Cooperate Finance

Which of the following is the general formula for the EAR when m is the number of times interest is compounded in a year?

(1 + quoted rate/m)m âˆ' 1

Long-term liabilities represent obligations of the firm lasting more than Blank______.

1 year

Using a time value of money table, what is the future value interest factor for 20 percent for 2 years?

1.44

Match the following terms relating to stock valuation.

Price in one year,Next expected dividend,Discount rate,Price today,Dividend just paid

Which principle of operational excellence refers to ongoing improvement of the operations based on the experience of front line employees?Â

Problem solving

Which principle of operational excellence refers to continuous process flows that match supply with demand?Â

Processes

The goal of SMED is a setup process whose time can be described with how many digits?

Single

Statistical process control is based on what?

Statistical analysis

The formula for the future value of an annuity factor is (1 + r)t âˆ' 1/r.

TRUE

True or false: A Kanban system typically controls the amount of inventory.

TRUE

True or false: A put bond allows the holder to force the issuer to buy the bond back at a stated price.

TRUE

True or false: A simple way to amortize a loan is to have the borrower pay the interest each period plus a fixed amount.

TRUE

True or false: According to Graham and Harvey's 1999 survey of 392 CFOs (published in 2001), the internal rate of return and the NPV are the two most popular capital budgeting methods used by firms in the United States and Canada.

TRUE

True or false: Current yield = Annual coupon payment/Price

TRUE

True or false: The bottleneck step in a process can change depending upon the batch size set at a step with a setup.

TRUE

What does it mean when a company reports ROA of 12 percent?

The company generates $12 in net income for every $100 invested in assets.

Which of the following are true of bonds?

They are normally interest-only loans.,They are issued by both corporations and governments.

Blank______ changes as the output of the firm changes.

Variable cost

Which of the following statement is true about a robust process?

Variation in input variables does not lead to large variation in outcome variables.

Match the Japanese term to its meaning.

Waste,Unevenness in flow,Overburdening a machine or operator with work

The coupon payments on floating-rate bonds are Blank______.

adjustable

Rework leads to a waste of _______.

both

Ishikawa diagrams are used to visualize the _blank​_ structure of a complex system

causal

Environmental variables ______ affect the process outcome.

do

Input variables _____ impact the outcome of the process.

do

For a step with a setup, the capacity _blank​_ depend on the batch size.

does

The defect probability is the likelihood a randomly chosen flow unit ________ meet specifications.

does not

Assume interest is compounded monthly. The Blank______ annual rate will express this rate as though it were compounded annually.

effective

In almost all multiple cash flow calculations, it is implicitly assumed that the cash flows occur at the Blank______ of each period.

end

In the dividend growth model, the expected return for investors comes from which two sources?

growth rate,dividend yield

The value of a firm is derived using the firm's Blank______ rate and its Blank______ rate.

growth; discount

When inventory follows a saw-toothed pattern, the average inventory is simply Blank______ of the maximum inventory.

half

The information needed to compute the profit margin can be found on the Blank______.

income statement

At a resource with a setup, increasing the batch size _blank​_ the capacity of the resource.

increases

Cash flow to creditors equals:

interest paid minus net new borrowing.

Time spent doing a setup _____ classified as idle time.

is not

Interest paid (plus/minus) net new borrowing equals cash flow to creditors.

less

The higher the capability index, the _blank​_ likely the process will produce a defect.

less

The project cash flow equals the project operating cash flow project change in NWC minus project capital spending.

less

If a company has inventory, the quick ratio will always be Blank______ the current ratio.

less than

The capacity of a step with a setup is _blank​_ its output rate when producing.

less than

An ordinary annuity consists of a(n) Blank______ stream of cash flows for a fixed period of time.

level

For x-bar charts the _blank​_ of each sample is plotted on the y-axis.

mean

A simple way to amortize a loan is to have the borrower pay the interest each period plus some fixed amount. This approach is common with -term business loans.

medium

The discounted cash flow valuation shows that higher cash flows earlier in a project's life are Blank______ valuable than higher cash flows later on.

more

The more steps in a process the _blank​_ likely a defect.

more

Accounts receivable and accounts payable are included in project cash flow estimation as part of changes in Blank______.

