Q&A Hero

Q: Given the following assets; I) Long-term assets II) Inventories III) Receivables IV) Marketable securities Arrange the above assets in the order of liquidity. (The most liquid being first) A. I, II, III and IV B. II, III, IV and I C. III, IV, II, and I D. IV, III, II and I

Q: Yankee CDs are issued by large savings and loan associations and other nonbank savings institutions.

Q: Given the following assets; I) Long-term assets II) Inventories III) Receivables IV) Marketable securities Which is the least liquid of these assets? A. I B. II C. III D. IV

Q: The loan from a Federal Reserve bank which normally lasts only a few days and is designed to provide immediate aid in meeting a bank's legal reserve requirement is known as extended credit.

Q: Loans of Federal funds under a continuing contract are automatically renewed each day unless either the borrower or the lender decides to end the agreement.

Q: According to Strategy C, a firm would: A. Be in permanent need of short-term borrowing B. Have high current cash holdings C. Use low or no short-term debt and more long-term financing D. None of the above

Q: Accommodating banks buy and sell Federal funds simultaneously.

Q: According to Strategy B, a firm would: A. Maintain a high ratio of current assets to sales. B. Use low or no short-term debt and more long-term financing. C. Use more short-term debt and less long-term financing. D. Be a short-term lender during a part of the year and a borrower during the rest.

Q: According to Strategy A, a firm should: A. Maintain a high ratio of current assets to sales B. Use high levels of short-term debt and low levels of long-term financing C. Use more short-term debt and less long-term financing D. Have surplus cash that can be invested in short-term securities

Q: There are no reserve requirements on Federal funds borrowings in the U.S.

Q: Cumulative capital requirement can be met by: I) long-term financing II) short-term financing A. I only B. II only C. I and II D. None of the above

Q: Federal funds today consist exclusively of deposits held at the Federal Reserve banks.

Q: The main difference between short-term and long-term finance is: A. The risk of long-term cash flows being more important than short-term risks B. The present value of long-term cash flows being greater than short-term cash flows C. The timing of short-term cash flow being within a year or less D. All of the above

Q: Deposits have been growing faster than nondeposit sources of funds in recent years among U.S. banks.

Q: Short-term financial decisions: I) involve short lived assets II) involve short lived liabilities III) are easily reversed A. I only B. II only C. I, II, and III D. III only

Q: Asset management (i.e., conversion of assets to cash) is regarded as an interest-sensitive approach to raising funds.

Q: Why is liquidity relevant?

Q: Discuss the DuPont system.

Q: are nondeposit borrowings that are fully collateralized by home mortgages and have maturities ranging from overnight to 20 years.

Q: What are the primary reasons for a company to use debt in its capital structure?

Q: When financial institution borrows in the RP market, this loan is listed as .

Q: Briefly explain the different categories of financial ratios.

Q: One of the three types of loans in the Fed Funds market, are automatically renewed each day unless either the borrower or lender decides to end this agreement.

Q: What are the common ratios used to measure liquidity of a firm?

Q: One of the three types of loans in the Fed Funds market, are longer-term Fed Funds contracts lasting several days, weeks or months, often accompanied by a written contract.

Q: One of the three types of loans in the Fed Funds market, are unwritten agreements, negotiated via wire or telephone, with the borrowed funds returned the next day.

Q: How are "uses and sources" of funds are calculated?

Q: What are the three basic financial statements?

Q: Federal Reserve balances of banks can be transferred from one institution to another in seconds through the Feds wire transfer network called the .

Q: Briefly explain the relationship between accounting standards and the legal traditions.

Q: The type of discount window loan with generally the lowest rate of interest is known as __________ credit.

Q: ROA can be increased by increasing asset turnover.

Q: The type of discount window loan with generally the highest rates of interest is known as ___________ credit.

Q: The calculation of market value added for a firm requires the use of the book value per share.

Q: A ______________ repurchase agreement (RP) is one in which the underlying collateral is not identified precisely and thus allows some substitution.

Q: According to the Du Pont system:

Q: A repurchase agreement (RP) whereby the collateral is specifically identified is known as a conventional or ____________ RP.

Q: P/E ratio measures the price that investors are prepared to for each dollar of earnings.

Q: Repurchase Agreements (RPs) are very similar to Federal Funds and are often viewed as ____________ federal funds transactions.

Q: Market value ratios indicate how highly the firm is valued by the managers.

Q: Virtually all nondeposit borrowing of a bank are ______-term rather than _______-term debt.

Q: Efficiency ratios indicate how productively the company is using its assets to generate profits.

Q: Ratios can help you to ask the right questions, they rarely answer these questions.

Q: The Federal Reserve will make loans through its _________________________.

Q: Leverage ratios show how heavily the company is in debt.

Q: Because there is a danger that the bank in need of funds will not be able to find someone willing to grant the bank a loan at a reasonable rate, they face _________________________.

Q: Total uses of funds is equal to investments in net working capital plus investments in fixed assets plus dividends paid to shareholders.

Q: Net working capital is equal to total assets minus total liabilities.

Q: A(n) _________________________ is an interest bearing receipt for funds issued by a bank with a minimum denomination of $100,000.

Q: Given a book value per share of $5 and a market value of $12, what is the market value added of a firm with 2,000,000 outstanding shares? A. $1,000,000 B. $10,000,000 C. $14,000,000 D. $24,000,000

Q: The spread between current and expected loans and investments and the current and expected deposit inflows and other sources of funds is known as the _________________________.

