Q&A Hero

Q: A firm's current ratio has steadily increased over the past 5 years, from 1.9 five years ago to 3.8 today. What would a financial analyst be most justified in concluding? a. The firm's fixed assets turnover probably has improved. b. The firm's liquidity position probably has improved. c. The firm's stock price probably has increased. d. Each of the above is likely to have occurred. e. The analyst would be unable to draw any conclusions from this information.

Q: What is a physical attribute of a motorcycle that is essential for its primary function? A) color B) price C) mobility D) design E) popularity

Q: If an industryʹs long-run per-unit costs increase as its output increases thenA) the firmʹs long-run economic profits must be greater than zero. B) the firm is most likely a decreasing-cost industry.C) the firm is most likely an increasing -cost industry. D) the firm is most likely a constant-cost industry.

Q: As part of the "green movement," the European Commission has passed legislation to control all kinds of packaging waste throughout the European Union. Two critical issues that affect product development are the control of the packaging component of solid waste and A) the prevalence of similar environmental standards across different member countries. B) consumer demand for environmentally friendly products. C) higher government subsidies for greener technologies. D) the continuous availability of alternative energy resources for production. E) the proven efficient management of inventory of conventional energy products.

Q: Which of the following statements is most correct? a. Cash flows and accounting profit are not at all related since no common elements are used in the calculation of either individual measure. b. The debt ratio measures that portion of fixed assets which is supported by common equity. c. High inflation can seriously distort firms' balance sheets, and since inflation also affects depreciation and inventory costs, profits can also be affected. d. Financial statement analysis is important from the investor's viewpoint in assessing past performance and predicting future performance. However, from a management perspective, financial statement analysis measures history and is merely a reporting requirement. It is not useful for planning future actions because it does not help determine future cash flows. e. When an action is taken at one point in time, but its full effects cannot be accurately measured until later, this has the potential to affect the firm's financial statements. However, as long as the firm keeps the same standard accounting period this timing problem can be avoided.

Q: In the above figure, the profit-maximizing rate of production for the perfectly competitive firm isA) 5. B) 10.C) 13.D) none of the above.

Q: Which country or group of countries has been at the forefront of the "green movement"? A) The United States B) Japan C) Europe D) OPEC countries E) NAFTA countries

Q: Which of the following statements is correct? a. The annual report contains four basic financial statements: the income statement; balance sheet; statement of cash flows; and statement of changes in long-term financing. b. Although the annual report is geared toward the average stockholder, it represents financial analysts' most complete source of financial information about the firm. c. The key importance of annual report information is that it is used by investors when they form their expectations about the firm's future earnings and dividends and the riskiness of those cash flows. d. The annual report provides no relevant information for use by financial analysts or by the investing public. e. None of the above statements is correct.

Q: Refer to the above table. What are total costs at an output of 2 units?A) $50 B) $100 C) $150 D) $200

Q: PG Autos introduces a new technology in its cars to improve their mileage and reduce carbon emissions. It also takes measures to improve its production facilities in order to reduce its carbon footprint. Actual introduction of green measures to meet the government guidelines rather than just through advertising and marketing shows that PG Autos engages in ________ marketing. A) permission B) recycle C) green D) black E) greenwash

Q: Which of the following statements is correct? a. If two firms pay the same interest rate on their debt and have the same rate of return on assets, and if that ROA is positive, the firm with the higher debt ratio will also have a higher rate of return on common equity. b. One of the problems of ratio analysis is that the relationships are subject to manipulation. For example, we know that if we use some of our cash to pay off some of our current liabilities, the current ratio will always increase, especially if the current ratio is weak initially. c. Generally, firms with high profit margins have high asset turnover ratios, and firms with low profit margins have low turnover ratios; this result is exactly as predicted by the Du Pont equation. d. Firms A and B have identical earnings and identical dividend payout ratios. If Firm A's growth rate is higher than that of Firm B, Firm A's P/E ratio must be greater than Firm B's P/E ratio. e. None of the above statements is correct.

Q: The more profits are reinvested into the firm, theA) less there is available to distribute to bondholders. B) less there is available to distribute to stockholders.C) more the firm will be able to raise in sales of new issues to stock.D) more bonds the firm will sell in order to pay their required dividends to preferred stockholders.

Q: What is the definition of green marketing? A) It refers to word-of-mouth marketing, where a company develops customers who become voluntary advocates of a product. B) It refers to inbound marketing used on websites in the form of a banner, text, or graphic. C) It refers to the type of marketing that takes place on the Internet, where all the marketing resources and assets are transferred online. D) It is used to identify concerns with the environmental consequences of a variety of marketing activities. E) It refers to nontraditional or stealth marketing campaigns.