net working capital

The difference between labor content and flow time is ______ time.

non-value-added

If a company's growth for Years 1 through 3 is 20 percent but stabilizes at 5 percent beginning in Year 4, its growth pattern would be described as Blank______.

nonconstant

This type of growth describes a company that grows quickly at first, then slower in future years.

nonconstant

Which of the following present problems when using the IRR method?

nonconventional cash flows,mutually exclusive projects

Using an Excel spreadsheet to solve for the payment in an amortized loan, enter the number of periods as the value.

nper

Which of the following variables is not required to calculate the value of a bond?

original issue price of bond

The entire principal of an interest-only loan is the:

original loan amount.

Defects are detected based on variation in _blank​_ variables.

outcome

In a fishbone diagram, a horizontal arrow points at the name of the variable to analyze.

outcome

The present value formula for a(n) Blank______ is PV = C/r, where C is the constant and regularly timed cash flow to infinity, and r is the interest rate.

perpetuity

When all steps have to be performed correctly for a unit to be good the probability of a good unit is the _blank​_ of the probability of each step being performed correctly.

product

At a step with a setup, inventory accumulates when that step is in _blank​_.

production

Opportunity costs are classified as Blank______ costs in project analysis.

relevant

A process is designed to do well, even under very exceptional conditions.

robust

For heijunka to be effective, _blank​_ times must be reduced to where they are nearly inconsequential.

setup

A mixed-model assembly strategy states that different products should be produced in _blank​_ batches one after the other.

small

A small batch size at a step with a setup will lead to a _blank​_ amount of inventory.

small

Few defects will be produced when the actual process variation is _blank​_ than the target variation.

smaller

Options for future, related business moves are called Blank______.

strategic options

Bond ratings are based on the probability of default risk, which is the risk that Blank______.

the bond's issuer may not be able to make all the required payments

The dividend yield is determined by dividing the expected dividend (D1) by:

the current price (P0).

To find the present value of an annuity of $100 per year for 10 years at 10 percent per year using the tables, find a present value factor of 6.1446 and multiply it by Blank______.

$100

Broadband, Inc., has estimated preliminary cash flows for a project and found that the NPV for those cash flows is $400,000. The company now plans to perform a scenario analysis on the cash flow and NPV estimates. It will use an NPV of Blank______ as the base case.

$400,000

ABC Co. issued 1 million 6 percent annual coupon bonds that mature in 10 years. The face value is $1,000 per bond. What are the expected cash flows from one of these bonds?

$60 in interest at the end of each year for 10 years and a $1,000 repayment of principal at the end of 10 years

Which of the following is the formula for the future value of an annuity factor?

((1+r)tâˆ'1r)(1+r)t-1r<math xmlns=\http://www.w3.org/1998/Math/MathML\"><mfenced><mfrac><mrow><mo>(</mo><mn>1</mn><mo>+</mo><mi>r</mi><msup><mo>)</mo><mi>t</mi></msup><mo>-</mo><mn>1</mn></mrow><mi>r</mi></mfrac></mfenced></math>"

The formula for the present value of an annuity due is:

(1 + r) × (PV of an ordinary annuity).

Which of the following is the correct representation of the cash coverage ratio?

(EBIT + depreciation)/Interest expense

What is the formula for computing the internal growth rate (IGR)?

(ROA × b)/(1 âˆ' ROA × b)

What is the formula for computing a firm's sustainable growth rate?

(ROE × b)/(1 âˆ' ROE × b)

Which of the following is the correct representation of the total debt ratio?

(Total assets âˆ' Total equity)/(Total assets)

Suppose a faucet adds water at a rate of 1 gallon per minute. For which drain flushing rate will inventory accumulate the fastest?

.6 gallon per minute

The cash flows of an annuity due are the same as those of an ordinary annuity except that there is an extra cash flow at Time .

0

The multiple rates of return problem is the possibility that more than one discount rate may make the net present value of an investment equal to .

0

FV = × (1 + r)t

1

What is the total number of inputs that change at a given time while doing sensitivity analysis?

1

Using a time value of money table, what is the future value interest factor for 10% for 2 years?

1.21

Which formula below represents a present value factor?

