COB 300 B Quiz, 300 Finance Test 1
Return on Assets is - Answers -the rate of return generated by the firms assets
return on common equity is - Answers -the return provided to stockholders (in an
accounting sense)
Return on invested capital (ROIC) is - Answers -the return provided to all suppliers of
capital
Operating cycle - Answers -The length of time it takes for the investment of cash in
inventory to be returned in the form of payments from customers
The longer the operating cycle - Answers -the greater the need for liquidity
Current assets generally includes - Answers -cash, marketable securities, accounts
receivable, and inventories
Current liabilities generally includes - Answers -accounts payable, accrued wages and
taxes, and notes payable
Low liquidity ratios are often a sign of - Answers -financial difficulties
Price earnings ratio (P/E) - Answers -how much investors are willing to pay for $1 of
reported earnings
Market to book ratio (M/B) - Answers -how much investors are willing to pay for $1 of
book value equity
Common size analysis provides - Answers -a "big picture" of the changing relationships
among accounts over time by standardizing the data
Vertical common size analysis - Answers -Each account as % of total
Horizontal common size analysis - Answers -Each account as % of base year
Window dressing - Answers -techniques to make statements and ratios look better
Compensation plans can result in - Answers -Distortions / Dressing
Ratios standardize - Answers -numbers and facilitate comparisons
, Ratios are used to - Answers -highlight weaknesses and strengths
Ratio comparisons - Answers -should be made through time and with competitors
Finance is about - Answers -The allocation of funds between those with more funds
than they need and those who needs funds
The three primary areas of finance - Answers -Business finance, investments, financial
institutions
The financial system provides an environment in which - Answers -households provide
funds to businesses and government
Market intermediary facilitates - Answers -the allocation of funds by matching borrowers
and lenders
Financial Intermediary - Answers -Provides funds to institution who in turn provides
funds to business or government
A security is - Answers -A negotiable financial instrument that is evidence of
indebtedness or ownership
Equity interests (Common Stock) - Answers -which represent the ownership interest
that the provider of funds has in the user of funds
Hybrid securities (convertible bonds or preferred stock) - Answers -Have characteristics
of both equity and debt
Money Market security is a - Answers -short term security (T-Bills, commercial paper)
Capital Market security is a - Answers -Security with a maturity greater than one year
(notes, bonds, debentures)
Bank loan - Answers -a loan made by a financial institution
Commercial paper - Answers -loan issued by a business or governmental entity
US Treasury bill - Answers -A short term indebtedness of the US Government
Mortgage loan - Answers -a loan that is backed by specific collateral
Municipal Bond - Answers -an indebtedness issued by a state or local goverment
Corporate Bond - Answers -An indebtedness issued by a corporation
Return on Assets is - Answers -the rate of return generated by the firms assets
return on common equity is - Answers -the return provided to stockholders (in an
accounting sense)
Return on invested capital (ROIC) is - Answers -the return provided to all suppliers of
capital
Operating cycle - Answers -The length of time it takes for the investment of cash in
inventory to be returned in the form of payments from customers
The longer the operating cycle - Answers -the greater the need for liquidity
Current assets generally includes - Answers -cash, marketable securities, accounts
receivable, and inventories
Current liabilities generally includes - Answers -accounts payable, accrued wages and
taxes, and notes payable
Low liquidity ratios are often a sign of - Answers -financial difficulties
Price earnings ratio (P/E) - Answers -how much investors are willing to pay for $1 of
reported earnings
Market to book ratio (M/B) - Answers -how much investors are willing to pay for $1 of
book value equity
Common size analysis provides - Answers -a "big picture" of the changing relationships
among accounts over time by standardizing the data
Vertical common size analysis - Answers -Each account as % of total
Horizontal common size analysis - Answers -Each account as % of base year
Window dressing - Answers -techniques to make statements and ratios look better
Compensation plans can result in - Answers -Distortions / Dressing
Ratios standardize - Answers -numbers and facilitate comparisons
, Ratios are used to - Answers -highlight weaknesses and strengths
Ratio comparisons - Answers -should be made through time and with competitors
Finance is about - Answers -The allocation of funds between those with more funds
than they need and those who needs funds
The three primary areas of finance - Answers -Business finance, investments, financial
institutions
The financial system provides an environment in which - Answers -households provide
funds to businesses and government
Market intermediary facilitates - Answers -the allocation of funds by matching borrowers
and lenders
Financial Intermediary - Answers -Provides funds to institution who in turn provides
funds to business or government
A security is - Answers -A negotiable financial instrument that is evidence of
indebtedness or ownership
Equity interests (Common Stock) - Answers -which represent the ownership interest
that the provider of funds has in the user of funds
Hybrid securities (convertible bonds or preferred stock) - Answers -Have characteristics
of both equity and debt
Money Market security is a - Answers -short term security (T-Bills, commercial paper)
Capital Market security is a - Answers -Security with a maturity greater than one year
(notes, bonds, debentures)
Bank loan - Answers -a loan made by a financial institution
Commercial paper - Answers -loan issued by a business or governmental entity
US Treasury bill - Answers -A short term indebtedness of the US Government
Mortgage loan - Answers -a loan that is backed by specific collateral
Municipal Bond - Answers -an indebtedness issued by a state or local goverment
Corporate Bond - Answers -An indebtedness issued by a corporation
