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B. The Principle of Comparative Advantage C. asymmetric information D. put option A. moral hazard B. The Principle of Valuable Ideas C. free-rider problem A. adverse selection C. zero-sum game D. The Behavioral Principle A. a report issued annually by managers to primarily convey information about select working capital ratios. B. the length of time remaining until an asset’s maturity. D. the extent to which something can be sold for cash quickly and easily without loss of value. A. the length of an asset’s life when it is issued. B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes. A. the length of an asset’s life when it is issued. . C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes. D. the extent to which something can be sold for cash quickly and easily without loss of value. B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. C. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity. D. the net amount (net book value) for something shown in quarterly accounting statements. A. the extent to which something can be sold for cash quickly and easily without loss of value. B. the statement of a firm’s financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders’ equity). A. the length of an asset’s life when it is issued. B. the statement of a firm’s financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders’ equity). C. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity. . . B. dividend yield. C. average cost of capital. D. none of these A. The market value of the bond is more than $1,000 B. The current yield was a lot less than 9% when the bond was first issued C. The current yield was a lot greater than 9% when the bond was first issued B. issued with a maturity date. C. valued as an annuity. D. none of these A. lower transaction costs. B. less political risk. D. all of these A. non-listing of foreign securities on U.S. stock exchanges. C. efficiency in converting currencies. D. all of these A. its nonsystematic risk. C. its specific risk. D. its standard deviation. B. the prime rate of interest C. the current rate of interest D. the nominal rate of interest A. intermediate-term U.S. government bonds B. U.S. Treasury bills D. anybody’s guess A. less risk B. lack of diversification C. diversification A. Ruskin’s available balance is $150,000, its book balance is $147,000, and its disbursement float is $3,000. B. If Ruskin writes a $3,000 check that takes 4 days to clear, during this period, $3,000 of disbursement float has been created. C. Ruskin’s book balance declines by the amount of the check, from $150,000 to $147,000, but the bank balance is unchanged until the check clears. D. A. about 30.42 days B. about 56.50 days D. none of these A. about 35.42 days C. about 40.83 days D. none of these A. The Principle of Time Value of Money B. The Signaling Principle D. The Options Principle A. The Principle of Incremental Benefits C. The Signaling Principle D. The Options Principle A. long-term loans that looks like short-term debt C. the pledge of receivables D. all of these B. A customer who is likely to make late payments is also more likely to default and to require extra collection efforts. C. Credit bureau reports give information about any legal judgments against the firm. D. none of these B. setting evaluation methods and credit

standards C. the choice of credit terms D. controlling and administering the firm’s credit functions B. that customers simply purchase what they want. C. that suppliers dictate the terms of the purchase. D. that suppliers cannot dictate the terms of the purchase. A. not pay corporate income taxes because it would have no interest expense. B. not pay any income taxes because interest would exactly offset its taxable income. C. pay corporate income taxes because it would have interest expense. D . A. pay corporate income taxes because it would have interest expense. B. pay corporate income taxes because it would not have interest expense. . D. none of these A. an irrelevant consideration for a cost of capital. C. important only if the firm faces financial distress. D. none of these A. It is indeed cash flow that’s irrelevant. B. The standard cash flow estimation does not explicitly identify the financing costs. C. The Principle of Incremental Benefits reminds us that it is the incremental cash flow that’s relevant. A. maintenance expenditures projects that involve replacing worn-out or damaged equipment. B. cost savings and revenue enhancement projects that include improvements in production technology to realize cost savings and marketing campaigns to achieve revenue enhancement. C. capacity expansion projects that involve expanding the current business by adding new equipment and facilities. A. sideways B. downward D. any way B. NPV C. PI D. Payback A. A mutually exclusive project is one that can be chosen independently of other projects. B. When undertaking one project prevents investing in another project, and vice versa, the projects are said to have a positive payback. D. all of these B. NPV C. PI D. Payback A. hiring and firing practices. C. what the arbitrage pricing theory tells us. D. none of these A. tax position. B. size. C. competitive position. B. the firm’s inventory turnover ratio. C. accounting practices. D. management’s attitude toward what other industries are doing. A. no legal restrictions C. higher taxes D. all of these A. a decrease in anticipated earnings. C. a decrease in leverage. D. all of these B. a split tax system C. a two-tier tax system D. none of these A. are seldom issued to finance the purchase of aircraft C. enable the borrower to obtain title to the assets only before it fully repays the debt D. all of these A. to set a price and other terms that investors will find acceptable when issuing securities C. to look for the most advantageous ways to finance the firm, such as the lowest-cost debt alternative D. that announcing the firm’s decision to issue securities conveys information about the firm A. usually a fixed rate, but it can be a variable rate that’s adjusted according to a specified formula B. the amount the borrower must repay A. recognize that the cancellation option in a lease is valuable to the lessee. C. look for profitable opportunities to lease (or rent) an asset, rather than borrow and buy it. D. look for profitable opportunities to arrange project financing or limit partnership financing for an asset you wish to purchase. A. The Principle of Comparative Advantage C. The Options Principle D. The Capital Market Efficiency A. The Principle of Self-Interested Behavior B. The Principle of Comparative Advantage D. The Time Value of Money Principle A. $25,000 B. $250,000 C. $550,000 A. $3,000,000 C. $3,000,000 minus fixed costs D. $3.00 B. $1,102,000 C. $1,000,500 D. $912,500 B. fair. C. followed by many analysts. D. all of these A. caught up in a bear market. B. being sold by insiders. D. undervalued. A. Soft capital rationing refers to the rationing imposed externally by limited funds for borrowing from outside sources. B. Hard capital rationing refers to the rationing imposed internally by the firm. D. all of these B. The Principle of Risk-Return Trade-Off C. The Time Value of Money Principle D. The Signaling Principle A. The Principle of Capital Market Efficiency C. The Principle of Diversification D. The Principle of Risk-Return Trade-Off A. The Principle of Self-Interested Behavior B. The Principle of Valuable Ideas D. The Principle of Incremental Benefits