1/(1 + r)t

A firm with a profit margin of 10 percent generates Blank______ in net income for every dollar in sales.

10 cents

If there are nine directors to be elected, what is the least number of shares you will need to guarantee a seat on the board under cumulative voting?

10 percent of the stock plus 1 share

If a new project requires an investment in net working capital when it is launched, then at the end of the project, NWC will be:

100 percent reversed.

Current assets are defined as assets that can be turned into cash within Blank______ months.

12

Which of the following spreadsheet functions will result in the correct answer for the below annuity problem:

1448.656247

The rules for depreciating assets for tax purposes are based upon provisions in the:

1986 Tax Reform Act.

If you hold 50 shares of a particular corporation's common stock and there are 5 directors to be elected, how many votes will you be allowed to cast under cumulative voting?

250

For a p-chart the lower control limit is standard deviations below the center line.

3

Consider a two-step process where the first step produces at a rate of 2 units per minute and the second step produces at a rate of 1 unit per minute. Assuming the beginning inventory in a buffer before step 2 is equal to zero, the inventory in that buffer after 30 minutes will be _blank​_.

30 units

How many presses would be required to produce 10,000 copies of a 300 page book with Gutenberg's printing press technology without performing any setups?

300

Days' sales in receivables is given by the following ratio:

365/receivables turnover

At a step with a setup, which will require larger batch sizes (and hence more inventory) to meet demand?

4 products with total demand equal to 200 gallons per hour

550 gallons of soup is produced in a production cycle, 360 out of every 480 gallons produced must be chicken noodle soup and 120 out of every 480 gallons must be tomato soup. Thus, of the 550 gallons, how many gallons should be chicken?

412.5

If there are nine directors that need to be elected, how many shares do you need to own in order to guarantee a seat on the board under straight voting?

50 percent of the stock + 1 share

If parts flow from machine A to machine B and then to machine C, then which pair of machines can be farther apart from each other?

A and C

How does the timing and the size of cash flows affect the payback method? Assume the project does pay back within the project's lifetime.

An increase in the size of the first cash inflow will decrease the payback period, all else held constant.

A well-known form of implementing detect-stop-alert is the cord that allows workers to halt production.

Andon

Which of the following correctly describes the relationship between depreciation, income, taxes, and investment cash flows?

As depreciation expense increases, net income and taxes will decrease, while investment cash flows will increase.

Suppose a machine that fills bottles of beverage has an issue with an internal sensor and consistently overfills bottles by more than .2 ounces. This is what type of variation?

Assignable cause

Suppose a new person is hired to perform a task and for the first few days that person performed the task at a slower rate than when the previous, experienced, person performed it. This is an example of what kind of variation?

Assignable cause

Which kind of variation is due to a systematic issue?

Assignable cause

Which term refers to combining machines with the intelligence of workers?

Autonomation

Which type of outcome is exemplified by an automobile manufacturer tracking the frequency with which cars are defective?

Binary

Which of the following processes can be used to calculate the future value of multiple cash flows?

Calculate the future value of each cash flow first and then sum them.,Compound the accumulated balance forward one year at a time.

Drag the denominator used to calculate utilization to the step's requirement for a setup time.

Capacity,Flow rate when producing

As an investor in the bond market, why should you be concerned about changes in interest rates?

Changes in interest rates cause changes in bond prices.

In the context of baking cupcakes for sale later, which activities are setups?

Cleaning the baking tins between batches,Pre-heating the oven,The baking of the batch of cupcakes

The idea that no two snowflakes are alike is an example of what kind of variation?

Common cause

lines that point to the main line in a fishbone diagram, can capture either input or environmental variables.

Diagonal

Which of the following represents the valuation of stock using a zero growth model?

Dividend/Discount rate = D/R

Which of the following are reasons that make valuing a share of stock more difficult than valuing a bond?

Dividends are unknown and uncertain.,Stock has no set maturity.,The required rate of return is unobservable

Which one of the following is true about dividend growth patterns?

Dividends may grow at a constant rate.

Which of the following is the appropriate spreadsheet function to convert a quoted rate of 12 percent compounded quarterly to an EAR?

EFFECT(0.12,4)

Which of the following is not a difference between debt and equity?