Q: Given a book value per share of $10 and a market value of $24, what is the market capitalization of a firm with 2,000,000 outstanding shares? A. $2,000,000 B. $20,000,000 C. $28,000,000 D. $48,000,000

Q: Because the interest rate on CDs, commercial paper and other nondeposit borrowings (except borrowings from the Federal Reserve discount window) are determined by supply and demand conditions in the market they all face __________________ risk.

Q: Which of the following factors would be influential in a typical financial plan? I) how a firm can generate superior long-term returns II) choice of industry III) position within the industry A. I only B. I and II only C. II and III only D. I, II and III

Q: A _________________________ is the temporary sale of high-quality, easily-liquidated assets accompanied by the agreement to buy back those assets on a future specific date at a predetermined price.

Q: Market value ratios indicate: I) How productively is the firm utilizing its assets. II) How liquid is the firm. III) How profitable is the firm. IV) How highly is the firm valued by the investors. A. I only B. II only C. II and III only D. IV only

Q: _________________________ is the short-term notes, with maturities ranging from 3 to 4 days to 9 months, issued by well known companies.

Q: Profitability ratios indicate: I) How productively is the firm utilizing its assets. II) How liquid is the firm. III) How profitable is the firm. IV) How highly is the firm valued by the investors. A. I only B. II only C. III only D. III and IV only

Q: Originally __________________ consisted exclusively of deposits held by U.S. banks at the Federal Reserve banks which were loaned from one bank to another.

Q: Efficiency ratios indicate: I) How productively is the firm utilizing its assets. II) How liquid is the firm. III) How profitable is the firm. IV) How highly is the firm valued by investors. A. I only B. II only C. III only D. III and IV only

Q: When the first priority of a bank is to make loans to all good quality loan customers they are following the _________________________.

Q: Which measure would be most useful in comparing the operating profitability of two firms in different industries? A. Net profit margin B. Return on equity C. Sales to total assets D. Return on assets

Q: Given the following data: Earnings per share = $5; Dividends per share = $3; Price per share = $50. Calculate the payout ratio: A. 10% B. 5% C. 60% D. None of the above

Q: When a bank buys funds from other financial institutions in order to cover good quality loan demand and to satisfy deposit reserve requirements they are practicing _________________________.

Q: The CDs large foreign banks sell through their U.S. branches are called _________________________.

Q: Given the following data: Earnings per share = $6; Dividends per share = $3; Price per share = $60, calculate the P/E ratio: A. 16.7 B. 10 C. 25 D. None of the above

Q: Given the following data: Earnings per share = $5; Dividends per share = $3; Price per share = $50. calculate the dividend yield: A. 10% B. 5% C. 60% D. None of the above

Q: Dollar denominated CDs issued outside the U.S. are called _________________________.

Q: Given the following data: EBIT = 400; NI = 100; Average Equity = 1000, calculate the ROE (Return on Equity): A. 10% B. 12% C. 7.5% D. None of the above

Q: Setting the Federal Reserve primary-credit discount rate above the Fed Funds rate mirrors what credit facilities used by several European central banks? A) The Vince credit facilities B) The Adam Smith credit facilities C) The Lombard credit facilities D) The Lower Back credit facilities E) None of the above

Q: The Carter State Bank is planning on raising $600 million in a new offering of commercial paper through its holding company. They plan on using $500 million of it to fund new loans. The current interest rate for similar commercial paper is 4.85% and they expect .3% in issuing costs. What is the effective rate of interest on this issue of commercial paper? A) 5.15% B) 6.18% C) 5.82% D) 4.85% E) None of the above

Q: Net profit margin is calculated as: A. (EBIT-tax)/Sales B. Net income/sales C. Net income/Cost of goods sold D. none of the above

Q: The HTR Bank is planning on raising $750 million in a new offering of commercial paper through its holding company. They plan on using $725 million of it to fund new loans. The current interest rate for similar commercial paper is 7.15% and they expect .15% in issuing costs. What is the effective rate of interest on this issue of commercial paper? A) 7.30% B) 7.15% C) 7.40% D) 7.55% E) None of the above

Q: Given the following data: EBIT = 400; Tax = 100; Sales = 3000; Average Total Assets = 1500, calculate the ROA (Return on Assets): A. 10% B. 20% C. 7.5% D. None of the above

Q: A bank promises an annual return of 4.85% on a 60 day, $300,000 CD. What will be the total amount due to the customer at the end of the two month period? A) $302,425 B) $314,550 C) $14,550 D) $2,425 E) None of the above

Q: Given the following data: EBIT = 400; Tax = 100; Sales = 3000; Average Total Assets = 1500, calculate net profit margin: A. 10% B. 18.3% C. 7.5% D. None of the above

Q: When a firm improves (lowers) its average collection period it generally: A. Requires additional cash investment in inventory B. Releases cash locked up in accounts receivables C. Does not alter its cash position D. A firm cannot reduce its inventories

Q: A bank plans on borrowing $450 million for 20 days through a RP transaction collateralized by T-Bills. The current RP rate is 6.25%. What is this banks total interest cost in dollars? A) $28,125,000 B) $78,125 C) $1,406,250 D) $1,562,500 E) None of the above

Q: When a firm improves (lowers) its days in inventories it generally: A. Requires additional cash investment in inventory B. Releases cash locked up in inventory C. Does not alter its cash position D. A firm cannot reduce its inventories

Q: A bank plans on borrowing $225 million for 10 days through a RP transaction collateralized by T-Bills. The current RP rate is 4.5%. What is this banks total interest cost in dollars? A) $10,125,000 B) $1,125,000 C) $281,250 D) $28,125 E) None of the above