STR581 – Strategic Planning and Implementation – Final ExamClick here to download answers100. Occurs when inaccurate information can falsely exist.A. free-rider problemB. adverse selectionC. moral hazardD. The Principle of Valuable Ideas101. Which principle states that extraordinary returns are achievable with new ideas?A. The Principle of Valuable IdeasB. The Principle of Risk-Return Trade-OffC. The Principle of Incremental IdeasD. The Notional Principle102. Which of the following statements is true?A. The difference between the value of one action and the value of the best alternative is called anopportunity cost.B. An agent-manager can never make bad decisions.C. A security is a claim issued by a firm that pays owners interest but not dividends.D. A call option analyzes conflicts of interest and behavior in a principal-agent relationship.103. Generally accepted accounting principles (GAAP) refers toA. the extent to which something can be sold for cash quickly and easily without loss of value.B. the length of an asset’s life when it is issued.C. a technical accounting term that encompasses the conventions, rules, and procedures necessary todefine accepted accounting practice at a particular time.D. a report issued annually by a firm that includes, at a minimum, an income statement, a balancesheet, a statement of cash flows, and accompanying notes.104. Remaining maturity refers to:A. the amount of time remaining until its maturity.B. the length of an asset’s life when it is issued.C. a technical accounting term that encompasses the conventions, rules, and procedures necessary todefine accepted accounting practice at a particular time.D. a report issued annually by a firm that includes, at a minimum, an income statement, a balancesheet, a statement of cash flows, and accompanying notes.105. The annual report refers toA. the extent to which something can be sold for cash quickly and easily without loss of value.B. a report issued annually by managers to primarily convey information about select working capitalratios.C. the length of time remaining until an asset’s maturity.D. a report issued annually by a firm that includes, at a minimum, an income statement, a balancesheet, a statement of cash flows, and accompanying notes.106. The firm’s assets in the balance sheet refer to:A. the extent to which something can be sold for cash quickly and easily without loss of value.B. the productive resources in the firm’s operations.
C. the statement of a firms financial position at one point in time, including its assets and the claimson those assets by creditors (liabilities) and owners (stockholders equity).107. Book value (or Net book value) refers to: A. the net amount shown in the accountingstatements. B. the length of an asset’s life when it is issued. C. the statement of a firms financialposition at one point in time, including its assets and the claims on those assets by creditors(liabilities) and owners (stockholders equity). D. the price for which something could be boughtor sold in a reasonable length of time, where “reasonable length of time” is defined in terms ofthe item’s liquidity.108. Original maturity refers to: A. the net amount (net book value) for something shown inquarterly accounting statements. B. the length of an asset’s life when it is issued. C. a technicalaccounting term that encompasses the conventions, rules, and procedures necessary to defineaccepted accounting practice at a particular time. D. the price for which something could bebought or sold in a reasonable length of time, where “reasonable length of time” is defined interms of the item’s liquidity. FIN/571 Corporate Finance Final Exam Progress: (0/57)109. Preferred stock payment obligations are typically __________. A. viewed like debtobligations. B. issued with a maturity date. C. valued as an annuity. D. none of these110. Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is9% and the current yield is 10%. Which of the following statements is true? A. The current yieldwas a lot greater than 9% when the bond was first issued B. The current yield was a lot less than9% when the bond was first issued C. The market value of the bond is less than $1,000 D. Themarket value of the bond is more than $1,000111. If the yield to maturity for a bond is less than the bonds coupon rate, then the marketvalue of the bond is __________. A. less than the par value. B. greater than the par value. C.cannot tell D. equal to the par value.112. According to the CAPM, the expected return for a portfolio is determined by the portfolios.A. variance. B. beta. C. standard deviation. D. none of these113. Certain countries have restrictions. In practice, U.S. investors have NOT invested very muchinternationally. Possible factors