Exam 3

Question 1

Inflation risk is the danger that your money will grow at a rate slower than inflation and be less worth tomorrow than it is today

Answer 1

True

Question 2

From 1870 through 1890, the UK and US economies greatly benefited from a global decline in prices resulting from the second industrial revolution, and that was bad

Answer 2

False

Question 3

Recessions generally lead to deflation which is bad even if your money purchasing power increases.

Answer 3

True

Question 4

Market (nominal) interest rate is the money paid for the use of capital, not adjusted for anticipated inflation (the inflation-free interest rate)

Answer 4

False

Question 5

Real dollars, also known as constant dollars, are dollars expressed in terms of the same purchasing power relative to a particular time

Answer 5

True

Question 6

Actual dollars (A$) as of any period (e.g., a year), k , can be converted into real dollars (R$) of constant market purchasing power as of any base period, b, given a certain inflation rate f, using the Excel formula

Answer 6

None of the above

Question 7

With $100, you could buy 50 Big Macs in year 1990 but only 17 Big Macs in year 2021. That means according to the Big-Max index, $100 in year 2021 has only

Answer 7

None of the above

Question 8

In the base time period (𝑏), the purchasing power of an actual dollar is less than that of a real dollar.

Answer 8

False

Question 9

If cash flows are in terms of Actual Dollars, then the interest rate to use is the market interest rate.

Answer 9

True

Question 10

In replacement analysis studies, a suggested alternative replacement (new) assets is called

Answer 10

The challenger

Question 11

The period (years) that yields the minimum Equivalent Uniform Annual Cost (EUAC) of owning and operating as asset is called

Answer 11

Economic Life

Question 12

The time period an asset is kept in productive service (primary or backup) is called

Answer 12

Useful Life

Question 13

All present and past cash flows are considered in replacement studies.

Answer 13

False

Question 14

The defender may be kept longer if its marginal cost is less than the minimum EUAC of the challenger over its economic life

Answer 14

True

Question 15

If an upgrade of the defender is required to have a competitive service level with the challenger, this should be added to the present realizable MV

Answer 15

True

Question 16

Gross Income

Answer 16

Includes only revenue and direct expenses

Question 17

Direct Expenses are

Answer 17

All expenses that vary directly with numbers of product sold

Question 18

The Accounting Equation requires that

Answer 18

Owners’ Liabilities=Total Assets-Total Liabilities

Question 19

The Cash Flow Statement

Answer 19

Illustrates all transactions involving cash

Question 20

The three key Financial Statements are

Answer 20

Income, Cash Flow Statement, Balance Sheet

Question 21

Inventory

Answer 21

Appears on the Cash Flow Statement & Appears on the Balance Sheet

Question 22

The current portion of debt is:

Answer 22

The sum of principal payments due within the next 12 months

Question 23

An increase in assets

Answer 23

Reduces cash

Question 24

Cost of Goods Sold (COGS) includes all expenses that vary directly with the number of units sold

Answer 24

True

Question 25

Gross Margin is always equal or greater than Net Margin

Answer 25

True

Question 26

Inventory Is Valued at

Answer 26

Cost of goods sold

Question 27

A company can get equity only through two ways:

Answer 27

Retained earnings and Owners’ Contribution

Question 28

To known the financial position of a company at the end of the fiscal period, I should look at its

Answer 28

Balance sheet statement

Question 29

To know how much profit a company made during the fiscal period, I should look at its

Answer 29

Income statement

Question 30

To know how much cash a company generated and spent in a fiscal period, I should look at its

Answer 30

Cash flow statement

Question 31

A receivable is created when an invoice is received and lasts until the invoice is paid.

Answer 31

False

Question 32

In Accrual Accounting, revenue is recognized before cash is received.

Answer 32

True

Question 33

The accepted standards of right and wrong that are usually applied to personal behavior

Answer 33

Morals

Question 34

The general and abstract concepts of right and wrong behavior culled from philosophy, theology, and professional societies.

Answer 34

Ethics

Question 35

The system or rules established by authority, society, or custom

Answer 35

Laws

Question 36

The codes of behavior and courtesy

Answer 36

Etiquette

Question 37

A situation in which an engineer’s loyalty and obligations may be compromised because of self interests or other loyalties and obligations

Answer 37

Conflict of interest

Question 38

Engineering Ethics are the set of Behavioral standards that all engineers are expected to follow

Answer 38

True

Question 39

Whistleblowing is the act of informing authorities of harmful, dangerous, or illegal activities

Answer 39

True

Question 40

Ethics and excellence in engineering go together

Answer 40

True

Question 41

Occasionally a conflict of interest may occur accidentally or unavoidably. In such cases, the best course of action is to

Answer 41

disclose the conflict to your employer and anyone else directly involved