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Questions
Q:
If antitrust legislation is successful, then the monopolistic firm willA) decrease output and charge a lower price than before.B) increase output and charge a higher price than before. C) increase output and charge a lower price than before. D) decrease output and charge a higher price than before.
Q:
Which of the following are assumptions of the simple CAPM model?
I. Individual trades of investors do not affect a stock's price.
II. All investors plan for one identical holding period.
III. All investors analyze securities in the same way and share the same economic view of the world.
IV. All investors have the same level of risk aversion.
A. I, II, and IV only
B. I, II, and III only
C. II, III, and IV only
D. I, II, III, and IV
Q:
Ending Company is in bankruptcy and is being liquidated under the provisions of Chapter 7 of the bankruptcy code. The trustee has converted all assets into $80,000 cash (which includes the amounts shown below for assets sold) and has prepared the following list of approved claims:Property taxes payable $ 10,000Accounts payable, unsecured 30,000Mortgage payable, secured by property that was sold for $50,000 30,000Note payable to bank, secured by all accounts receivable of which $20,000was able to be collected and the balance was written off 30,000Required:How much will the bank receive on the note payable?
Q:
In which market structures is the firm able to earn long-run economic profits?A) Perfect competition and monopolistic competition.B) Monopolistic competition and oligopoly. C) Oligopoly and monopoly.D) Monopolistic competition, oligopoly and monopoly.
Q:
Fama and French claim that after controlling for firm size and the ratio of the firm's book value to market value, beta is:
I. Highly significant in predicting future stock returns
II. Relatively useless in predicting future stock returns
III. A good predictor of the firm's specific risk
A. I only
B. II only
C. I and III only
D. I, II, and III
Q:
Which of the following is a characteristic of oligopoly?A) Mutual firm independence B) Zero economic profits in the short runC) Marginal cost pricing D) Only a few firms in the industry
Q:
An adjusted beta will be ______ than the unadjusted beta.
A. lower
B. higher
C. closer to 1
D. closer to 0
Q:
CommTex Corporation is liquidating under Chapter 7 of the Bankruptcy Act. The accounts of CommTex at the time of filing are summarized as follows:EstimatedRealizableBook Value ValueCash $ 80,000 $ 80,000Accounts receivable-net 50,000 40,000Inventory 80,000 60,000Land 10,000 20,000Building-net 150,000 110,000Equipment-net 60,000 40,000Goodwill 10,000 0$ 440,000Accounts payable $ 120,000Wages and salaries 20,000Contributions due to pension plan 10,000Taxes payable 60,000Accrued interest payable (includes 10,000$8,000 from the mortgage payable and$2,000 from the note payable)Note payable 120,000Mortgage payable 90,000Capital stock 80,000Deficit (70,000)$ 440,000The land and building are pledged as security for the mortgage payable as well as any accrued interest on the mortgage. The note payable is secured with the equipment, but the interest on the note is unsecured. Wages and salaries were earned within 90 days of filing the petition for bankruptcy and pension plan contributions relate to services rendered within 6 months of filing the petition for bankruptcy; neither exceeds $4,000 per employee. Liquidation expenses are expected to be $40,000.Required:Required:1. Prepare a schedule showing the priority rankings of the creditors and the expected payouts.2. Devendor Corporation was a supplier to CommTex Corporation and at the time of CommTex's bankruptcy filing, Devendor's account receivable from CommTex was $25,000. On the basis of the estimates, how much can Devendor expect to receive?
Q:
The monopolistic competitive firm in short-run equilibrium may experience economic profits that areA) always zero. B) greater than, equal to, or less than zero. C) always positive. D) always negative.
