Q&A Hero

Q: According to the capital asset pricing model, a fairly priced security will plot _________. A. above the security market line B. along the security market line C. below the security market line D. at no relation to the security market line

Q: Which pronouncements have the highest level of authority for state and local governments?A) Financial Accounting Standards Board StatementsB) GASB StatementsC) Consensus Positions of GASB Emerging Issues Task ForceD) GASB Technical Bulletins

Q: In both a monopolistically competitive market and a pure monopoly market, firmsA) can make long-run profits. B) set price greater than marginal cost. C) are protected by entry barriers. D) advertise extensively.

Q: Investors require a risk premium as compensation for bearing ______________. A. unsystematic risk B. alpha risk C. residual risk D. systematic risk

Q: Ohio Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.05 on the dollar. Lender Bank holds a $100,000 mortgage note receivable from Ohio that is secured by equipment with a $120,000 book value and a $90,000 fair value, and a second mortgage on the same equipment amounting to $50,000. Required:How much of the mortgage receivable will be recovered by Lender?

Q: A monopolist is producing at an output level at which MR = $9 and MC = $8. 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: Arbitrage is based on the idea that _________. A. assets with identical risks must have the same expected rate of return B. securities with similar risk should sell at different prices C. the expected returns from equally risky assets are different D. markets are perfectly efficient

Q: Hilfmir Corporation filed for Chapter 11 bankruptcy on January 1, 2011. A summary of their financial status is shown below on June 30, 2011, at the date of the approved reorganization, along with the fair value of their assets.Per Books Fair ValueCash $ 134,000 $ 134,000A/R - net 20,000 20,000Inventory 32,000 40,000Plant Assets - net 114,000 106,000Patent 80,000 0$ 380,000A/P $ 60,000Wages Payable 20,000Prepetition liab. 250,000Common Stock 140,000Deficit (90,000)$ 380,000Under the reorganization plan, the reorganization value has been set at $320,000. Prepetition liabilities include $30,000 of trade Accounts Payable and a $220,000 Note Payable to Bigg Bank. The reorganization plan calls for the Prepetition accounts payable to be paid at 80% at a later date, and the Note Payable for $220,000 to be replaced by a Note Payable for $76,000 and the issuance of common stock of the new entity for $100,000. The former stockholders will receive $40,000 in common stock of the new entity, Hilfmir, in exchange for their shares.Required:Show the calculations to determine if Hilfmir is eligible for fresh-start accounting, and prepare a fresh-start balance sheet for the new entity, Hilfmir, as of July 1, 2011.

Q: In a long-run equilibrium, a perfectly competitive firmʹs average total cost isA) minimized. B) maximized.C) zero. D) equal to average fixed cost.

Q: According to the capital asset pricing model, a security with a _________. A. negative alpha is considered a good buy B. positive alpha is considered overpriced C. positive alpha is considered underpriced D. zero alpha is considered a good buy

Q: Pasten Corporation is liquidating under Chapter 7 of the Bankruptcy Act. The accounts of Pasten at the time of filing are summarized as follows:EstimatedRealizableBook Value ValueCash $ 65,000 $ 65,000Accounts receivable-net 15,000 13,000Inventory 280,000 190,000Land 20,000 28,000Building 210,000 220,000Goodwill 595,000 0$ 1,185,000Accounts payable $ 800,000Wages and salaries 21,000Taxes payable 12,000Accrued mortgage interest payable 16,000Mortgage payable 304,000Capital stock 100,000Deficit (68,000)$ 1,185,000The 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 bankruptcy petition and do not exceed $10,000 per employee. Liquidation expenses are expected to be $35,000.Required:1. Prepare a schedule showing the priority rankings of the creditors and the expected payouts.2. Yuomi Corporation was a supplier to Pasten Corporation and at the time of Pasten's bankruptcy filing, Yuomi's account receivable from Pasten was $500,000. On the basis of the estimates, how much can Yuomi expect to receive?

