Unit 6 or so

Which items change when a company pays a cash dividend? Working capital Total assets Total liabilities Shareholders' equity

2 and 3

A recession is defined as a drop in GDP for:

2 consecutive quarters

An analyst is viewing financial statements of Diderot Clothing Stores (DCS), a chain of high-fashion women's apparel. DCS had $7 million as its beginning-of-year retained earnings and it made post-tax profits of $3 million. The board of directors decides to pay a dividend of $1 million. Once paid, what will be the ending retained earnings?

9 mill

All of the following corporate actions would have the effect of increasing the firm's net worth except A) issuing common stock. B) issuing convertible debentures. C) issuing convertible preferred stock. D) purchasing some of the corporation's outstanding bonds at a discount.

B

A corporation calls in $5 million of its outstanding 6% bonds. The call price is 103. The effect on the balance sheet is all of the following except A) long-term liabilities decrease. B) current assets decrease. C) current liabilities decrease. D) owners' equity decreases.

C

An upward sloping yield curve represents which of the following? A) Time value of money B) Inflation expectations C) All of the above D) Increased risk of default over time

C

Some prominent stock market pundits are predicting that the economy will slide into a recession in the near future. Furthermore, they are expecting moderate deflation during the same period. If this were to happen, your clients would probably enjoy the greatest overall return from investing in

US treasury bonds

When investors tend to increase their investments in debt securities on the short end of the spectrum, it generally leads to

a positive yield curve

yield spread

widens in bad economy, narrows in good economy

A stock analyst viewing a corporation's income statement would not be able to determine the company's

cash on hand

The research department of an investment advisory firm forecasts that the current business cycle should reach its peak within the next 2 months. Under such circumstances, which of the following portfolio adjustments would be most suitable for the firm's customers who actively invest in common stocks?

defensive stocks

A commentator on a cable news show mentions that the capital structure of the Lowveh Corporation is highly leveraged. This means that the company

has significant LT debt

If, during a given year, a company has net income of $1 million and pays out dividends of $800,000, its retained earnings will

increase by 200k

The gross domestic product (GDP) for the United States is composed of

the sum of all consumer goods, capital goods, and services produced in the United States and net exports to other countries.

In comparing the change in the GDP from one year to another, to arrive at an accurate figure, each year's GDP should be converted to which of the following?

constant dollars

An investor using yield curve analysis would expect to view bonds of

a single issuer over varying maturities

A company has filed for an initial public offering for its $10 par common stock. The IPO is priced at $35 per share. Where on the balance sheet is the extra $25 per share recorded?

capital surplus, paid-in capital, paid-in surplus

When a company recognizes a sale only when payment is made, it is using which form of accounting?

cash

The issuance of a long-term debt instrument, such as a bond, by a company would have an immediate effect on which of the following balance sheet items? Total assets Total liabilities Working capital Shareholders' equity

1, 2, and 3

Which items would change if a company declared a cash dividend? Working capital Total assets Total liabilities Shareholders' equity

1, 3, and 4

Publicly traded corporations are subject to an annual audit of their financial records. Those audits must comply with GAAP (generally accepted accounting principles). When preparing to recommend a stock to a customer, you would most likely want to see that the auditor gave

an unqualified opinion