Bus & Finance more Q's Flashcards
Which of the following factors does not lead to deflation?
Demand for money goes up.
The supply of other goods goes up.
Supply of money goes up
Demand for other goods goes down.
Supply of money goes up
If supply of money increases people are able to pay higher prices for the same goods and this leads to inflation.
A convertible bond is characterized by which of the following?
It can be converted into stock at the option of the holder.
It can be converted into cash at the option of the holder.
It can be converted into future delivery of a commodity at a specified price and time.
It can be converted into a currency future.
It can be converted into stock at the option of the holder.
A convertible bond can be converted into stock at the option of the holder. They are debentures, that is, unsecured debt instruments. Convertible bonds are one means to tap funds in the capital markets.
An extraordinary item is a gain or loss included in a company’s financial statements, which is infrequent and unusual in nature. It must have all but which of the following characteristics to be considered an extraordinary item?
unusual in nature
infrequent in occurrence
repetitive in nature
significant in amount
repetitive in nature
An extraordinary item can be a gain or a loss, but it must have all of the characteristics in the choices except this one. An extraordinary item is usually explained further in the “notes to the financial statements.”
The balance of payments is a record of all monetary transactions between a country and the rest of the world during a period of time. In terms of the balance of payments, what is the term for the part of the balance of payments that enumerates changes in a country’s international reserves?
capital account
current account
official reserve account
all of the above
official reserve account
The official reserve account is the part of the balance of payments that enumerates changes in a country’s international reserves. If a country imports more than it exports or makes more foreign investments, its foreign reserves will decline. If a country exports more than it imports and experiences foreign investments, its holding of foreign reserves will rise.
A debt instrument with 5 – 10 years to maturity is considered which of the following?
intermediate-term
long-term
short-term
balloon payment loan
intermediate-term
An intermediate-term loan is a debt instrument with 5 – 10 years to maturity. It appears as a long-term debt on the balance sheet since it matures in over one year but it matures quicker than long-term debt.
What is the difference between the current assets and current liabilities of a company called?
The two are always equal
Debt
Working Capital
Management Error
Working Capital
Working capital is the difference between current assets and current liabilities. The current assets and liabilities can vary.
If a student is sent to a local supermarket to conduct a survey about the supermarket, what type of data is she expected to return with?
Biased
Primary
Unbiased
Unique
Primary
A survey is used to collect primary data about a market so that it can be used to understand the customer behavior and frame the marketing strategy.
In terms of futures contracts (formal agreements executed through a commodity exchange for the delivery of goods in the future), which of the following statements is least accurate?
Individuals or firms that enter into offsetting contracts are called speculators.
Hedgers use futures contracts to reduce the risk of loss from fluctuating prices.
A long position is a contract to accept delivery.
The futures price is the price for the future delivery of a commodity or financial asset.
Individuals or firms that enter into offsetting contracts are called speculators.
This statement is not accurate. Individuals or firms that enter into offsetting contracts are called hedgers. Hedgers use futures contracts to reduce the risk of loss from fluctuating prices.
The interest rate that banks are charged for borrowing reserves from the Federal Reserve is called the:
open market rate
surplus rate
deflation rate
discount rate
discount rate
The discount rate is the interest rate charged to banks for borrowing reserves from the Federal Reserve. It is a major tool of monetary policy.
discount rate
The discount rate is the interest rate charged to banks for borrowing reserves from the Federal Reserve. It is a major tool of monetary policy.
Repayment of a bank loan
Payment of dividends despite unprofitable operations
sale of land on credit
Sale of finished goods
Payment of dividends despite unprofitable operations
If dividends are being paid out in spite of unprofitable operations the company has to bear a loss. This decreases the owner’s equity.
If an investor borrows stock and sells it in order to make money when the price of the stock declines, this is called a(n):
long position
short sale
margin requirement
day order
short sale
In a short sale the investor borrows stock and sells it. If the price declines, the individual buys back the stock and pays off the loan (returns the borrowed stock). The investor earns a profit because the stock is bought for less than it was sold.
With reference to inflation and deflation, what does CPI stand for?
Central Price Index
Consumer Price Index
Consumer Preference Indicator
Commodity Price Index
Consumer Price Index
The Consumer Price Index or CPI is a basket of goods, the weighted average of which helps decide the inflation or deflation in the economy.
Which of the following does not appear in the Balance Sheet of a company?