Q: If marginal revenue is greater 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: If all investors become more risk averse, the SML will _______________ and stock prices will _______________. A. shift upward; rise B. shift downward; fall C. have the same intercept with a steeper slope; fall D. have the same intercept with a flatter slope; rise

Q: Oceana Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.35 on the dollar. Loans-R-Us holds a $1,000,000 mortgage note receivable from Oceana that is secured by building and equipment with a $1,200,000 book value and a $900,000 fair value. Required:How much of the mortgage receivable will Loans-R-Us recover?

Q: Use the above figure. At an output equal to ʺQʺ the average fixed cost for the firm will be the line segmentA) DE. B) AB. C) BE. D) CD.

Q: The capital asset pricing model was developed by _________. A. Kenneth French B. Stephen Ross C. William Sharpe D. Eugene Fama

Q: Rank the following claims 1 through 5, with 1 being the first priority claim, under Chapter 7 of the bankruptcy code._____ A. Trustee fees for administration of the estate._____ B. Accounts payable for goods delivered prior to filing an involuntary petition for bankruptcy_____ C. Customer deposits for services never rendered._____ D. First mortgage on the company's real estate._____ E. Income taxes owed for the prior year.

Q: The difference between the short run and the long run isA) economic profits are negative in the short run and positive in the long run.B) economic and accounting profits are not equal in the short run but are equal in the long run.C) that in the short run at least one factor of production cannot be varied while in the long run all factors of production can be varied.D) the short run is a period less than a year while the long run is a period greater than a year.

Q: In a well-diversified portfolio, __________ risk is negligible. A. nondiversifiable B. market C. systematic D. unsystematic

Q: Aqua Corporation filed a petition under Chapter 7 of the bankruptcy act in January, 2011. On February 28, the following information was presented regarding Aqua's financial status.Book Values Fair ValuesCash $ 50,000 $ 50,000A/R - net 100,000 90,000Inventories 80,000 60,000Fixed Assets - net 200,000 230,000Priority Claims 80,000A/P 100,000N/P 110,000Mortgage Payable 200,000The Note Payable is secured by Accounts Receivable, and the Mortgage Payable is secured by the Fixed Assets.Required:Calculate the amount expected to be available for unsecured claims and the percentage recovery that the unsecured class should expect to receive.

Q: When economic profits are zero, accounting profitsA) must be positive. B) will be negative.C) will equal zero. D) could be positive, negative or zero.

Q: The market portfolio has a beta of _________. A. -1 B. 0 C. .5 D. 1

Q: Gargantuan Bank has loaned money in two separate loans to Little Company, which is now in Chapter 7 bankruptcy. Little Company has the following assets and liabilities, stated at fair value in liquidation.Assets pledged with secured creditors $ 190,000Assets pledged with partially secured creditors 70,000Other assets 30,000Secured debt to Gargantuan 130,000Partially secured debt to Gargantuan 110,000Unsecured liabilities with priority 50,000Unsecured liabilities 160,000Required:Determine the amount of cash that Gargantuan will collect from these two pieces of debt.

Q: The budget lineA) shifts to the left as income increases. B) has a positive slope.C) is a vertical line.D) shows the combination of goods that can be purchased at fixed prices and with a given income.

Q: If enough investors decide to purchase stocks, they are likely to drive up stock prices, thereby causing _____________ and ___________. A. expected returns to fall; risk premiums to fall B. expected returns to rise; risk premiums to fall C. expected returns to rise; risk premiums to rise D. expected returns to fall; risk premiums to rise

Q: Faled Company has the following assets and liabilities, stated at fair value in liquidation.Assets pledged with secured creditors $ 100,000Assets pledged with partially secured creditors 75,000Other assets 160,000Secured liabilities 50,000Partially secured liabilities 110,000Unsecured liabilities with priority 80,000Unsecured liabilities 215,000Required:Determine the amount of cash that will be available to pay unsecured creditors, and the percentage of unsecured liabilities that will be paid.