Q:
The expected rate of return of a portfolio of risky securities is _________.A. the sum of the securities' covarianceB. the sum of the securities' varianceC. the weighted sum of the securities' expected returnsD. the weighted sum of the securities' variance
Q:
Alitech Corporation is liquidating under Chapter 7 of the Bankruptcy Act. The accounts of Alitech at the time of filing are summarized as follows:EstimatedRealizableBook Value ValueCash $ 10,000 $ 10,000Accounts receivable-net 60,000 50,000Inventory 110,000 65,000Land 20,000 35,000Building 200,000 126,000Goodwill 22,000$ 422,000Accounts payable $ 120,000Wages and salaries 30,000Taxes payable 80,000Accrued mortgage interest payable 22,000Mortgage payable 100,000Capital stock 90,000Deficit (20,000)$ 422,000The land and building are pledged as security for the mortgage payable as well as any accrued interest on the mortgage. Wages and salaries were earned within 90 days of filing the petition for bankruptcy and do not exceed $10,000 per employee. Liquidation expenses are expected to be $30,000.Required:1. Prepare a schedule showing the priority rankings of the creditors and the expected payouts.2. Billing Corporation was a supplier to Alitech Corporation and at the time of Alitech's bankruptcy filing, Billing's account receivable from Alitech was $40,000. On the basis of the estimates, how much can Billing expect to receive?
Q:
Diversification is most effective when security returns are _________.
A. high
B. negatively correlated
C. positively correlated
D. uncorrelated
Q:
Rank the following claims of an organization filing Chapter 7 bankruptcy from 1 to 4 based on the following classifications. Each classification may be used more than once.1. Secured Claims2. Unsecured Priority Claims3. Unsecured Nonpriority Claims4. Stockholders' Claims_____ A. Claims for wages that are less than $10,000 per individual, earned within 90 days of filing petition for bankruptcy._____ C. Claim by the accounting firm for the audit fee from the prior year-end audit completed two months prior to the bankruptcy filing._____ D. Claims for employee benefit plan contributions that are less than $10,000 per individual and relating to services rendered within 180 days of bankruptcy filing._____ E. Claims with a valid lien against assets of the entity._____ F. Claim by employee for commissions earned in 90 days prior to filing bankruptcy petition, for the portion in excess of $10,000._____ G. Administrative expenses of the estate, such as trustee fees._____ H. Claim by a supplier for goods delivered on account._____ I. Interest on unsecured claims._____ J. Taxes owed to a government unit.
Q:
A monopolist is producing at an output level at which MR = $6 and MC = $9. It could increase profitsA) by increasing both output and price.B) by reducing output and by increasing price.C) by reducing both output and price.D) by increasing output and by reducing price.
Q:
The correlation coefficient between two assets equals _________.
A. their covariance divided by the product of their variances
B. the product of their variances divided by their covariance
C. the sum of their expected returns divided by their covariance
D. their covariance divided by the product of their standard deviations
Q:
In reference to the long-run firm competitive equilibrium diagram, which of the following statements is INCORRECT?A) In the long run, the firm has no incentive to alter its scale of operations.B) Because profits must be zero in the long run, the firmʹs short-run average costs (SAC) must equal P at Qe, which occurs at minimum SAC.C) In the long run, the firm operates where price, marginal revenue, marginal cost, short -run minimum average cost, and long -run minimum average cost all are equal.D) In the long run, this firm must be part of a constant -cost industry, because its marginal revenue curve is perfectly elastic.
Q:
Which of the following statements is correct concerning companies emerging from reorganization under Chapter 11 when they do not qualify for fresh start accounting? The forgiveness of debt is reported asA) an operating gain.B) a non-operating gain.C) an extraordinary item.D) an increase in contributed capital.
Q:
Asset A has an expected return of 20% and a standard deviation of 25%. The risk-free rate is 10%. What is the reward-to-variability ratio?A. .40B. .50C. .75D. .80
Q:
If marginal revenue is less than marginal cost, the firm shouldA) raise price. B) raise marginal revenue.C) increase its rate of output. D) decrease its rate of output.
Q:
An entity which qualified for fresh-start accounting is not required to disclose which of the following items in their initial financial statements?A) Adjustments from historical cost of assets and liabilitiesB) Amount of debt of the prior entity forgivenC) Amount of ending retained earnings/deficit of the prior entityD) Changes to the management team from the prior entity
Q:
Which of the following statistics cannot be negative?
