account basis, which means __________. A. that suppliers cannot dictate the terms of the purchase. B. that customers simply purchase what they want.C. that suppliers dictate the terms of the purchase. D. that customers cannot simply purchase what they want. FIN/571 Corporate Finance Final Exam Progress: (0/57) 126. An all-equity-financed firm would __________. A. pay corporate income taxes if its taxable income is positive. B. not pay any income taxes because interest would exactly offset its taxable income. C. pay corporate income taxes because it would have interest expense. D. not pay corporate income taxes because it would have no interest expense. 127. A profitable firm would __________. A. pay corporate income taxes because it would have interest expense. B. pay corporate income taxes because it would not have interest expense. C. pay corporate income taxes if it had a positive taxable income. D. none of these 128. An investor's risky portfolio is made up of individual stocks. Which of the following statements about this portfolio is true? A. Each stock in the portfolio will have a beta greater than one. B. Each stock in the portfolio has its own beta. C. Selling any stock in this portfolio will lower the beta of the portfolio. D. An investor cannot change the risk of this portfolio by her choice about personal leverage (lending or borrowing). 129. Boeing Corporation is a world leader in commercial aircraft. In the face of competition, Boeing often faces a critical __________ decision: whether to develop a new generation of passenger aircraft. A. dividend B. present value C. payback D. capital budgeting 130. The capital budgeting process can be broken down into five steps. These steps include which of the following? A. Generate ideas for capital budgeting projects B. Prepare proposals C. Review existing projects and facilities D. all of these 131. There are two important tax considerations for a capital budgeting project. These include which (if any) of the following? A. It is indeed cash flow that’s irrelevant. B. The standard cash flow estimation does not explicitly identify the financing costs. C. The Principle of Incremental Benefits reminds us that it is the incremental cash flow that’s relevant. D. none of these 132. The __________ method breaks down when evaluating projects in which the sign of the cash flow changes. A. Payback B. NPV C. PI D. IRR 133. Whenever projects are both independent and conventional, then the IRR and NPV methods agree. Which of the following statements is true? A. A mutually exclusive project is one that can be chosen independently of other projects. B. When undertaking one project prevents investing in another project, and vice versa, the projects are said to have a positive payback. C. A conventional project is a project with an initial cash outflow that is followed by one or more expected future cash inflows. D. all of these
- 5. 134. In practice, the __________ rule is preferred. A. PI B. NPV C. IRR D. Payback FIN/571 Corporate Finance Final Exam Progress: (0/57) 135. Studies show systematic differences in capital structures across industries. These are due mostly to differences in __________. A. accounting practices. B. the firm’s inventory turnover ratio. C. the ability of assets to support borrowing. D. management’s attitude toward what other industries are doing. 136. Studies show systematic differences in capital structures across industries. These are due mostly to differences in the availability of tax shelter provided by things other than debt, such as __________. A. accelerated depreciation. B. operating tax loss carryforwards. C. investment tax credit. D. all of these 137. Studies show systematic differences in capital structures across industries. These are due mostly to differences in __________. A. hiring and firing practices. B. the availability of tax shelter provided by things other than debt, such as accelerated depreciation, investment tax credit, and operating tax loss carryforwards. C. what the arbitrage pricing theory tells us. D. none of these 138. There can be a variety of motives for stock repurchases including __________. A. a buyback of overvalued stock. B. an increase in leverage. C. a decrease in anticipated earnings. D. all of these 139. Some countries have __________ in which shareholders' returns are not fully taxed twice. A. an imputation tax system B. a split tax system C. a two-tier tax system D. none of these 140. There can be a variety of motives for stock repurchases including __________. A. a decrease in leverage. B. a buyback of undervalued stock. C. a decrease in anticipated earnings. D. all of these 141. Mortgage bonds are __________. A. secured by a lien on general assets of the issuer B. secured by a lien on specific assets of the issuer C. usually secured by assets such as common shares of one of the issuer's subsidiaries D. none of these 142. Conditional sales contracts __________. A. are seldom issued to finance the purchase of aircraft B. are similar to equipment trust certificates C. enable the borrower to obtain title to the assets only before it fully repays the debt D. all of these 143. The Time Value of Money Principle says __________. A. to look for the most advantageous ways to finance the firm, such as the lowest-cost debt alternative B. to use discounted cash flow analysis to compare the costs and benefits of financing decisions, such as alternative securities to sell, lease versus borrow and buy, and bond refundingC. to set a price and other terms that investors will find acceptable when issuing securities D. that announcing the firm's decision to issue securities conveys information about the firm 144. __________ says to look for opportunities to develop asset-based financing arrangements that offer new positive-NPV financing mechanisms. A. The Principle of Valuable