include __________. A. lower transaction costs. B. expropriationrisk. C. firm-specific risk. D. all of these114. Certain countries have restrictions. In practice, U.S. investors have NOT invested very muchinternationally. Possible factors include __________. A. non-listing of foreign securities on U.S.stock exchanges. B. foreign tax considerations. C. efficiency in converting currencies. D. all ofthese115. Dimensions of risk include ___________. A. the certainty of a negative outcome B.uncertainty about the future outcome C. uncertainty about yesterday’s outcome D. theimpossibility of the same return116. One problem with using negative values for w1 (the proportion invested in the risklessasset) to represent a borrowed amount is that the implied borrowing rate of interest is the sameas __________. A. the current rate of interest B. the prime rate of interest C. the nominal rate ofinterest D. the lending rate of interest117. The Principle of __________ implies that the expected return for an asset equals itsrequired return. A. Risk-Return Trade- B. Capital Market Efficiency C. Signaling D. ComparativeAdvantage FIN/571 Corporate Finance Final Exam Progress: (0/57)
118. __________ says to calculate the incremental after-tax cash flows connected with workingcapital decisions. A. The Principle of Incremental Benefits B. The Signaling Principle C. TheOptions Principle D. The Principle of Time Value of Money119. Stony Products has an inventory conversion period (ICP) of about 60.83 days. Thereceivables collection period (RCP) is 36.50 days. The payables deferral period (PDP) is about30.42 days. What is Stonys cash conversion cycle (CCC)? A. about 69 days B. about 66 days C.about 67 days D. about 68 days120. Firms make short-term financial decisions just about every day solving such questions as__________. A. Where should we borrow? B. Where should we invest our cash? C. How muchliquidity should we have? D. all of these121. __________ says to calculate the incremental after-tax cash flows connected with workingcapital decisions. A. The Options Principle B. The Signaling Principle C. The Principle ofIncremental BenefitsD. The Principle of Time Value of Money122. Main sources of short-term funds include __________. A. trade credit and commercialpaper B. futures and bank loans C. bonds and trade credit D. none of these123. Which of the following statements is (are) true? A. The "dating 120" or the "60 extra" meanthat the clock does not start until 120 or 60 days after the invoice date. B. Prox or proximaterefers to the next month. C. Invoices with "10th prox" must be paid by the 10th of the nextmonth. D. all of these124. Which (if any) of the following statements is false? A. The invoice is a written statementabout goods that were ordered, along with their prices and the payment dates. In other words,the invoice is simply the bill for purchases. B. For the 4/10, net 40 credit terms, you are offering atotal credit period of 30 days from the date of the invoice, a discount period of 10 days, and a 4%discount if paid on or before the discount period expires. C. When a firm is using invoice billing,the invoice that accompanies shipment is a separate bill to be paid. D. none of these125. Most credit sales are made on an open account basis, which means __________. A. thatsuppliers cannot dictate the terms of the purchase. B. that customers simply purchase what theywant.C. that suppliers dictate the terms of the purchase. D. that customers cannot simplypurchase what they want. FIN/571 Corporate Finance Final Exam Progress: (0/57)126. An all-equity-financed firm would __________. A. pay corporate income taxes if its taxableincome is positive. B. not pay any income taxes because interest would exactly offset its taxableincome. C. pay corporate income taxes because it would have interest expense. D. not paycorporate income taxes because it would have no interest expense.127. A profitable firm would __________. A. pay corporate income taxes because it would haveinterest expense. B. pay corporate income taxes because it would not have interest expense. C.pay corporate income taxes if it had a positive taxable income. D. none of these128. An investors risky portfolio is made up of individual stocks. Which of the followingstatements about this portfolio is true? A. Each stock in the portfolio will have a beta greater thanone. B. Each stock in the portfolio has its own beta. C. Selling any stock in this portfolio will lowerthe beta of the portfolio. D. An investor cannot change the risk of this portfolio by her choiceabout personal leverage (lending or borrowing).129. Boeing Corporation is a world leader in commercial aircraft. In the face of competition,Boeing often faces a critical __________ decision: whether to develop a new generation ofpassenger aircraft. A. dividend B. present value C. payback D. capital budgeting