Equity is publicly traded, while debt is not.

As a general rule, which of the following are true of debt and equity?

Equity represents an ownership interest.,The maximum reward for owning debt is fixed.

True or false: If the interest rate is greater than zero, the value of an annuity due is always less than an ordinary annuity.

FALSE

True or false: If there is a conflict between market and accounting data, accounting data should be given precedence.

FALSE

True or false: If you invest for two periods at an interest rate of r, then your money will grow to (1 + r) per dollar invested.

FALSE

True or false: In a Kanban system, there is no limit on how much inventory can accumulate.

FALSE

True or false: In calculating cash flows, you should consider all financing costs.

FALSE

True or false: Inventory turnover is sales divided by inventory.

FALSE

True or false: Operating cash flow is based on the salvage value of equipment.

FALSE

True or false: Setup activities can be deferred until after production is done for the day.

FALSE

True or false: The DuPont identity is a popular expression breaking ROA into three parts.

FALSE

True or false: The IRR is easy to use because you only need to know the appropriate discount rate.

FALSE

True or false: The PI always results in correct decisions in comparisons of mutually exclusive investments.

FALSE

True or false: The dividend payout ratio equals cash dividends divided by sales.

FALSE

Blank______ are the prime source of information about a firm's financial health.

Financial statements

#NAME?

Fool

Blank______ is a situation that arises when a business cannot raise capital for a project under any circumstances.

Hard rationing

Which term refers to leveling production by reducing variation in the work-schedule?

Heijunka

What is the primary concern of the payback period rule?

How long it takes to recover the initial investment

Which of these questions can be answered by reviewing a firm's balance sheet?

How much debt is used to finance the firm?,What is the total amount of assets the firm owns?

How will a new method for performing a task that reduces variation affect the process capability index?

Increase it

A root cause is a change in which kind of variable?

Input

On which variables in a process does management exert the most control?

Input

Which variables are under management control?

Input

For a farmer growing corn, what type of variable is the frequency with which the crops are watered using an irrigation system?

Input variable

When engaging in an effort to reduce setup time, which type of task should you prioritize?

Internal

Which of the following is a disadvantage of the profitability index?

It cannot rank mutually exclusive projects.

Which of the following are reasons why NPV is considered a superior capital budgeting technique?

It considers the riskiness of the project.,It properly chooses among mutually exclusive projects.,It considers all the cash flows. ,It considers time value of money.

What is a real rate of return?

It is a rate of return that has been adjusted for inflation.,It is a percentage change in buying power.

What is a bond's accrued interest?

It is interest that has been earned but not yet received by the current bondholder.

What is the nominal rate of return on an investment?

It is the actual percentage change in the dollar value of an investment unadjusted for inflation.

Which of the following is true about the sustainable growth rate?

It is the maximum rate of growth a firm can maintain without increasing its financial leverage.

What is the bid price?

It is the price at which a dealer is willing to buy securities.,It is the price an investor will receive if he or she sells a bond to a dealer.

What is the asked price?

It is the price at which an investor can buy a particular security from a dealer.,It is the price at which a dealer is willing to sell a particular security.

What beneficial purpose does staggering serve?

It provides institutional memory.

What does a Treasury yield curve show?

It shows the yield for different maturities of Treasury notes and bonds.

What is the most important factor in achieving heijunka?

Low setup times

Suppose demand for a product is 100 units a day and a factory produces seven days a week. Which production schedule would be in line with the TPS philosophy toward pace?

Make 100 units every day

A manager has estimated a positive NPV for a project. What could drive this result?

Management rationality could drive this result.,The cash flow estimations are inaccurate.,The project is a good investment.

Why is the bond market less transparent than the stock market?

Many bond transactions are negotiated privately.

How is the price-earnings (PE) ratio computed?

Market price per share/Earnings per share

A positive NPV exists when the market value of a project exceeds its cost. Which of these two values is the most difficult to establish?

Market value

How is the market-to-book ratio measured?

Market value per share/Book value per share

You are solving a present value equation using a financial calculator and are given the number of years for compounding. This should be entered as the Blank______ value on the financial calculator.

N

If a project has multiple internal rates of return, which of the following methods should be used?