A. covariance
B. variance
C. E(r)
D. correlation coefficient
Q:
Use the above figure. At an output equal to ʺQʺ the total cost for the firm will be the areaA) OQDC. B) OQFA. C) OQBC. D) OQEB.
Q:
Fresh-start reporting results inA) a new reporting entity with no retained earnings/deficit balance.B) a new reporting entity with a retained earnings/deficit balance equal to the reorganization value.C) a continuation of the reorganized organization with no retained earnings/deficit balance.D) a continuation of the reorganized organization with a retained earnings/deficit balance equal to the reorganization value.
Q:
The ________ is equal to the square root of the systematic variance divided by the total variance.
A. covariance
B. correlation coefficient
C. standard deviation
D. reward-to-variability ratio
Q:
If the firm can vary all factors of production, it is operatingA) at a profit. B) at a zero economic profit.C) in the short run. D) in the long run.
Q:
In a Chapter 11 case, the debtor corporation filing the petition may continue in possession of the corporation's property, and is referred to as a(n)A) examiner.B) trustee.C) liquidator.D) debtor in possession.
Q:
An investor's degree of risk aversion will determine his or her ______.
A. optimal risky portfolio
B. risk-free rate
C. optimal mix of the risk-free asset and risky asset
D. capital allocation line
Q:
When accounting profits are negative, economic profitsA) must be positive. B) will be negative.C) will equal zero. D) could be positive, negative or zero.
Q:
A company emerging from bankruptcy will have a reorganization value thatA) approximates the book value of the entity's assets prior to bankruptcy.B) approximates the book value of the entity prior to bankruptcy.C) approximates the fair market value of the entity without considering liabilities.D) approximates the fair market value of the entity's liabilities.
Q:
Adding additional risky assets to the investment opportunity set will generally move the efficient frontier _____ and to the ______.
A. up; right
B. up; left
C. down; right
D. down; left
Q:
The quantity of good M is measured along the vertical axis, and the quantity of good N is measured along the horizontal axis. If the prices of both goods M and N declines by 50% each, then the budget lineA) shifts inward to the left by 50%. B) shifts outward to the right by 50%. C) shifts outward to the right by 100%. D) rotates clockwise by 180 degrees.
Q:
Which condition must be met for fresh-start reporting for an emerging company from Chapter 11?A) Holders of existing voting shares immediately before confirmation of the reorganization plan must receive more than fifty percent of the emerging entity.B) The loss of control by voting shareholders must be temporary.C) The reorganization value of the emerging entity's assets immediately before the date of the confirmation of the reorganization plan must be less than the total of all postpetition liabilities and allowed claims.D) The fresh-start entity must have a deficit.
Q:
Asset A has an expected return of 15% and a reward-to-variability ratio of .4. Asset B has an expected return of 20% and a reward-to-variability ratio of .3. A risk-averse investor would prefer a portfolio using the risk-free asset and ______.
A. asset A
B. asset B
C. no risky asset
D. The answer cannot be determined from the data given.
Q:
Using the above table, what is the total utility of the third piece of pizza?A) 75 utils B) 0 utils C) 25 utils D) -25 utils
Q:
What is an advantage of filing a Chapter 11 petition?A) The continuation of interest accrual on liabilitiesB) Restrictions imposed by the bankruptcy court on day-to-day transactionsC) It is less costly than filing Chapter 7.D) The opportunity to cancel unfavorable contracts
Q:
Based on the outcomes in the following table, choose which of the statements below is (are) correct?I. The covariance of security A and security B is zero.II. The correlation coefficient between securities A and C is negative.III. The correlation coefficient between securities B and C is positive.A. I onlyB. I and II onlyC. II and III onlyD. I, II, and III
Q:
Two items which have a negative cross price elasticity of demand are referred to asA) luxury goods. B) inferior goods. C) substitutes. D) complements.