130. The capital budgeting process can be broken down into five steps. These steps includewhich of the following? A. Generate ideas for capital budgeting projects B. Prepare proposals C.Review existing projects and facilities D. all of these131. There are two important tax considerations for a capital budgeting project. These includewhich (if any) of the following? A. It is indeed cash flow that’s irrelevant. B. The standard cashflow estimation does not explicitly identify the financing costs. C. The Principle of IncrementalBenefits reminds us that it is the incremental cash flow that’s relevant. D. none of these132. The __________ method breaks down when evaluating projects in which the sign of thecash flow changes. A. Payback B. NPV C. PI D. IRR133. Whenever projects are both independent and conventional, then the IRR and NPV methodsagree. Which of the following statements is true? A. A mutually exclusive project is one that canbe chosen independently of other projects. B. When undertaking one project prevents investingin another project, and vice versa, the projects are said to have a positive payback. C. Aconventional project is a project with an initial cash outflow that is followed by one or moreexpected future cash inflows. D. all of these134. In practice, the __________ rule is preferred. A. PI B. NPV C. IRR D. Payback FIN/571Corporate Finance Final Exam Progress: (0/57)135. Studies show systematic differences in capital structures across industries. These are duemostly to differences in __________. A. accounting practices. B. the firm’s inventory turnoverratio. C. the ability of assets to support borrowing. D. management’s attitude toward what otherindustries are doing.136. Studies show systematic differences in capital structures across industries. These are duemostly to differences in the availability of tax shelter provided by things other than debt, such as__________. A. accelerated depreciation. B. operating tax loss carryforwards. C. investment taxcredit. D. all of these137. Studies show systematic differences in capital structures across industries. These are duemostly to differences in __________. A. hiring and firing practices. B. the availability of tax shelterprovided by things other than debt, such as accelerated depreciation, investment tax credit, andoperating tax loss carryforwards. C. what the arbitrage pricing theory tells us. D. none of these138. There can be a variety of motives for stock repurchases including __________. A. a buybackof overvalued stock. B. an increase in leverage. C. a decrease in anticipated earnings. D. all ofthese139. Some countries have __________ in which shareholders returns are not fully taxed twice.A. an imputation tax system B. a split tax system C. a two-tier tax system D. none of these140. There can be a variety of motives for stock repurchases including __________. A. adecrease in leverage. B. a buyback of undervalued stock. C. a decrease in anticipated earnings. D.all of these141. Mortgage bonds are __________. A. secured by a lien on general assets of the issuer B.secured by a lien on specific assets of the issuer C. usually secured by assets such as commonshares of one of the issuers subsidiaries D. none of these142. Conditional sales contracts __________. A. are seldom issued to finance the purchase ofaircraft B. are similar to equipment trust certificates C. enable the borrower to obtain title to theassets only before it fully repays the debt D. all of these
143. The Time Value of Money Principle says __________. A. to look for the most advantageousways to finance the firm, such as the lowest-cost debt alternative B. to use discounted cash flowanalysis to compare the costs and benefits of financing decisions, such as alternative securities tosell, lease versus borrow and buy, and bond refundingC. to set a price and other terms thatinvestors will find acceptable when issuing securities D. that announcing the firms decision toissue securities conveys information about the firm144. __________ says to look for opportunities to develop asset-based financing arrangementsthat offer new positive-NPV financing mechanisms. A. The Principle of Valuable Ideas B. The TimeValue of Money Principle C. The Principle of Self-Interested Behavior D. The Principle ofComparative Advantage145. The Principle of Self-Interested Behavior says __________. A. to calculate the netadvantage of leasing based on the incremental after-tax benefits that leasing will provide. B. tolook for profitable opportunities to lease (or rent) an asset, rather than borrow and buy it. C. touse discounted cash flow analysis to compare