NPV,MIRR

Once cash flows have been estimated, which of the following investment criteria can be applied to them?

NPV,payback period,IRR

The two most important stock markets in the United States are the New York Stock Exchange and Blank______.

Nasdaq

Drag the description of work to its appropriate category.

Necessary because of how current process operates,Necessary to transform flow unit from inputs to output the customer wants

Which of the following is the correct equation for return on equity?

Net income/Total equity

Blank______ is a measure of how much value is created or added by undertaking an investment.

Net present value

Which of the following is the equation for estimating operating cash flows using the tax-shield approach?

OCF = (Sales - Costs) × (1 âˆ' Tax rate) + Depreciation × Tax rate

What are some features of the OTC market for bonds?

OTC dealers are connected electronically.,The OTC has no designated physical location.

Blank______ refers to the stream of customer orders to buy and sell stocks.

Order flow

Which variables are used to measure the quality of process output?

Outcome

Which variables measure the quality of the output of a process?

Outcome

variables measure the quality of the outcome of a process

Outcome

When calculating the utilization of a step with a setup, what information is used in the denominator?Â

Output rate when producing

At what point should all external tasks be done in order to reduce setup time?Â

Outside of setup

What is the formula for the present value of a growing perpetuity, where C1 is the net cash flow, R is the required return, and g is the growth rate?

P = C1/(R âˆ' g)

Which principle of operational excellence refers to a long-term approach that favors quality and capabilities over short-term financial goals ?

Philosophy

In which type of system does production occurs only because there is demand?

Pull

Upon discovering a defect, which of the following actions would represent the TPS philosophy of quality? (Check all that apply.)

Pull a cord that stops the production line immediately.,Thoroughly analyze the root cause of the problem.

Which type of system allows inventory to keep accumulating?

Push

P0 = (D1 + P1)/(1 + Blank______)

R

What is the equation for approximating the nominal rate of return? R = the nominal rate of interest r = the real rate of interest h = the inflation rate.

R = r + h

Which factor should govern the speed of a process?

Rate of demand

Match the situation with the likely improvement method.

Reduce costs,Increase flow rate

Which of the following represents the receivables turnover ratio?

Sales/Accounts receivable

What is the difference between scenario analysis and sensitivity analysis?

Scenario analysis considers a combination of factors for each scenario, while sensitivity analysis focuses on only one variable at a time.

What is scenario analysis?

Scenario analysis determines the impact on NPV of a set of events relating to a specific scenario.

analysis is useful in pinpointing variables that deserve the most attention.

Sensitivity

A small batch size at a step with a setup leads to low capacity because the step spends much of its time in what mode?

Setup

How is the time to complete setup activities related to the number of units subsequently produced.

Setup time is not related to the number of units.

What is the advantage that typically offsets setup times?Â

Shorter processing times

Which of the following is true relative to capital rationing?

Soft rationing is typically internal in that the firm allocates funds to divisions for capital projects.,Hard rationing implies the firm is unable to raise funds for projects.

Which is an example of common cause variation?

Some tomatoes on a vine are not shaped like all the others.

True or false: Free cash flow is also known as cash flow from assets.

TRUE

True or false: Â Once the center line and the lower and upper control limits have been created, the p-chart is used in exactly the same way as the X-bar chart.

TRUE

For Blank______, workers were animals who needed to be trained to perform work in the manner designed by engineers.

Taylor

If you are holding two identical bonds, except that one matures in 10 years and the other matures in 5 years, which bond's price will be more sensitive to interest rate risk?

The 10-year bond.

Which of the following are reasons why IRR continues to be used in practice?

The IRR of a proposal can be calculated without knowing the appropriate discount rate.,It is easier to communicate information about a proposal with an IRR.,Businesspeople prefer to talk about rates of return.

Which of the following is true of classes of common stock?

The classes of common stock often have unequal voting rights.,A primary reason for creating more than one class of stock is to maintain control.

What is true about environmental variables?

They are not under the control of management.

Junk bonds have the following features:

They are rated below investment grade bonds.

Which of the following are true of dividends?

They are taxable to individual shareholders.,They are paid at the discretion of the board of directors.

Under the principles of genchi genbutsu and kaizen, who should collect data how work is performed in order to improve the process?

