Accounting
Anthropology
Archaeology
Art History
Banking
Biology & Life Science
Business
Business Communication
Business Development
Business Ethics
Business Law
Chemistry
Communication
Computer Science
Counseling
Criminal Law
Curriculum & Instruction
Design
Earth Science
Economic
Education
Engineering
Finance
History & Theory
Humanities
Human Resource
International Business
Investments & Securities
Journalism
Law
Management
Marketing
Medicine
Medicine & Health Science
Nursing
Philosophy
Physic
Psychology
Real Estate
Science
Social Science
Sociology
Special Education
Speech
Visual Arts
Finance
Q:
Which of the following statements is most CORRECT?
a. Futures contracts generally trade on an organized exchange and are marked to market daily.
b. Goods are never delivered under forward contracts, but are almost always delivered under futures contracts.
c. There are futures contracts for currencies but no forward contracts for currencies.
d. Futures contracts don't have any margin requirements but forward contracts do.
e. One advantage of forward contracts is that they are default free.
Q:
The block code is the coding scheme most appropriate for a chart of accounts.
Q:
Operational inefficiencies occur because accounts common to many concurrent transactions need to be updated in real time.
Q:
Speculative risks are symmetrical in the sense that they offer the chance of a gain as well as a loss, while pure risks are those that can only lead to losses.
a. True
b. False
Q:
Real-time processing in systems that handle large volumes of transactions each day can create operational inefficiencies.
Q:
Suppose the December CBOT Treasury bond futures contract has a quoted price of 80'07. If annual interest rates go up by 1.00 percentage point, what is the gain or loss on the futures contract? (Assume a $1,000 par value, and round to the nearest whole dollar.)a. −$78.00b. −$82.00c. −$86.00d. −$90.00e. −$95.00
Q:
Suppose the December CBOT Treasury bond futures contract has a quoted price of 80'07. What is the implied annual interest rate inherent in the futures contract?a. 6.86%b. 7.22%c. 7.60%d. 8.00%e. 8.40%
Q:
An inverted triangle with the letter "N" represents a file in "name" order.
Q:
Suppose the September CBOT Treasury bond futures contract has a quoted price of 89'09. What is the implied annual interest rate inherent in this futures contract?a. 6.32%b. 6.65%c. 7.00%d. 7.35%e. 7.72%
Q:
Real time processing is used for routine transactions in large numbers.
Q:
A control account is a general ledger account which is supported by a subsidiary ledger.
Q:
Company A can issue floating-rate debt at LIBOR + 1% and can issue fixed rate debt at 9%. Company B can issue floating-rate debt at LIBOR + 1.5% and can issue fixed-rate debt at 9.4%. Suppose A issues floating-rate debt and B issues fixed-rate debt, after which they engage in the following swap: A will make a fixed 7.95% payment to B, and B will make a floating-rate payment equal to LIBOR to A. What are the resulting net payments of A and B?
a. A pays a fixed rate of 9%, B pays LIBOR + 1.5%.
b. A pays a fixed rate of 8.95%, B pays LIBOR + 1.45%.
c. A pays LIBOR plus 1%, B pays a fixed rate of 9.4%.
d. A pays a fixed rate of 7.95%, B pays LIBOR.
e. None of the above answers is correct.
Q:
A commercial bank recognizes that its net income suffers whenever interest rates increase. Which of the following strategies would protect the bank against rising interest rates?
a. Entering into an interest rate swap where the bank receives a fixed payment stream, and in return agrees to make payments that float with market interest rates.
b. Purchase principal only (PO) strips that decline in value whenever interest rates rise.
c. Enter into a short hedge where the bank agrees to sell interest rate futures.
d. Sell some of the bank's floating-rate loans and use the proceeds to make fixed-rate loans.
e. Buying inverse floaters.
Q:
Auditors may prepare program flowcharts to verify the correctness of program logic.
Q:
A swap is a method used to reduce financial risk. Which of the following statements about swaps, if any, is NOT CORRECT?
a. The earliest swaps were currency swaps, in which companies traded debt denominated in different currencies, say dollars and pounds.
b. Swaps are very often arranged by a financial intermediary, who may or may not take the position of one of the counterparties.
c. A problem with swaps is that no standardized contracts exist, which has prevented the development of a secondary market.
d. A company can swap fixed interest payments for floating interest payments.
e. A swap involves the exchange of cash payment obligations.