the costs and benefits of leasing, relative to thealternative of borrowing and buying. D. that leasing transfers the tax benefits of ownership fromthe lessee to the lessor.146. __________ says to transfer the tax benefits of ownership to other parties if they arewilling to pay for benefits your firm cannot use. A. The Principle of Two-Sided Transactions B. ThePrinciple of Incremental Benefits C. The Principle of Comparative Advantage D. The CapitalMarket Efficiency Principle FIN/571 Corporate Finance Final Exam Progress: (0/57)147. The wholesale price for Captain John’s is $1.00 per loaf, and the variable cost of productionis $0.50 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional5.0 million loaves in the next year. What additional revenues minus expenses will be generatedfrom expansion? A. $25,000 B. $250,000 C. $550,000 D. none of these148. The wholesale price for Captain John’s is $0.612 per loaf, and the variable cost ofproduction is $0.387 per loaf. Captain John’s is expecting that expansion will allow them to sell anadditional 4.5 million loaves in the next five years. What additional revenues minus expenses willbe generated from expansion? A. $1,102,000 B. $912,500 C. $1,012,500 D. $1,000,500149. The wholesale price for Captain John’s is $3.00 per loaf. One million loaves will be sold inthe next year. What is the contribution margin? A. cannot tell B. $3.00 C. $3,000,000 D.$3,000,000 minus fixed costs150. Which of the following statements is true? A. Soft capital rationing refers to the rationingimposed externally by limited funds for borrowing from outside sources. B. Hard capital rationingrefers to the rationing imposed internally by the firm. C. A post audit is a set of procedures forevaluating a capital budgeting decision after the fact. D. all of these151. Pursuing valuable ideas is the best way __________. A. to avoid risk. B. to achieveextraordinary returns.C. to restrain your spending. D. to get yourself in trouble.152. In efficient markets, as in the United States, you should think long and hard before youconclude that a market price is __________. A. wrong. B. fair. C. followed by many analysts. D. allof these153. __________ says to forecast the firm’s cash flows, and analyze the incremental cash flowsof alternative decisions. A. The Principle of Risk-Return Trade-Off B. The Signaling Principle C. ThePrinciple of Incremental Benefits D. The Time Value of Money Principle
154. ___________ says to use both bottom-up and top-down processes to increase the chanceof uncovering valuable ideas. A. The Principle of Valuable Ideas B. The Behavioral Principle C. ThePrinciple of Two-Sided Transactions D. The Principle of Comparative Advantage155. __________ says to use common industry practices as a good starting place for theplanning process. A. The Behavioral Principle B. The Principle of Incremental Benefits C. ThePrinciple of Self-Interested Behavior D. The Principle of Valuable Ideas156. The most important performance dimension for product development projects is: A.Quality B. Product flexibility C. Time-to-market D. Productivity157. When evaluating a new product development project using net present value analysis,which of the following will make the project more attractive? A. Delaying the start of the projectB. Making the project run over a longer period of time C. Improving (bringing forward) the datewhen revenue will begin D. A and B158. Which of the following statements is true about value analysis/value engineering (VA/VE)?A. The purpose of VA/VE is to simplify products and processes. B. The objective of VA/VE is toachieve equivalent or better performance at a lower cost. C. VA is performed before theproduction stage, while VE deals with products already in production. D. both A and B159. The category given the maximum point value in the Baldrige award is: A. Business results B.Process management C. Strategic planning D. Customer and market focus160. Which of the following is not a dimension of design quality? A. ServiceabilityB.Customization C. Features D. Durability161. Which Quality Guru advocated that senior management is responsible for 94% of qualityproblems? A. Ishikawa B. Juran C. Crosby D. Deming162. Which of the following is not an assumption of the basic economic-order quantity model?A. ordering or setup costs are constant B. quantity discounts are available C. annual demand isconstant and known D. lead time is constant163. The basic difference between P and Q systems is: A. P models favor more expensive itemsB. P model is more appropriate for important items such as critical repair parts C. Q models areevent triggered while P models are time triggered D. Q models are time triggered while P modelsare event triggered164. Which of the