Q: Using the above table, what is the total utility of the first piece of pizza?A) 0 utils B) 50 utils C) 75 utils D) 100 utils

Q: Empirical results estimated from historical data indicate that betas _________. A. are always close to zero B. are constant over time C. of all securities are always between zero and 1 D. seem to regress toward 1 over time

Q: Dip Corporation is in a Chapter 11 bankruptcy reorganization. For each of the following transactions relating to the reorganization, show the journal entry that would be required by Dip. Assume that all unsecured liabilities were not reclassified to Prepetition Claims Subject to Compromise.Dip has $200,000 in bonds payable which mature at the end of the current year. The bondholders agree to accept $100,000 of new common stock and $75,000 cash, payable immediately.2. Accrued interest on the bonds recorded at $20,000 will not be paid.3. Recorded patents in the amount of $15,000 are determined to be worthless and are written off.4. Equipment recorded net at $24,000 is appraised at $30,000.5. A building recorded net at $78,000 is appraised for $87,000.6. Creditors owed $120,000 recorded in accounts payable are paid $96,000 in full settlement.7. Property taxes and payroll taxes withheld are paid in full at $12,000.8. A capital lease recorded at $48,000 is re-negotiated, and the resulting operating lease will require monthly lease payments of $500.9. An unsecured bank note amounting to $180,000 will be exchanged for $120,000 note secured by the building and equipment.10. Current stockholders will exchange their stock which has a current book value of $300,000 for $100,000 common stock of the new entity.

Q: If the value of the cross elasticity of demand is negative, the two goods areA) complementary goods. B) substitute goods. C) normal goods. D) inferior goods.

Q: In the context of the capital asset pricing model, the systematic measure of risk is captured by _________. A. unique risk B. beta C. the standard deviation of returns D. the variance of returns

Q: Trustin Corporation is in a Chapter 7 bankruptcy liquidation. For each of the following transactions, show the journal entry that would be required by the trustee of the estate.1. An electric bill is received for $1,000 which had not yet been recorded by Trustin.2. Inventory recorded net at $18,000 is sold for $16,000 cash.3. Recorded patents in the amount of $7,000 are determined to be worthless and are written off.4. Equipment recorded net at $24,000 is sold for $20,000 cash.5. A building recorded net at $78,000 is sold for $87,000 cash.6. Trustee fees of $2,500 are accrued.7. The fully secured mortgage is paid in the amount of $70,000.8. Wages payable that were recorded in the amount of $9,000 are paid.9. An equipment lease, which was recorded as prepaid equipment lease, is cancelled and a $1,500 refund is received.10. Accounts receivable amounting to $12,000 are collected, and an additional $3,000 is determined to be uncollectible.

Q: The result of the calculation of the price elasticity of demand isA) always positive.B) always negative.C) sometimes positive, sometimes negative.D) always greater than one.

Q: The arbitrage pricing theory was developed by _________. A. Henry Markowitz B. Stephen Ross C. William Sharpe D. Eugene Fama

Q: DeFunk Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.18 on the dollar. Magma Corporation holds a $200,000 mortgage receivable from DeFunk that is secured by the land and buildings with a book value of $180,000 and a fair value of $190,000. Magma also holds an $80,000 unsecured note receivable from Defunk. Mortgage interest owed, which is secured with the mortgage note, is $4,000. Note interest owed, which is unsecured, is $2,000.Required:How much of the amounts owed will Magma recover?

Q: Government intervention will not be necessary when voluntary contracting internalizes an externality. Which of the following is NOT a necessary condition for this to occur? A) Well-defined private property rights B) Low transaction costs C) Large numbers of individuals involved in the transactions D) Low contract enforcement costs

Q: Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.2 is 20%. What is the risk-free rate? A. 2% B. 6% C. 8% D. 12%

Q: Moddle Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.20 on the dollar. National Corporation holds a $500,000 mortgage note receivable from Moddle that is secured by equipment with a $550,000 book value and a $430,000 fair value.Required:How much of the mortgage receivable will National recover?

Q: Consider the CAPM. The risk-free rate is 5%, and the expected return on the market is 15%. What is the beta on a stock with an expected return of 17%? A. .5 B. .7 C. 1 D. 1.2

Q: An example of third-party financing of health care isA) patients paying for their visit to the doctor.B) patients not going to the doctor in order to save money.C) a patient going to another doctor for a second or a third opinion.D) Medicare.

