Mlp Unit # 1 – Accounting and Finance
Unit # 1 – Accounting and Finance
1. A convertible bond is one which
a. can be exchanged for shares of stock
b. may be called ahead of maturity date by the issuer
c. has a maturity less than 90 days
d. makes no coupon payments and is initially priced at a deep discount
2. The Statement of Cash Flows addresses
a. assets, liabilities, and equity
b. dividends and retained earnings
c. operating, investing, and financing activities
d. working capital and float
3. The cash flow for three investments are:
Year1 Year2 Year3 Year4
A $8000 $0 $0 $0
B $2000 $2000 $2000 $2000
C $0 $0 $4000 $4000
D $4000 $4000 $0 $0
Which of these has the highest present value?
a. A
b. B
c. C
d. D
4. Opportunity cost is
a. cost which has already been incurred and cannot be recovered
b. the value of the best alternative foregone when a choice is made between two investments
c. the cost incurred by the next unit of production
d. the difference between book value and market value for an asset
5. The constant growth model (or “dividend discount model”) of stock valuation is based upon the premise that
a. the value of a stock is purely a function of supply and demand conditions in the market
b. a stock’s dividends are inherently more valuable than a bond’s interest payments
c. a company with a healthy cash flow will generally reduce its dividends over time
d. the value of a stock is the present value of the future dividends
6. When using Net Present Value (NPV) to make an investment decision, a project is acceptable if NPV is
a. Equals zero (modified)
b. Equals the desired rate of return.
c. Greater than zero.
d. Less than zero.
7. Absorption costing is required to be used for financial accounting because
a. It is the simplest cost allocation method
b. It is required by the tax laws
c. It was the first method developed
d. It is required by GAAP
Use the following information to answer the next three questions: JKL Pet
1. A convertible bond is one which
a. can be exchanged for shares of stock
b. may be called ahead of maturity date by the issuer
c. has a maturity less than 90 days
d. makes no coupon payments and is initially priced at a deep discount
2. The Statement of Cash Flows addresses
a. assets, liabilities, and equity
b. dividends and retained earnings
c. operating, investing, and financing activities
d. working capital and float
3. The cash flow for three investments are:
Year1 Year2 Year3 Year4
A $8000 $0 $0 $0
B $2000 $2000 $2000 $2000
C $0 $0 $4000 $4000
D $4000 $4000 $0 $0
Which of these has the highest present value?
a. A
b. B
c. C
d. D
4. Opportunity cost is
a. cost which has already been incurred and cannot be recovered
b. the value of the best alternative foregone when a choice is made between two investments
c. the cost incurred by the next unit of production
d. the difference between book value and market value for an asset
5. The constant growth model (or “dividend discount model”) of stock valuation is based upon the premise that
a. the value of a stock is purely a function of supply and demand conditions in the market
b. a stock’s dividends are inherently more valuable than a bond’s interest payments
c. a company with a healthy cash flow will generally reduce its dividends over time
d. the value of a stock is the present value of the future dividends
6. When using Net Present Value (NPV) to make an investment decision, a project is acceptable if NPV is
a. Equals zero (modified)
b. Equals the desired rate of return.
c. Greater than zero.
d. Less than zero.
7. Absorption costing is required to be used for financial accounting because
a. It is the simplest cost allocation method
b. It is required by the tax laws
c. It was the first method developed
d. It is required by GAAP
Use the following information to answer the next three questions: JKL Pet