following statements is true about the Q-system? A. It does not have an EOQ,since the quantity varies according to demand. B. The order interval is fixed not the orderquantity. C. It does not have a reorder point but rather a target inventory. D. The system iscompletely determined by the two parameters, Q and R.165. The objectives of work-center scheduling include(s): A. To meet due dates B. To minimizelead times C. To minimize finish goods inventory D. A and B166. A _________ approach actually schedules in detail each resource using the setup andruntime required for each order. A. Forward scheduling B. Backward scheduling C. Infinite loadingD. Finite loading167. The assignment method is appropriate in solving problems that have the followingcharacteristics: A. There are n things to be distributed to n destinations B. Though eachdestination may handle all the things, the final assignment has each thing assigned to one andonly one destination C. Only one criterion should be used (minimum cost, maximum profit, forexample) D. A and C
168. Which of the following according to Goldratt is not a component of production cycle time?A. Wait time B. Maintenance timeC. Setup time D. Process time169. Goldratts rule of production scheduling include all but: A. An hour saved at a non-bottleneck is a mirage B. A process batch should be fixed both along its route and in timeC. Donot balance the capacity - balance the flow D. Utilization and activation of a resource is not thesame thing170. According to Goldratt and Fox, a useful performance measure to treat inventory is ______.A. Inventory turnover B. Current ratio C. Quick ratio D. Dollar days171. Which of the following would not be considered in deciding how far to minimum-costschedule (crash) a project? A. Project overrun penalties B. Incentives for early completion C.Indirect project costs (e.g. interest on a construction loan) D. The normal duration times of tasksnot on a critical path172. The advantages of pure project include all but: A. The project manager has full authorityover the project. B. Team pride, motivation, and commitments are high. C. Decisions are madequickly. D. A team member can work on several projects.173. Which of the following is not a typical project milestone? A. Completion of design B.Production of a prototype C. Training of project members D. Completed testing of the prototypeSupply-chain response relates to the following: A. How quickly a customer order can be filled B.How quickly a company can react to a new competing product C. How inexpensive the product isD. A and B174. According to Hau Lee, which of the following types of products need to be delivered withefficient supply-chains? A. Custom products B. Innovative products C. Grocery productsD. Hightechnology products175. The idea of the Value Density calculation is: A. Finding a carrier that can handle the weightB. Matching the weight of the product with an appropriate carrier C. Determining how a productshould be shipped considering its weight and valueD. Finding the minimum cost carrier176. Which of the following statements is not true about capacity management in operations? A.When looking at capacity, operations managers need to look at both resource input and productoutputs. B. An operations management view also emphasizes the time dimension of capacity. C.Capacity planning itself has different meaning to individuals at different levels within theoperations management hierarchy. D. The definition of capacity, in an operations managementcontext, makes a clear distinction between efficient and inefficient use of capacity.177. The steps to determining capacity requirements include: A. Using decision trees to evaluatecapacity alternatives B. Calculating equipment and labor requirements to meet product lineforecasts C. Projecting labor and equipment availabilities over the planning horizon D. B and C178. Capacity utilization rate can be computed as: A. Capacity used - best operating level B.Capacity used x best operating level C. Capacity used / best operating level D. Capacity used +best operating level179. Which of the following is NOT one of the more successful applications of lean concepts inservices? A. Organize problem-solving groups B. Upgrade housekeeping C. Upgrade quality D.Introduction of demand-push scheduling