Q: Which of the following statements is most correct? If a company lowers its DSO, but no changes occur in sales or operating costs, then a. the company might well end up with a higher debt ratio. b. the company might well end up with a lower debt ratio. c. the company would probably end up with a higher ROE. d. the company's total asset turnover ratio would probably decline. e. none of the above is a correct statement.

Q: Accounting profit is equal toA) total revenue minus dividends and interest. B) dividends paid.C) total revenue minus implicit costs. D) total revenue minus explicit costs.

Q: Which of the following statements is most correct? a. An increase in a firm's debt ratio, with no changes in its sales and operating costs, could be expected to lower its profit margin on sales. b. An increase in the DSO, other things held constant, would generally lead to an increase in the total asset turnover ratio. c. An increase in the DSO, other things held constant, would generally lead to an increase in the ROE. d. In a competitive economy, where all firms earn similar returns on equity, one would expect to find lower profit margins for airlines, which require a lot of fixed assets relative to sales, than for fresh fish markets. e. It is more important to adjust the Debt/Assets ratio than the inventory turnover ratio to account for seasonal fluctuations.

Q: A women's clothing company based in Singapore had to modify its clothes before introducing them in Iran, as it needed to meet the needs of the women who are generally expected to cover themselves completely as per societal norms. To adapt its clothes to Iranian markets, the company used opaque material and provided accessories like scarves. Which requirement has dictated the product adaptation? A) legal B) cultural C) technological D) economic E) climatic

Q: Use the law of diminishing marginal utility to explain the diamond -water paradox.

Q: A television manufacturer in South Korea had to simplify its televisions before introducing them to the Nigerian markets, as the country lacked the skills to repair the product in case of a malfunction. The local salesforce also did not have the sufficient knowledge about the installation of the product. The requirement that is influencing product adaptation in this scenario is A) legal B) climatic C) political D) cultural E) technological

Q: A stock dividend will, in and of itself, affect the amounts in which of the following accounts? (Assume the stock has a par value.) a. Common stock account. b. Paid-in capital account. c. Retained earnings account. d. Cash. e. Only answers a, b, and c above.

Q: If the total utility derived from consuming three oysters was 40 utils and the total utility derived from consuming four oysters was 52 utils, what was the marginal utility derived from the consumption of the fourth oyster?A) 92 utils B) 52 utilsC) 12 utils D) It is impossible to determine.

Q: A U.S. cosmetics company had to increase the SPF value of its sunscreen lotions marketed in the Middle East to provide more protection against UV radiation. Which requirement dictated the product adaptation? A) legal B) cultural C) economic D) climatic E) political

Q: We can be sure that, in and of itself, a stock dividend will not affect which of the following financial aspects of the firm? (Assume the stock has a par value.) a. Market value per share. b. Book value per share. c. Common stock account. d. Paid-in capital account. e. Total assets.

Q: For which of the following purchases would the absolute price elasticity of demand be smallest?A) A sports car B) Utilities C) Chewing gum D) A cell phone

Q: Stock dividends a. Have the same effects on financial statements as cash dividends. b. Are similar to stock splits in that they do not change the fundamental position of current shareholders. c. Must be accompanied by cash dividends. d. Are viewed unfavorably by investors and thus should not be used. e. Have no effect on a firm's balance sheet.

Q: Downward Dog Wines had to market its products with a different name in a foreign market as it was mandatory to translate the name into the local language. Which factor has most likely influenced the compulsory change of Downward Dog's product name in the foreign market in this scenario? A) legal requirement B) climatic requirement C) technological requirement D) monetary requirement E) economic requirement

Q: The marginal cost to society of reducing pollution increases with the increased use of pollution abatement becauseA) of the diminishing marginal utility of abatement. B) of the reduced demand for abatement.C) of the diminishing returns from abatement.D) of the high cost of abatement.

Q: Bragster Bar, a brand of energy bars in Canada, sells its bars singly or in packs of two in South Asian markets instead of their regular multiple-item packaging that contains 10 or 20 bars. What requirement of the local market most likely influenced Bragster Bar's packaging decision? A) legal B) political C) economic D) technological E) cultural

Q: A stock split will cause a change in the total dollar amounts shown in which of the following balance sheet accounts? a. Cash. b. Common stock. c. Paid-in capital. d. Retained earnings. e. None of the above.