Q:
Which of the following does not occur for a trustee in a Chapter 7 bankruptcy case?A) Gains and losses on the sale of assets are debited to the estate equity account.B) Unrecorded liabilities discovered by the trustee are debited to the estate equity account and credited to the liability account.C) Liquidation expenses are debited to the estate equity account.D) An income statement is prepared showing gains and losses on sale of assets.
Q:
Many current and retired Enron Corp. employees had their 401k retirement accounts wiped out when Enron collapsed because ________.
A. they had to pay huge fines for obstruction of justice
B. their 401k accounts were held outside the company
C. their 401k accounts were not well diversified
D. none of these options
Q:
The price elasticity of demand is theA) percentage change in quantity demanded divided by the percentage change in price. B) change in quantity demanded divided by the change in price.C) percentage change in price divided by the percentage change in quantity demanded. D) change in price divided by the change in quantity demanded.
Q:
In a Chapter 7 bankruptcy case, what is the first-to-last ranking order of priority for payment? (Use the following list of claim types.)I. stockholder claimsII. unsecured priority claimsIII. secured claimsIV. unsecured nonpriority claimsA) I, II, IV, and IIIB) III, II, IV, and IC) III, I, IV, and IID) II, IV, III, and I
Q:
The _______ decision should take precedence over the _____ decision.
A. asset allocation; stock selection
B. bond selection; mutual fund selection
C. stock selection; asset allocation
D. stock selection; mutual fund selection
Q:
Buffalo in the United States almost became extinct while cattle have never been close to extinction. The difference is due toA) the greater marginal value of a buffalo relative to a head of cattle, leading to greater ʺharvestingʺ of buffalo.B) the use of private property rights on cattle and common property rights on buffalo.C) the greater marginal value of a head of cattle relative to buffalo, leading to over -hunting of buffalo.D) the differences in size between the two animals, and the effect of size differences on the costs of hunting them.
Q:
Creditor committees are electedA) in all bankruptcy cases.B) in Chapter 7 cases.C) only in bankruptcy cases arising from involuntary petitions.D) in Chapter 11 cases.
Q:
Risk that can be eliminated through diversification is called ______ risk.
A. unique
B. firm-specific
C. diversifiable
D. all of these options
Q:
Rising health care spending is a problem confronting the federal government becauseA) it is the governmentʹs job to make sure everyone receives the health care they need.B) federal spending on health care has increased rapidly over the last thirty years.C) the federal-funded VA hospitals have been expanding faster than government revenues can provide for.D) the medical expenses of federal employees has been rising at a rate much faster than for non-federal workers.
Q:
A primary difference between voluntary and involuntary bankruptcy petitions is thatA) creditors file the petition in an involuntary filing.B) trustees are not used in an voluntary filing.C) voluntary petitions are not subject to review by the bankruptcy court.D) the debtor corporation files the petition in an involuntary filing.
Q:
The plot of a security's excess return relative to the market's excess return is called the _______.
A. efficient frontier
B.security characteristic line
C. capital allocation line
D. capital market line
Q:
The graph which represents the distribution of income in an economy is called theA) Laffer curve. B) Lorenz curve.C) distribution curve. D) aggregate demand curve.
Q:
A petition commencing a case against a corporate debtorA) can be filed only under Chapter 7 of the bankruptcy act.B) can be filed only under Chapter 11 of the bankruptcy act.C) can be filed under either Chapter 7 or Chapter 11 of the bankruptcy act.D) will be determined by the trustee whether it shall be Chapter 7 or Chapter 11 of the bankruptcy act.
Q:
Lear Corp. has an expected excessreturn of 8% next year. Assume Lear's beta is 1.43. If the economy booms and the stock market beats expectations by 5%, what was Lear's actual excess return?
A. 7.15%
B. 13%
C. 15.15%
D. 18.59 %
Q:
The employees of Ajax cookies are on strike. Jane has decided not to shop at any store that is still selling Ajax cookies. This is known asA) a closed shop. B) a union shop.C) a sympathy strike. D) a secondary boycott.