180. A kanban card is used to signal that: A. work is ready to be moved to the next station B. aworker has run out of parts C. a machine has broken down D. work is authorized to replenish adownstream station181. Which of the following is not true about JIT systems? A. The JIT system is based on thephilosophy of eliminating waste and utilizing the full capability of the worker. B. Under JIT theideal lot size is one. C. JIT is typically applied to repetitive manufacturing. D. The goal of JIT is todrive all inventory queues to a moderate level thus minimizing inventory investment andshortening lead times.182. Which phrase most closely describes the Delphi forecasting technique? A. consumer surveyB. random individual opinions D. test markets183. Which of the following would not be classified as a component of demand? A. Cycle B.Seasonality C. Trend D. Causal variation184. Under exponential smoothing, if we want our forecast to be very responsive to recentdemand, the value of alpha should be: A. moderate B. zero C. small D. large E. No, Acme is not aholder in due course because of some other reason.185. One option for altering the pattern of demand is: A. carrying inventory B. using overtime C.hiring employees D. pricing186. Which of the following is not a cost relevant to aggregate production planning? A. Costsassociated with changes in the production rate B. Quantity discountsC. Basic production costs D.Inventory holding costs187. Aggregate planners balance: A. demand and capacity B. demand and inventories C. demandand costs D. supply and inventories188. Which MRP system input element specifies how many and when the firm plans to buildeach end item? A. Master production scheduleB. Bills of material C. Inventory records file D.Capacity planning189. Which of the following most closely describes net material requirements? A. grossrequirements - on-hand - planned order receipts B. gross requirements - on-hand + plannedorder receipts C. gross requirements - planned order receipts D. gross requirements - plannedorder releases190. Which of the following is true about MRP Systems? A. demand pattern is random B. lotsizing is EOQ C. based on independent demand D. objective is to meet manufacturing needs191. Which of the following statements is not true about capacity management in operations? A.Capacity planning itself has different meaning to individuals at different levels within theoperations management hierarchy. B. An operations management view also emphasizes the timedimension of capacity. C. When looking at capacity, operations managers need to look at bothresource input and product outputs. D. The definition of capacity, in an operations managementcontext, makes a clear distinction between efficient and inefficient use of capacity.192. Service capacity: A. is highly time and location dependent B. is subject to less volatiledemand fluctuations C. utilization directly impacts service quality D. A and C193. The steps to determining capacity requirements include: A. Using decision trees to evaluatecapacity alternatives B. Calculating equipment and labor requirements to meet product lineforecasts C. Projecting labor and equipment availabilities over the planning horizon D. B and C
194. Which one of the following managerial accounting approaches attempts to allocatemanufacturing overhead.A. Activity-based costing.B. Just-in-time inventory.C. Total-quality managementD. Theory of constraints.195. Baden Company manufactures a product with a unit variable cost of $50 and a unit salesprice of $88. Fixed manufacturing costs were $240,000 when 10,000 units were produced andsold. The company has a one-time opportunity to sell an additional 1,000 units at $70 each in aforeign market which would not affect its present sales. If the company has sufficient capacity toproduce the additional units, acceptance of the special order would affect net income as follows:A. Income would increase by $70,000.B. Income would increase by $4,000.C. Income would increase by $20,000D. Income would decrease by $4,000.
196. Which of the following is NOT one of the more successful applications of lean concepts inservices? A. Organize problem-solving groups B. Upgrade housekeeping C. Upgrade quality D.Introduction of demand-push scheduling197. ________ communicates a company’s intended value positioning of its product or brand tothe market. A. Promotion B. Packaging. C. Physical evidence. D. Place. E. Price198. Which list below best describes the major services performed by public accountants?A. Auditing, taxation, management consultingB. Cost accounting, production scheduling, recruitingC. Employee training, auditing, bookkeepingD. Bookkeeping, mergers, budgets199. The primary purpose of the statement of cash flows is to __________.A. provide information about the investing and financing activities during a periodB. prove that revenues exceed expenses if there is a net incomeC. facilitate banking relationshipsD. provide information about the cash receipts and cash payments during a period200. The cost principle requires that when assets are acquired, they be recorded at __________.A. selling priceB. list priceC. appraisal valueD. exchange price paid