Q: Which of the following statements is correct?A) The Social Security program funnels transfers from retired individuals to the youngest children of low-income families.B) Social Security is an entitlement which is available to everyone, including those who have not contributed to the fund during their active work years.C) Social Security benefits are received by people who had contributed to the fund during their active work years.D) As a public transfer payment, Social Security benefit is available only to the poor.

Q: A European chocolate manufacturer received several complaints from customers about the quality of its products when it began selling them in a tropical country. The firm had to repackage its chocolate bars with an extra plastic wrapper to protect it from the heat and dust. Which factor in the local market is most likely to have dictated the company's product adaptation in this scenario? A) legal requirements B) economic requirements C) political requirements D) climatic requirements E) technological requirements

Q: Which of the following statements is correct? a. In a reverse split, a company reduces the number of shares outstanding in order to stabilize and provide a floor for a rapidly declining stock price. b. In theory, dividends are determined as a residual item. Therefore, in order to conserve earnings for better future earnings opportunities, the poorer the firm's investment opportunities, the lower its dividend payments should be. c. The farther to the right the IOS is the higher a firm's dividend payout ratio, other things held constant. d. Even if a stock split has no information content, and even if the dividend per share adjusted for the split does not increase, there can still be a real benefit (i.e., a higher value for shareholders) from such a split, but any such benefit is probably small.

Q: Bilateral monopoly exists when A) a single buyer confronts a single seller. B) there are two monopolistic buyers trying to buy resources. C) two labor unions are trying to represent the same group of workers. D) a firm is both a monopoly in its output market and a monopsonist in its input market.

Q: Exercise Away Products found out it needed to shorten the legs of its treadmills sold in China owing to the height of the average Chinese person. By doing this, Exercise Away Products has achieved A) product homologation. B) global product standardization. C) product dilution. D) product obsolescence. E) product disapprobation.

Q: Other things held constant, which of the following will not affect the current ratio, assuming an initial current ratio greater than 1.0? a. Fixed assets are sold for cash. b. Long-term debt is issued to pay off current liabilities. c. Accounts receivable are collected. d. Cash is used to pay off accounts payable. e. A bank loan is obtained, and the proceeds are credited to the firm's checking account.

Q: The following table depicts both the product and labor markets for imported coffee. What is the total revenue when 15 workers per day are hired?Labor Input (workers per day)Total Physical ProductProduct Price ($)101005011110491212048131304714140461515045A) $5,000 B) $6,750 C) $7,350 D) $7,500

Q: Product ________ is the term used to describe the changes mandated by local product and service standards. A) localization B) protectionism C) disapprobation D) dilution E) homologation

Q: Other things held constant, if a firm holds cash balances in excess of their optimal level in a non-interest bearing account, this will tend to lower the firm's a. Operating profit margin. b. Total asset turnover. c. Return on equity. d. All of the above. e. Answers b and c above.

Q: Sam, who owns a carpentry shop, discovered that with 4 laborers he could produce 18 cabinets per day. With 5 laborers he produced 25 cabinets and with 6 laborers he produced 36 cabinets. What was the MPP of the 5th laborer?A) 8 cabinets B) 7 cabinets C) 6 cabinets D) 4 cabinets

Q: What are the two dimensions that define the quality of a product or service? A) consumer choice quality and process quality B) market-perceived quality and performance quality C) product quality and market quality D) actual quality and assumed quality E) absolute quality and relative quality

Q: All of the following represent cash outflows to the firm except a. Taxes. b. Interest payments. c. Dividends. d. Purchase of plant and equipment. e. Depreciation.

Q: The ʺcaptureʺ in the capture hypothesis occurs because A) regulators try to promote everyoneʹs best interest. B) society doesnʹt care for regulatory agencies.C) regulators always know what is in societyʹs best interest.D) regulators usually have been or will be associated with the industries they regulate.

Q: What is one of the top two criteria for global market consumers when making purchase decisions? A) appearance B) size C) technology D) quality E) service

Q: Which of the following would be classified as a use of cash? a. An increase in accounts payable. b. A decrease in marketable securities. c. A decrease in accounts receivable. d. An increase in retained earnings. e. An increase in inventories.

Q: A network effect arises wheneverA) firms in an oligopolistic industry engage in limit pricing.B) firms in an oligopolistic industry engage in a zero-sum game.C) a consumerʹs willingness to purchase a good or service is influenced by how many others also buy or have bought the item.D) a producerʹs willingness to produce a good or service is influenced by how many other firms also produce or have produced the item.

Q: What impact has global competition had on business activities in the international marketplace? A) It has shifted the focus from a consumer's market to a seller's market. B) It has increased product life cycles. C) It has put more power in the hands of the customer. D) It has reduced the competitive spirit of most businesses in a marketplace. E) It has limited the choices of the consumers.