Q:
The box symbol represents a temporary file.
Q:
The two basic types of hedges involving the futures market are long hedges and short hedges, where the words "long" and "short" refer to the maturity of the hedging instrument. For example, a long hedge might use Treasury bonds, while a short hedge might use 3-month T-bills.
a. True
b. False
Q:
Batch processing systems can store data on direct access storage devices.
Q:
In theory, reducing the volatility of its cash flows will always increase a company's value.
a. True
b. False
Q:
Program flowcharts are used to describe the logic represented in system flowcharts.
Q:
Interest rate swaps allow a firm to exchange fixed for floating-rate payments, but a swap cannot reduce actual net interest expenses.
a. True
b. False
Q:
System flowcharts represent the input sources, programs, and output products of a computer system.
Q:
Which of the following statements about interest rate and reinvestment rate risk is CORRECT?
a. Interest rate price risk exists because fixed-rate debt securities lose value when interest rates rise, while reinvestment rate risk is the risk of earning less than expected when interest payments or debt principal are reinvested.
b. Interest rate price risk can be eliminated by holding zero coupon bonds.
c. Reinvestment rate risk can be eliminated by holding variable (or floating) rate bonds.
d. Interest rate risk can never be reduced.
e. Variable (or floating) rate securities have more interest rate (price) risk than fixed rate securities.
Q:
Data flow diagrams represent the physical system.
Q:
Which of the following are NOT ways risk management can be used to increase the value of a firm?
a. Risk management can help a firm maintain its optimal capital budget.
b. Risk management can reduce the expected costs of financial distress.
c. Risk management can help firms minimize taxes.
d. Risk management can allow managers to defer receipt of their bonuses and thus postpone tax payments.
e. Risk management can increase debt capacity.
Q:
Document flowcharts are used to represent systems at different levels of detail.
Q:
One objective of risk management can be to reduce the volatility of a firm's cash flows.
a. True
b. False
Q:
The general journal is used to record recurring transactions that are similar in nature.
Q:
The three main advantages of holding companies are (1) control with fractional ownership, (2) taxation benefits, and (3) isolation of operating risks.
a. True
b. False
Q:
The portion of the monthly bill from a credit card company is an example of a turn-around document.
Q:
The two principal advantages of holding companies are (1) the holding company can control a great deal of assets with limited equity and (2) the dividends received by the parent from the subsidiary are not taxed if the parent holds at least 50% of the subsidiary's stock.
a. True
b. False
Q:
Directing work-in-process through its various stages of manufacturing is part of the conversion cycle.
Q:
The process of acquiring raw materials is part of the conversion cycle.
Q:
A joint venture is one in which two, or sometimes more, independent companies agree to combine resources in order to achieve a specific objective, usually limited in scope.
a. True
b. False
Q:
Which of the following statements is most CORRECT?
a. Regulations in the United States prohibit acquiring firms from using common stock to purchase another firm.
b. Defensive mergers are designed to make a company less vulnerable to a takeover.
c. Hostile mergers always create value for the acquiring firm.
d. In a tender offer, the target firm's management always remain after the merger is completed.
e. A conglomerate merger is one where a firm combines with another firm in the same industry.
Q:
Processing more transactions at a lower unit cost makes batch processing more efficient than real-time systems.
Q:
Borrowing funds on terms that would require immediate repayment of all funds if the firm is acquired, selling off valuable assets, and granting huge "golden parachutes" that open if the firm is acquired are three procedures used to defend against hostile takeovers. These strategies are known as "poison pills."
a. True
b. False
Q:
Recurring costs include: hardware maintenance, software acquisition, software maintenance, insurance, supplies and personnel costs.
Q:
Although goodwill created in a merger may not be amortized for shareholder reporting purposes, it may be amortized for Federal tax purposes.
a. True
b. False
Q:
During the detailed feasibility study of the project, the systems professional who proposed the project should be involved in performing the study.
Q:
Any goodwill created in a merger must be amortized over its expected life, usually 40 years, for shareholder reporting purposes.
a. True
b. False
Q:
All of the steps in the Systems Development Life Cycle apply to software that is developed in-house and to commercial software.