- 6. Ideas B. The Time Value of Money Principle C. The Principle of Self-Interested Behavior D. The Principle of Comparative Advantage 145. The Principle of Self-Interested Behavior says __________. A. to calculate the net advantage of leasing based on the incremental after-tax benefits that leasing will provide. B. to look for profitable opportunities to lease (or rent) an asset, rather than borrow and buy it. C. to use discounted cash flow analysis to compare the costs and benefits of leasing, relative to the alternative of borrowing and buying. D. that leasing transfers the tax benefits of ownership from the lessee to the lessor. 146. __________ says to transfer the tax benefits of ownership to other parties if they are willing to pay for benefits your firm cannot use. A. The Principle of Two-Sided Transactions B. The Principle of Incremental Benefits C. The Principle of Comparative Advantage D. The Capital Market Efficiency Principle FIN/571 Corporate Finance Final Exam Progress: (0/57) 147. The wholesale price for Captain John’s is $1.00 per loaf, and the variable cost of production is $0.50 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional 5.0 million loaves in the next year. What additional revenues minus expenses will be generated from expansion? A. $25,000 B. $250,000 C. $550,000 D. none of these 148. The wholesale price for Captain John’s is $0.612 per loaf, and the variable cost of production is $0.387 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional 4.5 million loaves in the next five years. What additional revenues minus expenses will be generated from expansion? A. $1,102,000 B. $912,500 C. $1,012,500 D. $1,000,500 149. The wholesale price for Captain John’s is $3.00 per loaf. One million loaves will be sold in the next year. What is the contribution margin? A. cannot tell B. $3.00 C. $3,000,000 D. $3,000,000 minus fixed costs 150. Which of the following statements is true? A. Soft capital rationing refers to the rationing imposed externally by limited funds for borrowing from outside sources. B. Hard capital rationing refers to the rationing imposed internally by the firm. C. A post audit is a set of procedures for evaluating a capital budgeting decision after the fact. D. all of these 151. Pursuing valuable ideas is the best way __________. A. to avoid risk. B. to achieve extraordinary returns.C. to restrain your spending. D. to get yourself in trouble. 152. In efficient markets, as in the United States, you should think long and hard before you conclude that a market price is __________. A. wrong. B. fair. C. followed by many analysts. D. all of these 153. __________ says to forecast the firm’s cash flows, and analyze the incremental cash flows of alternative decisions. A. The Principle of Risk-Return Trade-Off B. The Signaling Principle C. The Principle of Incremental Benefits D. The Time Value of Money Principle
- 7. 154. ___________ says to use both bottom-up and top-down processes to increase the chance of uncovering valuable ideas. A. The Principle of Valuable Ideas B. The Behavioral Principle C. The Principle of Two-Sided Transactions D. The Principle of Comparative Advantage 155. __________ says to use common industry practices as a good starting place for the planning process. A. The Behavioral Principle B. The Principle of Incremental Benefits C. The Principle of Self-Interested Behavior D. The Principle of Valuable Ideas 156. The most important performance dimension for product development projects is: A. Quality B. Product flexibility C. Time-to-market D. Productivity 157. When evaluating a new product development project using net present value analysis, which of the following will make the project more attractive? A. Delaying the start of the project B. Making the project run over a longer period of time C. Improving (bringing forward) the date when revenue will begin D. A and B 158. Which of the following statements is true about value analysis/value engineering (VA/VE)? A. The purpose of VA/VE is to simplify products and processes. B. The objective of VA/VE is to achieve equivalent or better performance at a lower cost. C. VA is performed before the production stage, while VE deals with products already in production. D. both A and B 159. The category given the maximum point value in the Baldrige award is: A. Business results B. Process management C. Strategic planning D. Customer and market