Those performing the work

The U.S. government borrows money by issuing Blank______.

Treasury bonds,Treasury notes

When is a sample is in line with past process outcomes?

When it falls within the lower and upper control limits.

What is a corporate bond's yield to maturity (YTM)?

YTM is the prevailing market interest rate for bonds with similar features.,YTM is the expected return for an investor who buys the bond today and holds it to maturity.

By creating \baton passing zones

\" a process can absorb in worker speeds and starting times."

For a process to be \six sigma

\" its capability index must be at least ."

A benchmark PE ratio can be determined using:

a company's own historical PEs.,the PEs of similar companies.

Which of the following is a perpetuity?

a constant stream of cash flows forever

The combination MIRR method is used by the Excel MIRR function and uses which of the following?

a financing rate for discounting,a reinvestment rate for compounding,compounding cash inflows to the end of the project,discounting all cash outflows to time 0

A bond's coupon payment is:

a fixed amount of interest that is paid annually or semiannually by the issuer to its bondholders.

Net income refers to income earned Blank______.

after interest and taxes

Cash flows should always be considered on a(n) Blank______ basis.

aftertax

Cash flows used in project estimation should always reflect:

aftertax cash flows.,cash flows when they occur.

In TPS, quality problems are exposed and fixed through a process called detect-stop-.

alert

A website that allows investors to trade directly with one another is called Blank______.

an ECN

Which of the following methods are used to calculate present value?

an algebraic formula,a time value of money table,a financial calculator

Taylor saw workers as ________.

animals to be tamed and trained to do work designed by engineers

A positive NPV exists when the market value of a project exceeds its cost. Unfortunately, most of the time the market value of a project:

cannot be observed.

The \just right\" batch size makes a smart trade-off between and inventory."

capacity

Future value is the Blank______ value of an investment at some time in the future.

cash

Future value is the value of an investment at some time in the future.

cash

Which of the following are considered relevant cash flows?

cash flows from external costs,cash flows from erosion effects,cash flows from beneficial spillover effects

A corporate bond's yield to maturity:

changes over time.,is usually not the same as a bond's coupon rate.

Non-value-added work is those movements that must be done to complete a unit but do not add value in the eyes of the . (Enter only one word per blank.)

client

Genchi genbutsu emphasizes solving problems by _blank​_.

collection and analysis of data by front-line workers

Another name for natural variation is _________ variation.

common cause

High inventory levels tend to _blank​_ quality problems.

cover up

A firm with a market-to-book value that is greater than 1 is said to have Blank______ value for shareholders.

created

Identify the two types of preferred dividends:

cumulative and noncumulative

A production is a repeating sequence of produced units.

cycle

Someone who maintains an inventory of stocks and buys and sells those stocks is known as a Blank______.

dealer

The bid-ask spread represents the Blank______.

dealer's profit

If the flow rate of the process as a whole increases, but the batch size and processing time at a step with a setup stays the same, then maximum inventory will _blank​_.

decrease

When interest rates in the market rise, we can expect the price of bonds to Blank______.

decrease

All else constant, the dividend yield will increase if the stock price Blank______.

decreases

As processing time increases, the output rate when producing _blank​_.

decreases

Decreasing the processing time at a step that has a setup, but is not the bottleneck, and holding everything else constant, _blank​_ the maximum inventory.

decreases

Which of the following may increase the yield on corporate bonds as compensation to investors but will not impact Treasury bond yields?

default risk premium,liquidity premium

A root cause is a change in an input or environmental variable that initiated a .

defect

Heijunka refers to producing as close as possible to the true rate of .

demand

One factor when designing a Kanban system is the ______ rate.

demand

In TPS, quality problems are exposed and fixed through a process called -stop-alert

detect

Capacity grows at a _blank​_ rate as batch size increases.

diminishing

Incremental cash flows come about as a(n) Blank______ consequence of taking a project under consideration.

direct

In a present value equation, the rate (r) can be found using the PV, FV, and t. (Enter one word per blank.)

discount

What information do we need to determine the value of a stock using the zero growth model?

discount rate,dividend

Calculating the present value of a future cash flow to determine its worth today is commonly called Blank______ valuation.

discounted cash flow (DCF)

An airline tracking defects corresponding to lost luggage, a pharmacy trying to reduce the number of patients who were provided the wrong drugs, or a data entry operation struggling with handwriting recognition all face Blank______ outcomes (a unit is either defective or not).

discrete

Return on assets equals net income by total assets.

divided

The payout ratio equals cash dividends divided by net income.

dividend

Payments to shareholders that represent a return on the capital contributed to the corporation are referred to as .

dividends

A key difference between interest payments and dividend payments is:

dividends are not tax deductible.,interest is tax deductible.