Stock at the end of the financial year
Stock at the beginning of the financial year
Drawings
Interest received but not yet earned
Stock at the beginning of the financial year
The Balance Sheet contains the assets and liabilities of the company as on the date it is created. The stock at the beginning of the year will not be a part of this. All the other options form a part of the balance sheet.
Managerial accounting generates information that managers can use to make sound decisions. There are four major types of internal management decisions. Which decision below is NOT one of the internal management decisions?
financial decisions
sales decisions
marketing decisions
production decisions
sales decisions
Sales decisions are not one of the internal management decisions. The four major types of internal management decisions are: financial decisions, resource allocation decisions, marketing decisions, and production decisions.
What is the phenomenon where the average costs per unit of output decrease with the increase in the scale or magnitude of the output being produced by a firm called?
Economic Division of resources
Optimum Production
Diseconomies of scale
Economies of scale
Economies of scale
When the number of products being produced by a firm increases the fixed costs get divided among a larger number of units and hence the total cost decreases. This is called economies of scale.
A balance sheet that combines the balance sheets of the firm’s various subsidiaries is known as which of the following?
amalgamated balance sheet
consolidated balance sheet
merged balance sheet
organizational balance sheet
consolidated balance sheet
A consolidated balance sheet is the parent company’s balance sheet. It combines the balance sheets of the firm’s various subsidiaries.
Which of the following is not an advantage of a sole proprietorship?
A sole proprietor has complete control and decision-making power over the business
Sale or transfer can take place at the discretion of the sole proprietor
No corporate tax payments
It has a perpetual life
It has a perpetual life
A sole proprietorship ends with the death of the owner unless it is taken care of by an heir.
Purchasing an insurance policy is an example of which of the following?
Accrued expense.
Unearned revenue.
Prepaid expense.
Accrued revenue.
Prepaid expense A prepaid expense is a payment for a future expense. This is an asset. Insurance is an example of a prepaid expense.
The return on an asset relative to the return on a portfolio of assets, such as the Standard and Poor’s 500 Stock Index, is which of the following?
standard deviation
annual return
portfolio risk
beta coefficient
beta coefficient
The beta coefficient is an index of the return of an asset relative to the return on a portfolio of assets. It is an index of systematic risk; a measure of the volatility of a stock’s return relative to the market return.
A new security will have a(an) _____, which is a detailed description.
Prospectus.
Account ledger.
Commercial paper.
Chart of accounts.
Prospectus
A new security will issue a prospectus. This is a detailed description that describes the corporation. It focuses on the upper management.
There are several measures of the composition of the money supply. M-2 refers to which of the following measures?
measurement of foreign funds
measurement of exchange rate
the sum of coins, currency and demand deposits
the sum of coins, currency, demand deposits and savings accounts and small-denomination time deposits
the sum of coins, currency, demand deposits and savings accounts and small-denomination time deposits
M-2 refers to the sum of coins, currency, demand deposits and savings accounts and small-denomination time deposits. M-1 refers to the sum of coins, currency and demand deposits.
Which of the following is the reason behind the U.S. buying pens from China and selling cars to China, though it can produce both cars as well as pens more efficiently than China?
Absolute advantage
Relative advantage
Comparative advantage
Irrational advantage
Comparative advantage
If the U.S. needs to stop producing more number of cars to produce the same number of pens than China, China is said to have a comparative advantage in producing pens. This is the reason trade goes on between the U.S. and China in spite of the U.S. being more efficient in producing both cars and pens.
The economic term for goods and services which are jointly and equally consumed by many people at the same time, and its consumption by one person does not alter its availability for another person is which of the following?
single-use goods
durable goods
public goods
private goods
public goods
Public goods are those goods and services which are jointly and equally consumed by many people at the same time, and its consumption by one person does not alter its availability for another person. These goods may not be produced through the free market pricing mechanism because those persons who do not want to pay the price cannot be prevented from the consumption of these goods and services. The examples of public goods and services may be public roads, dams, defense and education services, etc.
The theory of consumer demand known as utility analysis is characterized by all of the following except for:
Utility is measurable in terms of money.
The consumer is a rational being who aims at the maximization of utility.
The marginal utility of money is assumed to be variable.
The consumer has perfect knowledge of the choice of commodities open to him.
The marginal utility of money is assumed to be variable.
This is not a concept of utility analysis. The marginal utility of money is assumed to be constant. The theory of utility analysis is based on the cardinal measurement of utility which assumes that utility is measurable and additive.
A contract by which the holder of intellectual property grants another party permission to use that property is known as which of the following
Franchise.
Joint business venture.
Merger.
Licensing agreement.