Q:
A single creditorA) can never file a petition for bankruptcy.B) with a $12,300 or more secured claim may file a petition for bankruptcy.C) with a $12,300 or more unsecured claim may file a petition for bankruptcy, if there are fewer than 12 unsecured creditors.D) with a $12,300 or more unsecured claim may file a petition for bankruptcy if there are more than 12 unsecured creditors.
Q:
The portfolio with the lowest standard deviation for any risk premium is called the_______.
A. CAL portfolio
B. efficient frontier portfolio
C. global minimum variance portfolio
D. optimal risky portfolio
Q:
In a liquidation under Chapter 7, the trusteeA) may not be appointed, but may only be elected.B) may not be elected, but may only be appointed.C) is responsible for converting assets to cash and distributing payments to claimants.D) is responsible for appointing a creditors' committee.
Q:
Which of the following statements is true?A) A firm cannot increase quantity demand for labor when the wage rate falls without causing the product price to decline.B) A movement along the market demand curve for labor does not require a change in the product price.C) A firm can increase quantity demanded for labor when the wage rate falls without affecting the product price but the industry cannot hire more workers without causing the product price to fall.D) Both a firm and the industry can move down their demand curves for labor without causing product price to change.
Q:
The efficient frontier represents a set of portfolios that
A. maximize expected return for a given level of risk.
B. minimize expected return for a given level of risk.
C. maximize risk for a given level of return.
D. None of the options.
Q:
If antitrust legislation is successful, then
A) firms will produce the quantity at which marginal cost equals marginal revenue.
B) most firms will be earning a positive economic profit.
C) the price of each item will equal its marginal social opportunity costs.
D) natural monopoly will be eliminated.
Q:
Chapter 7 bankruptcy cases differ from Chapter 11 bankruptcy cases because Chapter 7 bankruptcyA) is involuntary.B) requires a reorganization plan that is approved by the court.C) requires the debtor corporation to file a list of creditors, schedule of assets and liabilities, and work with a trustee.D) leads to full liquidation of the bankrupt company.
Q:
In the article "Danger: High Levels of Company Stock," what is the maximum amount of your employer's stock that the author recommends you hold in your retirement account?
A. 5%
B. 10%
C. 50%
D. 90%
Q:
The market structure of perfect competition exists whenA) there are a small number of interdependent firms that constitute the entire market. B) there is a single producer of a product.C) there are many producers of differentiated products. D) there are many producers of a homogeneous product.
Q:
The duties of a debtor in possession in a Chapter 11 bankruptcy case do not includeA) filing a list of creditors and schedules of assets and liabilities with the bankruptcy court.B) operating the business during the reorganization period.C) filing a reorganization plan.D) issuing an order of relief.
Q:
The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index.Which stock is riskier to a nondiversified investor who puts all his money in only one of these stocks?A. Stock A is riskier.B. Stock B is riskier.C. Both stocks are equally risky.D. The answer cannot be determined from the information given.
Q:
A bankruptcy petition filed by a firm's creditors isA) a Chapter 2 petition.B) a petition for liquidation.C) an involuntary petition.D) a voluntary petition.
Q:
Over the past several decades, U.S. firms have faced more competition from overseas firms. Does this have any impact on the market power of U.S. oligopoly firms?A) No, because domestic firms in oligopoly markets are always so dominant that overseas producers have little or no impact on those markets.B) No, because the United States government has effectively blocked all imports that might compete with domestic firms in oligopoly industries.C) Yes, competition from overseas firms can substantially limit domestic firmsʹ market power. D) There is no way to know.
Q:
The demand curve faced by a monopolistically competitive firms isA) horizontal. B) vertical.C) downward sloping. D) unitary elastic.
Q:
When a corporation's total liabilities are greater than the fair value of total assets, the firm isA) a distressed corporation.B) a bankrupt corporation.C) insolvent in the equity sense.D) insolvent in the bankruptcy sense.