The constant growth model assumes that Blank______.

dividends change at a constant rate

Which of the following are cash flows to investors in stocks?

dividends,capital gains

OEE stands for overall equipment .

effectiveness

In general, NPV is Blank______.

equal to zero when the discount rate equals the IRR,positive for discount rates below the IRR,negative for discount rates above the IRR

Side effects from investing in a project refer to cash flows from:

erosion effects.,beneficial spillover effects.

Financial statement analysis is primarily \management by Blank______ .\""

exception

The price of a share of common stock is equal to the present value of all Blank______ future dividends.

expected

Setup activities that can be done while the machine is producing are called tasks.

external

When designing a Kanban system, the larger the container size, the ______ Kanban cards are needed.

fewer

Which of the following are the primary as well as easy ways used to perform financial calculations today?

financial calculator,spreadsheet functions

When calculating annuity present values using a financial calculator, the amount is left blank. (Enter the abbreviation only.)

future value

Match the Japanese term with its English meaning.

go and see in the real place,process improvement

The higher the demand rate, the _blank​_ the number of Kanban cards.

greater

The higher the safety stock, the _blank​_ the number of Kanban cards.

greater

The longer the replenishment time, the _blank​_ the number of Kanban cards.

greater

If the interest rate is greater than zero, the value of an annuity due is always Blank______ an ordinary annuity.

greater than

Inventory accumulates in a process when the inflow rate is _blank​_ the outflow rate.

greater than

A situation when a business cannot raise capital for a project under any circumstances is called .

hard,rationing

Sunk costs are costs that Blank______.

have already occurred and are not affected by accepting or rejecting a project

The more available time, the ______ the takt time.

higher

More frequent compounding leads to Blank______.

higher EARs

A bond with a BB rating has a Blank______ than a bond with a BBB rating.

higher risk of default

\Inside quotes\" represent the Blank______ and the Blank______."

highest bid price; lowest ask price

Autonomation refers to automation with a touch.

human

Which three of the following are common shapes for the term structure of interest rates?

humped,upward sloping,downward sloping

The time when a process is doing nothing is known as time.

idle

Interest expenses incurred on debt financing are Blank______ when computing cash flows from a project.

ignored

An increase in depreciation expense will Blank______ cash flows from operations.

increase

If a process improvement effort decreases the amount of time spent on non-value-added activities, then the value-added percentage will _blank​_.

increase

If an individual works 8 hours a day and after a process improvement his time spent on value added activities increases then his OEE will _blank​_.

increase

As processing time increases the batch size that yields the target capacity _blank​_.

increases

As setup time increases the batch size that yields the target capacity _blank​_.

increases

As target capacity increases the batch size that yields that target capacity _blank​_.

increases

When interest rates in the market fall, bond values will increase because the present value of the bond's remaining cash flows Blank______.

increases

The stand-alone principle assumes that evaluation of a project may be based on the project's Blank______ cash flows.

incremental

The difference between a firm's cash flows with a project versus without the project is called Blank______.

incremental cash flows

A(n) Blank______ project does not rely on the acceptance or rejection of another project.

independent

A perpetuity is a constant stream of cash flows for a(n) Blank______ period of time.

infinite

The nominal rate is found by adding the Blank______ and the real rate of return.

inflation

The profitability index (PI) is calculated by dividing the present value of an investment's future cash flows by its Blank______.

initial cost

The present value of the future cash inflows are divided by the Blank______ to calculate the profitability index.

initial investment

Defects are caused by variation in _blank​_ variables.

input,environmental

In a system, production instructions are communicated to an upstream step when there is consumption at a downstream step. (Enter only one word per blank.)

kanban

The larger the estimated standard deviation, the _blank​_ the quantity UCL-LCL.

larger

Indentures and loan agreements often contain protective covenants designed to protect the interests of Blank______.

lenders

Electronic communication networks increase and in a market.

liquidity,competition

inventory helps detect-stop-alert as it makes quality problems more immediately apparent.

low

The higher the demand rate, the ______ the takt time.

lower

The primary risk in estimation errors is the potential to Blank______.

make incorrect capital budgeting decisions

A zero coupon bond is a bond that Blank______.

makes no interest payments

Time-trend analysis is an example of:

management by exception.