Licensing agreement
In a licensing agreement, the holder of intellectual property grants the right of use to another, typically for a fee. For instance, the right of a company to use another company’s software on its computers is subject to licensing agreement.
The market value of all final goods and services produced within a country during a given time period is which of the following?
gross national income
green gross domestic product
gross domestic product
gross factor of production
gross domestic product
The gross domestic product (GDP) is the measure of the value of aggregate output of the economy within a country during a given time period. It is the market value of all final goods and services produced in the country during this given time period.`
The publication of untrue statements that malign the plaintiff’s ownership of property or its quality is called:
trade practice regulation
trade disparagement
trade damage
none of the above
trade disparagement
The publication of untrue statements that malign the plaintiff’s ownership of property or its quality is called trade disparagement. Generally, if the aspersions are cast upon the quality of what the person has to sell, or the person’s business itself, proof of damages is essential.
A small number of producers in an industry is which of the following?
Monopoly.
Monopolist.
Oligopoly.
Perfect competition.
Oligopoly Oligopolists are small numbers of producers. An industry that is dominated by oligopolists is an oligopoly.
If you do not report all of the income you earned on your tax return you are participating in which of the following?
groundfloor economy
above board economy
white economy
black economy
black economy
If you pay your cleaner or builder in cash, or for some reason neglect to tell the taxman that you were paid for a service rendered, you participate in the black or underground economy. Such transactions do not normally show up in the figures for GDP, so the black economy may mean that a country is much richer than the official data suggest.
The federal government taxes corporations. In terms of this taxation, which of the following is a tax in which the rate remains unchanged as the tax base increases?
marginal tax
regressive tax
progressive tax
proportionate tax
proportionate tax
A proportionate tax is a tax in which the rate remains unchanged as the tax base increases. An example of a proportional tax is property tax.
Which of the following is a lagging indicator?
Average work week.
Unemployment claims.
Delayed deliveries.
Prime rate.
Prime rate.
The prime rate is a lagging indicator. A lagging indicator changes after GDP does. The other answers are leading indicators.
The ongoing integration of markets, which results in increased interdependency among nations, is known as which of the following?
Homogenization.
Appropriation.
Expropriation.
Globalization.
Globalization Globalization occurs as markets from many nations and industries are increasingly integrated. Nations become increasingly interdependent, with aspects of a single business being carried out in multiple locations.
The idea that an expansionary fiscal policy will tend to increase the interest rate and reduce investment spending is known as which of the following?
political business cycle
crowding-out effect
fiscal drag
expansionary bias
crowding-out effect
The essence of the crowding-out effect is that an expansionary (deficit) fiscal policy will tend to increase the interest rate and reduce investment spending. This results in weakening or canceling the stimulus of the fiscal policy.
The difference between a country’s imports and its exports is which of the following?
trade deficit
trade surplus
balance of payments
balance of trade
balance of trade
Balance of trade is the difference between a country’s imports and its exports. Balance of trade is the largest component of a country’s balance of payments. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy. Trade deficit or trade surplus are part of the concept of balance of trade.
LIBOR (London interbank offer rate) is best defined as which of the following?
short-term interest rate for highest quality international loans among international banks
long-term interest rate for highest quality international loans among international banks
short-term interest rate for intermediate quality international loans among international banks
long-term interest rate for lowest quality international loans among international banks
short-term interest rate for highest quality international loans among international banks
LIBOR is the short-term interest rate for highest quality international loans among international banks. The safest borrowers generally receive a rate that is ¾ to 1% above the LIBOR rate.
When two parties agree to exchange currency at a stated rate at some point in the future, which of the following is at work?
Spot rate.
Forward rate.
Future rate.
Speculation rate.
Forward rate A forward rate is the rate at which two parties promise to exchange currency at a later date. This may be potentially advantageous if currency rates fluctuate widely.
All of the following are risks involved in international trade EXCEPT:
pressures for bribes
nationalization of property by a foreign country
balance of trade
economic boycott by other countries
balance of trade
Balance of trade is not an issue involved with risks of international trade. It is a term for the difference between the amount of exports and imports of goods by a nation. Besides the other three choices the risks also include: expropriation of property by a foreign country; export controls placed on goods and technology by the United States; and conflict with U.S. antitrust laws.
Prices of goods have which type of relationship with the quantity demanded?
concurrent relationship
inverse relationship
reverse relationship
horizontal relationship
inverse relationship
Prices have an inverse relationship with the quantity demanded. The higher the price, the less quantity people demand (if all other things are constant). The demand curve slopes downward.