Q:
When the nature of the project and the needs of the user permit, most organizations will seek a pre-coded commercial software package rather than develop a system in-house.
Q:
Currently (2012), mergers can be accounted for using either the purchase method or the pooling method.
a. True
b. False
Q:
Raymond Supply, a national hardware chain, is considering purchasing a smaller chain, Strauss & Glazer Parts (SGP). Raymond's analysts project that the merger will result in the following incremental free cash flows, tax shields, and horizon values:Year 1 2 3 4Free cash flow $1 $3 $3 $7Unlevered horizon value 75Tax shield 1 1 2 3Horizon value of tax shield 32Assume that all cash flows occur at the end of the year. SGP is currently financed with 30% debt at a rate of 10%. The acquisition would be made immediately, and if it is undertaken, SGP would retain its current $15 million of debt and issue enough new debt to continue at the 30% target level. The interest rate would remain the same. SGP's pre-merger beta is 2.0, and its post-merger tax rate would be 34%. The risk-free rate is 8% and the market risk premium is 4%. Using the compressed adjusted present value approach, what is the value of SGP to Raymond?a. $53.40 millionb. $61.96 millionc. $64.64 milliond. $76.96 millione. $79.64 million
Q:
Instead of implementing an application in a single big-bang release, modern systems are delivered in parts continuously and quickly
Q:
The rate used to discount projected merger cash flows should be the cost of capital of the new consolidated firm because it incorporates the actual capital structure of the new firm.
a. True
b. False
Q:
A tangible benefit can be measured and expressed in financial terms.
Q:
The owners of Arthouse Inc., a national artist supplies chain, are contemplating purchasing Craftworks Inc, a smaller chain. Arthouse's analysts project that the merger will result in incremental free flows and interest tax savings with a combined present value of $72.52 million, and they have determined that the appropriate discount rate for valuing Craftworks is 16%. Craftworks has 4 million shares outstanding and no debt. Craftworks' current price is $16.25. What is the maximum price per share that Arthouse should offer?
a. $16.25
b. $16.97
c. $17.42
d. $18.13
e. $19.00
Q:
When preparing a cost-benefit analysis, design costs incurred in the systems planning, systems analysis and conceptual design phases of the Systems Development Life Cycle are relevant costs.
Q:
The distribution of synergistic gains between the stockholders of two merged firms is almost always based strictly on their respective market values before the announcement of the merger.
a. True
b. False
Q:
One-time costs include operating and maintenance costs.
Q:
A two-tier merger offer is one where the acquiring company offers to purchase the target company in a two-part transaction. Cash is paid to some stockholders, bonds are issued to others, but the total values of each part of the transaction are equal.
a. True
b. False
Q:
When determining the operational feasibility of a new system, the expected ease of transition from the old system to the new system should be considered.
Q:
Juicers Inc. is thinking of acquiring Fast Fruit Company. Juicers expects Fast Fruit's NOPAT to be $9 million the first year, with no net new investment in operating capital and no interest expense. For the second year, Fast Fruit is expected to have NOPAT of $25 million and interest expense of $5 million. Also, in the second year only, Fast Fruit will need $10 million of net new investment in operating capital. Fast Fruit's marginal tax rate is 40%. After the second year, the free cash flows and the tax shields from Fast Fruit to Juicers will both grow at a constant rate of 4%. Juicers has determined that Fast Fruit's cost of equity is 17.5%, and Fast Fruit currently has no debt outstanding. Assume that all cash flows occur at the end of the year, Juicers must pay $45 million to acquire Fast Fruit. What it the NPV of the proposed acquisition? Note that you must first calculate the value to Juicers of Fast Fruit's equity.
a. $45.0 million
b. $68.2 million
c. $86.5 million
d. $113.2 million
e. $133.0 million
Q:
In the conceptual design phase of the Systems Development Life Cycle (SDLC), task force members are focused on selecting the new system design.
