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While discussing international parity conditions with an intern, Stone makes the following
statements.
Statement 1: Absolute purchasing power parity extends the law of one price and states that
a basket of goods should have the same price throughout the world. Absolute purchasing
power parity is not widely used in practice to forecast exchange rates.
Statement 2: Although relative purchasing power parity is useful as an input for long-run
exchange rate forecasts, it is not useful for predicting short-run currency values.
Are none right, one right, or both right?
Both are correct
ember.pdfNotable
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9/25/2026Notable
IncorrectIncorrect
Exam Questions
Exam Questions
_ Things_to
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Which of the following items in the statement of cash flows would be least appropriate to
detect improper revenue recognition by Delicious?
A) cash inflows from a reduction in receivables.
B) cash inflows due to a reduction in inventories.
C) cash inflows due to a higher net income.
A
Improper revenue recognition (e.g., bill and hold sales) accounting results in an increase in
sales (and increase in accounts receivable), increase in cost of goods sold (i.e., reduction in
inventory) and an increase in net income.
ember.pdfNotable
member.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$@
9/25/2026Notable
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Exam Questions
Exam Questions
_ Things_to
Things
Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
to Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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ember.pdfNotable
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9/25/2026Notable
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Exam Questions
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_ Things_to
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Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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Swift is following Sigma, Inc., a chipmaker for wearable devices. Sigma has invested
significantly in R&D since its inception and that expenditure is finally bearing fruit: the
company is now profitable. Sigma correctly expenses the R&D expenditure when incurred.
Relative to its competitors, Sigma pays a lower share of gross revenue to its independent
contractors. However, Sigma does pay contractors annual bonuses based on their number
of years of affiliation with the company.
Which relative valuation multiple would Swift most appropriately use to value Sigma, Inc.?
P/CF, P/B, or P/S?
We are told that the firm has significant investment in R&D, suggesting the existence of
intangible assets that are not reflected in Sigma's book value; hence, the price-to-book
value ratio may be misleading.
Sigma's cost structure is different from that of its peers, so use of price-to-sales ratio may
not be directly comparable.
The price-to-cash-flow ratio is most appropriate here because cash flow is less prone to
manipulation and less likely to be distorted by differences in accounting practices.
ember.pdfNotable
member.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$@
9/25/2026Notable
IncorrectIncorrect
Exam Questions
Exam Questions
_ Things_to
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Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
to Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$
Questions _ Things to Remember.pdfNotable Incorrect Exam Questions _ Things to Remember.pdf@@@@@@@@@@@@@@@@@@@@@@
While discussing international parity conditions with an intern, Stone makes the following
statements.
Statement 1: Absolute purchasing power parity extends the law of one price and states that
a basket of goods should have the same price throughout the world. Absolute purchasing
power parity is not widely used in practice to forecast exchange rates.
Statement 2: Although relative purchasing power parity is useful as an input for long-run
exchange rate forecasts, it is not useful for predicting short-run currency values.
Are none right, one right, or both right?
Both are correct
ember.pdfNotable
member.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$@
9/25/2026Notable
IncorrectIncorrect
Exam Questions
Exam Questions
_ Things_to
Things
Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
to Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
,member.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$@
m Questions
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Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$
Questions _ Things to Remember.pdfNotable Incorrect Exam Questions _ Things to Remember.pdf@@@@@@@@@@@@@@@@@@@@@@
Which of the following items in the statement of cash flows would be least appropriate to
detect improper revenue recognition by Delicious?
A) cash inflows from a reduction in receivables.
B) cash inflows due to a reduction in inventories.
C) cash inflows due to a higher net income.
A
Improper revenue recognition (e.g., bill and hold sales) accounting results in an increase in
sales (and increase in accounts receivable), increase in cost of goods sold (i.e., reduction in
inventory) and an increase in net income.
ember.pdfNotable
member.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$@
9/25/2026Notable
IncorrectIncorrect
Exam Questions
Exam Questions
_ Things_to
Things
Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
to Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
,member.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$@
m Questions
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Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$
Questions _ Things to Remember.pdfNotable Incorrect Exam Questions _ Things to Remember.pdf@@@@@@@@@@@@@@@@@@@@@@
ember.pdfNotable
member.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$@
9/25/2026Notable
IncorrectIncorrect
Exam Questions
Exam Questions
_ Things_to
Things
Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
to Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
,member.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$@
m Questions
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Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$
Questions _ Things to Remember.pdfNotable Incorrect Exam Questions _ Things to Remember.pdf@@@@@@@@@@@@@@@@@@@@@@
Swift is following Sigma, Inc., a chipmaker for wearable devices. Sigma has invested
significantly in R&D since its inception and that expenditure is finally bearing fruit: the
company is now profitable. Sigma correctly expenses the R&D expenditure when incurred.
Relative to its competitors, Sigma pays a lower share of gross revenue to its independent
contractors. However, Sigma does pay contractors annual bonuses based on their number
of years of affiliation with the company.
Which relative valuation multiple would Swift most appropriately use to value Sigma, Inc.?
P/CF, P/B, or P/S?
We are told that the firm has significant investment in R&D, suggesting the existence of
intangible assets that are not reflected in Sigma's book value; hence, the price-to-book
value ratio may be misleading.
Sigma's cost structure is different from that of its peers, so use of price-to-sales ratio may
not be directly comparable.
The price-to-cash-flow ratio is most appropriate here because cash flow is less prone to
manipulation and less likely to be distorted by differences in accounting practices.
ember.pdfNotable
member.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$@
9/25/2026Notable
IncorrectIncorrect
Exam Questions
Exam Questions
_ Things_to
Things
Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
to Remember.pdf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