focus 160. Which of the following is not a dimension of design quality? A. ServiceabilityB. Customization C. Features D. Durability 161. Which Quality Guru advocated that senior management is responsible for 94% of quality problems? A. Ishikawa B. Juran C. Crosby D. Deming 162. Which of the following is not an assumption of the basic economic-order quantity model? A. ordering or setup costs are constant B. quantity discounts are available C. annual demand is constant and known D. lead time is constant 163. The basic difference between P and Q systems is: A. P models favor more expensive items B. P model is more appropriate for important items such as critical repair parts C. Q models are event triggered while P models are time triggered D. Q models are time triggered while P models are event triggered 164. Which of the following statements is true about the Q-system? A. It does not have an EOQ, since the quantity varies according to demand. B. The order interval is fixed not the order quantity. C. It does not have a reorder point but rather a target inventory. D. The system is completely determined by the two parameters, Q and R. 165. The objectives of work-center scheduling include(s): A. To meet due dates B. To minimize lead times C. To minimize finish goods inventory D. A and B
- 8. 166. A _________ approach actually schedules in detail each resource using the setup and runtime required for each order. A. Forward scheduling B. Backward scheduling C. Infinite loading D. Finite loading 167. The assignment method is appropriate in solving problems that have the following characteristics: A. There are 'n' things to be distributed to 'n' destinations B. Though each destination may handle all the things, the final assignment has each thing assigned to one and only one destination C. Only one criterion should be used (minimum cost, maximum profit, for example) D. A and C 168. Which of the following according to Goldratt is not a component of production cycle time? A. Wait time B. Maintenance timeC. Setup time D. Process time 169. Goldratt's rule of production scheduling include all but: A. An hour saved at a non- bottleneck is a mirage B. A process batch should be fixed both along its route and in timeC. Do not balance the capacity - balance the flow D. Utilization and activation of a resource is not the same thing 170. According to Goldratt and Fox, a useful performance measure to treat inventory is ______. A. Inventory turnover B. Current ratio C. Quick ratio D. Dollar days 171. Which of the following would not be considered in deciding how far to minimum-cost schedule (crash) a project? A. Project overrun penalties B. Incentives for early completion C. Indirect project costs (e.g. interest on a construction loan) D. The normal duration times of tasks not on a critical path 172. The advantages of pure project include all but: A. The project manager has full authority over the project. B. Team pride, motivation, and commitments are high. C. Decisions are made quickly. D. A team member can work on several projects. 173. Which of the following is not a typical project milestone? A. Completion of design B. Production of a prototype C. Training of project members D. Completed testing of the prototype Supply-chain response relates to the following: A. How quickly a customer order can be filled B. How quickly a company can react to a new competing product C. How inexpensive the product is D. A and B 174. According to Hau Lee, which of the following types of products need to be delivered with efficient supply-chains? A. Custom products B. Innovative products C. Grocery productsD. High technology products 175. The idea of the Value Density calculation is: A. Finding a carrier that can handle the weight B. Matching the weight of the product with an appropriate carrier C. Determining how a product should be shipped considering its weight and valueD. Finding the minimum cost carrier 176. Which of the following statements is not true about capacity management in operations? A. When looking at capacity, operations managers need to look at both resource input and product outputs. B. An operations management view also emphasizes the time
- 9. dimension of capacity. C. Capacity planning itself has different meaning to individuals at different levels within the operations management hierarchy. D. The definition of capacity, in an operations management context, makes a clear distinction between efficient and inefficient use of capacity. 