Q: Changes in balance sheet accounts are necessary for a. A typical ratio analysis. b. Pro forma balance sheet construction. c. Statement of cash flows construction. d. Profit and loss analysis. e. Pro forma income statement construction.

Q: A very high fixed cost and a relatively low marginal cost is associated withA) every type of good or product. B) an information product.C) a persuasive good. D) an experience good.

Q: Effective advertising and proper positioning of products can help brands to improve a less-than-positive country stereotype.

Q: The book value of an asset is the market value less any accumulated depreciation. a. True b. False

Q: Products from developing countries have the highest quality image.

Q: The number of firms in a monopolistically competitive industry means thatA) firms will collude.B) existing firms in the industry will make sure new firms do not enter.C) firms will not cooperate to set a pure monopoly price. D) firms will try to set a common price.

Q: The balance sheet lists ant their fair market value as of midnight on the annual fiscal end date for the firm. a. True b. False

Q: Brand image is at the very core of business identity and strategy.

Q: The more substitutes there are for a monopolistʹs productA) the less elastic is the demand curve. B) the more elastic is the demand curve. C) the steeper is the demand curve.D) the more positively sloped the demand curve becomes.

Q: From an investor's standpoint, predicting the future is the purpose of financial statement analysis. a. True b. False

Q: In an increasing-cost industry, an increase in output will lead toA) an downward shift in the ATC curve. B) an downward shift in the MC curve.C) a reduction in long-run per-unit costs. D) an increase in long-run per-unit costs.

Q: In the context of global marketing, a product's country of origin does not affect its brand's image significantly.

Q: The four basic financial statements included in the annual report are the balance sheet, the income statement, the statement of cash flows, and the statement of reported earnings. a. True b. False

Q: Cultural barriers play a bigger role in services than in merchandise trade.

Q: In the above figure, the market price charged by this profit -maximizing, perfectly competitive firm isA) $5 per unit of output. B) $10 per unit of output. C) $8 per unit of output. D) $14 per unit of output.

Q: Financial statement analysis involves the analysis of a firm's financial position to identify its current strengths and weaknesses and to clearly identify the course of action to take advantage of those strengths and correct any weaknesses. a. True b. False

Q: Refer to the above table. What are total variable costs at an output of 2 units?A) $50 B) $100 C) $150 D) $200

Q: The majority of services enter foreign markets by licensing, franchising, or direct investment.

Q: A firm whose days sales outstanding is much higher than the industry's average is likely to either be too "tight" in its credit policy or too "loose" in its collection policy. a. True b. False

Q: Services are distinguished from products on the basis of their durability, homogeneity, and separability.

Q: The person most likely to receive a payment from a corporation in a year of losses is theA) bondholder. B) common stockholder. C) preferred stockholder. D) investment banker.

Q: Using the direct method to determine cash flows from operations, start with net income, then add back all expenses not paid in cash and subtract all revenues that do not provide cash. a. True b. False

Q: Services such as insurance and dry cleaning typically are classified as tangible.

Q: Accounting profits are total revenues minus A) all relevant opportunity costs. B) explicit and implicit costs. C) explicit costs and all other relevant opportunity costs. D) explicit costs.

Q: A positive number in the retained earnings account indicates that according to GAAP in the past the firm has earned income excess of all dividends paid. a. True b. False

Q: Explain how utility analysis can be used to derive a downward sloping demand curve.

Q: The support services component of the product component model contains such items as repair and maintenance and availability of spare parts.

Q: During a period of lowering prices, the FIFO accounting method will produce a higher balance sheet inventory but a lower cost of goods sold than the LIFO accounting method. a. True b. False

Q: In countries with low literacy rates, the pictures and symbols on products are taken literally as instructions and information.

Q: A certain athlete loves donuts. He receives 100 units of utility for the first donut, an additional 80 for the second, an additional 60 for the third, another 40 for the fourth, and another 20 for the fifth. The marginal utility of the fourth donut is and the total utility from consuming four donuts is .A) 40; 40 B) 40; 280 C) 140; 280 D) 280; 100

Q: One of the consistencies that marketers can look forward to when marketing products abroad is that almost all labeling laws worldwide are essentially the same.

Q: Common stockholders' equity is the current market value of all common shares of stock outstanding. a. True b. False

Q: For which of the following purchases would the absolute price elasticity of demand be greatest?A) A sports car B) Utilities C) Chewing gum D) A cell phone

Q: Net fixed assets reflect the historical costs for property, plant, and equipment less accumulated depreciation. a. True b. False