Q:
A project has a 50% chance of doubling your investment in 1 year and a 50% chance of losing half your money. What is the expected return on this investment project?
A. 0%
B. 25%
C. 50%
D. 75%
Q:
Which of the following must approve a Chapter 11 plan?A) The organization's management and the assigned trusteeB) The assigned trustee and creditorsC) The assigned trustee and entity's stockholdersD) The bankruptcy court and the creditors
Q:
A monopoly sells 5 units of output at $20. If the MR of the 6th unit is $14, then the price of the 6th unit isA) also $14. B) $17. C) greater than $20. D) $19.
Q:
A project has a 60% chance of doubling your investment in 1 year and a 40% chance of losing half your money. What is the standard deviation of this investment?
A. 25%
B. 50%
C. 62%
D. 73%
Q:
Refer to the above figure. A perfectly competitive firm that is in long -run equilibrium will be operatingA) with positive economic profits. B) at a quantity greater than point E. C) at a quantity less than point E. D) at point E.
Q:
When the bankruptcy court grants an order for relief under Chapter 7,A) creditors may not seek payment for their claims directly from the debtor corporation.B) the reorganization plan was accepted by creditors having at least one-half of the total number of claims and the claims represent at least two-thirds of the total amount owed.C) the bankruptcy court confirms that the reorganization plan is fair and equitable to creditors.D) the court discharges the debtor except for those claims provided for in the reorganization plan.
Q:
The expected return of a portfolio is 8.9%, and the risk-free rate is 3.5%. If the portfolio standard deviation is 12%, what is the reward-to-variability ratio of the portfolio?A. 0B. .45C. .74D. 1.35
Q:
The rate of production at which marginal revenue equals marginal cost isA) a point of negative profits for the firm.B) what determines the equilibrium price in the market. C) the firmʹs shutdown point.D) the point where profits are maximized.
Q:
The year-end balance sheet and residual profit and loss sharing percentages for the Gary, Harold, and Ivan partnership on December 31, 2011, are as follows:
Cash $ 60,000 Accounts payable $ 150,000
Loan to Gary 50,000 Loan from Harold 50,000
Other assets 360,000 Gary, capital (25%) 70,000
Harold, capital (25%) 80,000
Ivan, capital (50%) 120,000
Total assets $ 470,000 Total liab./equity $ 470,000
The partners agree to liquidate the business and distribute cash when it becomes available. A cash distribution plan is developed with vulnerability rankings for the Gary, Harold and Ivan partnership. After outside creditors are paid, the cash available will initially go to
A) Gary in the amount of $20,000.
B) Harold in the amount of $50,000.
C) Harold in the amount of $70,000.
D) Ivan in the amount of $40,000.
Q:
What is the standard deviation of a portfolio of two stocks given the following data: Stock A has a standard deviation of 30%. Stock B has a standard deviation of 18%. The portfolio contains 60% of stock A, and the correlation coefficient between the two stocks is -1.A. 0%B. 10.8%C. 18%D. 24%
Q:
Assume that in the short run a firm is producing 100 units of output, has average total costs of $100, and average fixed costs of $20. The firmʹs total variable cost at this output level isA) $120. B) $80. C) $8,000. D) $12,000.
Q:
If all partners are included in the first installment of an installment liquidation, then in future installments
A) cash will be distributed according to the residual profit and loss sharing ratios.
B) cash should not be distributed until all non-cash assets are converted into cash.
C) vulnerability rankings for each partner should be prepared.
D) a cash distribution plan must be prepared so that partners will know when they will be included in cash distributions.
Q:
In partnership liquidations, what are safe payments?
A) The amounts of distributions that can be made to the partners, after all creditors have been paid in full.
B) The amounts of distributions that can be made to the partners with assurance that such amounts will not have to be returned to the partnership.
C) The amounts of distributions that can be made to the partners, after all non-cash assets have been adjusted to fair market value.
D) The amounts of distributions that can be made to the partners during the liquidation based on the partner's contributed capital return.