Q: Lesher Corporation lost their primary contract and entered into voluntary Chapter 7 bankruptcy in the early part of 2012. By July 1, all assets were converted into cash, the secured creditors were paid, and $124,500 in cash was left to pay the remaining claims as follows:Accounts payable $ 50,000Claims incurred between the date of filing an involuntarybankruptcy petition and the date an interim trustee is appointed 8,000Payroll taxes withheld 14,000Wages payable (all under $10,000 per employee; earned within90 days of filing bankruptcy petition) 56,000Unsecured note payable 37,500Accrued interest on the note payable 2,000Administrative expenses of the trustee 22,000Total $ 189,500Required:Classify the claims by their Chapter 7 priority ranking, and analyze which amounts will be paid and which amounts will be written off.

Q: According to the text, todayʹs Lorenz curve isA) a straight line.B) a vertical line.C) more bowed than in 1929. D) less bowed than in 1929.

Q: Kline Corporation incurred major losses in 2011 and entered into voluntary Chapter 7 bankruptcy in the early part of 2012. By July 1, all assets were converted into cash, the secured creditors were paid, and $122,700 in cash was left to pay the remaining claims as follows:Accounts payable $ 37,000Claims incurred between the date of filing an involuntary 5,000petition and the date an interim trustee is appointedProperty taxes payable 8,000Wages payable (all under $10,000 per employee; 74,000earned within 90 days of filing bankruptcy petition)Unsecured note payable 19,000Accrued interest on the note payable 2,000Administrative expenses of the trustee 12,180Total $ 157,180Required:Classify the claims by their Chapter 7 priority ranking, and analyze which amounts will be paid and which amounts will be written off.

Q: In a simple CAPM world which of the following statements is (are) correct? I. All investors will choose to hold the market portfolio, which includes all risky assets in the world. II. Investors' complete portfolio will vary depending on their risk aversion. III. The return per unit of risk will be identical for all individual assets. IV. The market portfolio will be on the efficient frontier, and it will be the optimal risky portfolio. A. I, II, and III only B. II, III, and IV only C. I, III, and IV only D. I, II, III, and IV

Q: The weldersʹ union at Ajax is on strike. The maintenance union has decided to walk out in support of the weldersʹ union. This is known asA) a closed shop. B) a union shop.C) a sympathy strike. D) a secondary boycott.

Q: Gonne Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.35 on the dollar. Odemay Corporation holds a $100,000 mortgage note receivable from Gonne that is secured by equipment with a $120,000 book value and a $75,000 fair value.Required:How much of the mortgage receivable will be recovered by Odemay?

Q: When all investors analyze securities in the same way and share the same economic view of the world, we say they have ____________________. A. heterogeneous expectations B. equal risk aversion C. asymmetric information D. homogeneous expectations

Q: Which of the following will cause a shift in the demand curve of labor?A) An increase or decrease in the productivity of labor.B) An increase or decrease in the demand for the product labor produces. C) A decline in the price of a complementary input .D) all of the above

Q: Finale 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 $180,000 cash and has prepared the following list of approved claims:Customer deposits ($1,000 from each of three customersthat ordered products that were never delivered) $ 3,000Property taxes payable 6,000Accounts payable, unsecured 45,000Trustee's fees and other costs of liquidation 24,000Mortgage payable, secured by property that was sold for $120,000 90,000Note payable to bank, secured by all accounts receivable of which $45,000were collected and $15,000 were written off as uncollectible 60,000Required:How much will the bank receive on the note payable?

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: 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: 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: 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: An adjusted beta will be ______ than the unadjusted beta. A. lower B. higher C. closer to 1 D. closer to 0

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: 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: 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: 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: 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: 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: 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: 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: 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: 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: Which of the following statistics cannot be negative? A. covariance B. variance C. E(r) D. correlation coefficient

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: 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: 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: 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: 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: 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: 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.