177. The steps to determining capacity requirements include: A. Using decision trees to evaluate capacity alternatives B. Calculating equipment and labor requirements to meet product line forecasts C. Projecting labor and equipment availabilities over the planning horizon D. B and C 178. Capacity utilization rate can be computed as: A. Capacity used - best operating level B. Capacity used x best operating level C. Capacity used / best operating level D. Capacity used + best operating level 179. Which of the following is NOT one of the more successful applications of lean concepts in services? A. Organize problem-solving groups B. Upgrade housekeeping C. Upgrade quality D. Introduction of demand-push scheduling 180. A kanban card is used to signal that: A. work is ready to be moved to the next station B. a worker has run out of parts C. a machine has broken down D. work is authorized to replenish a downstream station 181. Which of the following is not true about JIT systems? A. The JIT system is based on the philosophy of eliminating waste and utilizing the full capability of the worker. B. Under JIT the ideal lot size is one. C. JIT is typically applied to repetitive manufacturing. D. The goal of JIT is to drive all inventory queues to a moderate level thus minimizing inventory investment and shortening lead times. 182. Which phrase most closely describes the Delphi forecasting technique? A. consumer survey B. random individual opinions D. test markets 183. Which of the following would not be classified as a component of demand? A. Cycle B. Seasonality C. Trend D. Causal variation 184. Under exponential smoothing, if we want our forecast to be very responsive to recent demand, the value of alpha should be: A. moderate B. zero C. small D. large E. No, Acme is not a holder in due course because of some other reason. 185. One option for altering the pattern of demand is: A. carrying inventory B. using overtime C. hiring employees D. pricing 186. Which of the following is not a cost relevant to aggregate production planning? A. Costs associated with changes in the production rate B. Quantity discountsC. Basic production costs D. Inventory holding costs 187. Aggregate planners balance: A. demand and capacity B. demand and inventories C. demand and costs D. supply and inventories
- 10. 188. Which MRP system input element specifies how many and when the firm plans to build each end item? A. Master production scheduleB. Bills of material C. Inventory records file D. Capacity planning 189. Which of the following most closely describes net material requirements? A. gross requirements - on-hand - planned order receipts B. gross requirements - on-hand + planned order receipts C. gross requirements - planned order receipts D. gross requirements - planned order releases 190. Which of the following is true about MRP Systems? A. demand pattern is random B. lot sizing is EOQ C. based on independent demand D. objective is to meet manufacturing needs 191. Which of the following statements is not true about capacity management in operations? A. Capacity planning itself has different meaning to individuals at different levels within the operations management hierarchy. B. An operations management view also emphasizes the time dimension of capacity. C. When looking at capacity, operations managers need to look at both resource input and product outputs. D. The definition of capacity, in an operations management context, makes a clear distinction between efficient and inefficient use of capacity. 192. Service capacity: A. is highly time and location dependent B. is subject to less volatile demand fluctuations C. utilization directly impacts service quality D. A and C 193. The steps to determining capacity requirements include: A. Using decision trees to evaluate capacity alternatives B. Calculating equipment and labor requirements to meet product line forecasts C. Projecting labor and equipment availabilities over the planning horizon D. B and C 194. Which one of the following managerial accounting approaches attempts to allocate manufacturing overhead? A. Activity-based costing. B. Just-in-time inventory. C. Total-quality management D. Theory of constraints. 195. Baden Company manufactures a product with a unit variable cost of $50 and a unit sales price of $88. Fixed manufacturing costs were $240,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $70 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows: A. Income would increase by $70,000. B. Income would increase by $4,000. C. Income would increase by $20,000 D. Income would decrease by $4,000.
- 11. 196. Which of the following is NOT one of the more successful applications of lean concepts in services? A. Organize problem-solving groups B. Upgrade housekeeping C. Upgrade quality D. Introduction of demand-push scheduling 197. ________ communicates a company’s intended value positioning of its product or brand to the market. A. Promotion B. Packaging. C. Physical evidence. D. Place. E. Price 198. Which list below best describes the major services performed by public accountants? A. Auditing, taxation, management consulting B. Cost accounting, production scheduling, recruiting C. Employee training, auditing, bookkeeping D. Bookkeeping, mergers, budgets 199. The primary purpose of the statement of cash flows is to __________. A. provide information about the investing and financing activities during a period B. prove that revenues exceed expenses if there is a net income C. facilitate banking relationships D. provide information about the cash receipts and cash payments during a period 200. The cost principle requires that when assets are acquired, they be recorded at __________. A. selling price B. list price C. appraisal value D. exchange price paid