Fin 355 Exam 2

Which of the following statements is most correct?
a. The inventory turnover ratio and days sales outstanding (DSO) are two ratios that are used to assess how effectively a firm is managing its current assets.
b. If a firm has high current and quick ratios, this always indicates that the firm is managing its liquidity position well.
c. If a firm sold some inventory for cash and left the funds in its bank account, its current ratio would probably not change much, but its quick ratio would decline.
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Which of the following statements is most correct?
a. The inventory turnover ratio and days sales outstanding (DSO) are two ratios that are used to assess how effectively a firm is managing its current assets.
b. If a firm has high current and quick ratios, this always indicates that the firm is managing its liquidity position well.
c. If a firm sold some inventory for cash and left the funds in its bank account, its current ratio would probably not change much, but its quick ratio would decline.
The inventory turnover ratio and days sales outstanding are two ratios that are used to assess how effectively a firm is managing its current assets
Borrowing on a long-term basis and using the proceeds to retire short-term debt would improve the current ratio and thus could be considered to be an example of "window dressing." (True or false)
True
All else equal, increasing the debt ratio will increase the ROA. (True or false)
False
The time value of money means that a dollar today is worth more than a dollar at some time in the future. (True or false)
True
When a loan is amortized over a five year term, the
a. payment decreases each year
b. amount applied to principal decreases each year
c. amount of interest paid decreases each year
d. balance is paid as a balloon payment in the fifth year
c. amount of interest paid decreases each year
All streams of cash flows are called annuities (True or false)
False
Your bank account pays a 6% nominl rate of interest. The interest is compounded quarterly. Which is most correct?
The periodic rate of interest is 1.5% and the effective rate of
The present vlue of an investment will always be larger thn its expected future value when interest is compounded (True or false)
False
If compnies have fewer good investment opportunities, interest rates are likely to decrease (True or false)
False
Federal government bonds have no risk premium because they carry no risk of ny kind (True or false)
False
The real risk-free rate is expected to remain constant at 3% in the future, a 2% rate of inflation is expected for the next 2 years, after which inflation is expected to increase to 4%, and there is a positive maturity risk premium that increases with years to maturity. Given these conditions, which of the following statements is correct?The yield on a 5-year treasury bond must exceed that on a 2-year Treasury bondWhich of the following would be most likely to lead to a higher level of interest rates in the economy?Corporations step up their expansion plans and thus increase their demand for capitalWho led the Fed previously?Ben BarnankeWho leads the Fed right now?Jerome PowellWhat is the Federal target rate?3-3.25What does the FOMC stand for?Federal Open Market CommitteeThe present value of an investment will always be larger than its expected future value when interest is compounded (True or false).FalseIf a firm increases its sales while holding inventories constant, then, other things held constant, its inventory turnover ratio will decrease (True or false)False