Q:
Holland Auto Parts is considering a merger with Workman Car Parts. Workman's market-determined beta is 0.9, and the firm currently is financed with 20% debt, at an interest rate of 8%, and its tax rate is 25%. If Holland acquires Workman, it will increase the debt to 60%, at an interest rate of 9%, and the tax rate will increase to 35%. The risk-free rate is 6% and the market risk premium is 4%. What will Workman's required rate of return on equity be after it is acquired?
a. 7.4%
b. 8.9%
c. 9.3%
d. 9.6%
e. 9.7%
Q:
An accountant's responsibility in the SDLC is to ensure that the system applies proper accounting conventions and rules and possesses adequate control.
Q:
The Systems Development Life Cycle (SDLC) concept applies to specific applications and not to strategic systems planning.
Q:
Which of the following statements is most CORRECT?
a. Financial theory says that the choice of how to pay for a merger is really irrelevant because, although it may affect the firm's capital structure, it will not affect its overall required rate of return.
b. The basic rationale for any financial merger is synergy and, thus, the estimation of pro forma cash flows is the single most important part of the analysis.
c. In most mergers, the benefits of synergy and the premium the acquirer pays over the market price are summed and then divided equally between the shareholders of the acquiring and target firms.
d. The primary rationale for most operating mergers is synergy.
e. The acquiring firm's required rate of return in most horizontal mergers will not be affected, because the 2 firms will have similar betas.
Q:
The objective of systems planning is to link systems projects to the strategic objectives of the firm.
Q:
If the capital structure is stable, and free cash flows are expected to be growing at a constant rate at the horizon date, then the horizon value is calculated by discounting the free cash flows plus the expected future tax shields at the weighted average cost of capital.
a. True
b. False
Q:
Coca-Cola's acquisition of Columbia Pictures and its announcement that it would operate its new subsidiary separately could be described as primarily a financial merger.
a. True
b. False
Q:
Explain how application version numbers can be used as an audit to0l for assessing program change controls.
Q:
Classify each of the following as either a one-time or recurring costs:
training personnel
initial programming and testing
system design-one
hardware costs
software maintenance costs
site preparation
rent for facilities
data conversion from old system to new system
insurance costs
installation of original equipment
hardware upgrades
Q:
In a financial merger, the relevant post-merger cash flows are simply the sum of the expected cash flows of the two companies, measured as if they were operated independently.
a. True
b. False
Q:
What is the purpose of the auditor's review of SDLC documentation?
Q:
Discounted cash flow methods are not appropriate for evaluating mergers because the cash flows are uncertain and the discount rate can only be determined after the merger is consummated.
a. True
b. False
Q:
Only if a target firm's value is greater to the acquiring firm than its market value as a separate entity will a merger be financially justified.
a. True
b. False
Q:
Discuss the advantages and disadvantages of the three methods of converting to a new system: cold turkey cutover, phased cutover, and parallel operation cutover.
Q:
Since the primary rationale for any operating merger is synergy, in planning such mergers, the development of accurate pro forma cash flows is the single most important action.
a. True
b. False
Q:
Explain the role of accountants in the conceptual design stage.
Q:
Which of the following statements is most CORRECT?
a. A defensive merger is one where the firm's managers decide to merge with another firm to avoid or lessen the possibility of being acquired through a hostile takeover.
b. Acquiring firms send a signal that their stock is undervalued if they choose to use stock to pay for the acquisition.
c. Cash payments are used in takeovers but never in mergers.
d. Managers often are fired in takeovers, but never in mergers.
e. If a company that produces military equipment merges with a company that manages a chain of motels, this is an example of a horizontal merger.
Q:
Define the feasibility measures that should be considered during project analysis and give an example of each.
Q:
Firms use defensive tactics to fight off undesired mergers. These tactics do not include
a. getting a white squire to purchase stock in the firm.
b. getting white knights to bid for the firm.
c. repurchasing their own stock.
d. changing the bylaws to eliminate supermajority voting requirements.
e. raising antitrust issues.
Q:
Discuss the three groups that participate in systems development.
Q:
Since a manager's central goal is to maximize the firm's stock price, any merger offer that provides stockholders with significant gains over the current stock price will be approved by the current management team.
a. True
b. False
Q:
Outline the five controllable activities that relate to new systems development
Q:
A company seeking to fight off a hostile takeover might employ the services of an investment banking firm to develop a defensive strategy.
a. True
b. False
Q:
Why is cost-benefit analysis more difficult for information systems than for many other types of investments organizations make?