An option on a real asset rather than a financial asset is known as a Blank______.

managerial option,real option

If a firm is evaluating two possible projects, both of which require the use of the same production facilities, and taking one project means that we cannot take the other, these projects would be considered Blank______.

mutually exclusive

Variation that is due to randomness is referred to as variation or cause variation.

natural,common

A firm may use a price-sales ratio when it has had (negative/positive) earnings over the past year.

negative

The last item (or \bottom line\") on the income statement is typically the Blank______."

net income

Which one of the following is the correct equation for computing return on assets (ROA)?

net income/total assets

In capital budgeting, Blank______ determines the dollar value of a project to the company.

net present value

Which of the following techniques will provide the most consistently correct result?

net present value

The interest rate charged per period multiplied by the number of periods per year is equal to

on a loan. A,P,R

The present value can be found using the perpetual cash flow and the discount rate.

perpetuity

Net capital spending is equal to ending net fixed assets minus beginning net fixed assets Blank______.

plus depreciation

The for an annuity can be calculated using the annuity present value, the present value factor, and the discount rate.

pmt

High inventory and _blank​_ quality go hand in hand.

poor

The NPV is Blank______ if the required return is less than the IRR, and it is Blank______ if the required return is greater than the IRR.

positive; negative

The current value of a future cash flow discounted at the appropriate rate is called the Blank______ value.

present

The formula for the Blank______ value interest factor of an annuity is

present

With discounting, the resulting value is called the Blank______ value, while with compounding the result is called the Blank______ value.

present; future

The price-earnings ratio is per share divided by per share.

price,earnings

The P in SPC stands for .

process

In a _blank​_ system, inventory is a managerial decision.

pull

If you borrow $15,000 today at 5 percent annual interest to be repaid in one year as a lump sum, this is termed a Blank______.

pure discount loan

In a _____ system, flow units are allowed to enter the process independent of the current amount of inventory in process and the demand rate.

push

Defect probability is the likelihood with which a _blank​_ chosen flow unit does not meet specifications.

randomly

Setups of small duration (e.g. 9 minutes or less) enable _blank​_.

reduced inventory,frequent changeovers,smaller batch sizes

The basic NPV investment rule is:

reject a project if its NPV is less than zero.,if the NPV is equal to zero, acceptance or rejection of the project is a matter of indifference.,accept a project if the NPV is greater than zero.

According to the basic IRR rule, we should:

reject a project if the IRR is less than the required return.

The term structure of interest rates examines the Blank______.

relationship between short-term and long-term interest rates

One of the most important steps in estimating cash flow is to determine the Blank______ cash flows.

relevant

The objective of the OEE framework is to identify what percentage of a _blank​_ time is value-added and what percentage is wasted.

resource's

Idle time is a waste of a time.

resources

Two forms of waste are waste of a flow unit's time and waste of a time.

resources'

A sukuk is a contract that is related to:

riba.,Islamic law.

A process is one where variation in input or environmental variables does not lead to large variation in outcome variables.

robust

A cause is a change in an environmental or input variable that initiated a defect.

root

The input or environmental variables for which the variation lead to a defect are referred to as the cause of the defect.

root

The profit margin is equal to net income divided by Blank______.

sales

Which one of the following equations defines the total asset turnover ratio?

sales/total assets

When we estimate the best-case, worst-case, and base-case cash flows and calculate the corresponding NPVs, we are engaging in Blank______.

scenario analysis,asking what-if questions

The trading of existing shares occurs in the Blank______ market.

secondary

Scenario analysis considers a combination of factors for each scenario, while analysis focuses on only one variable at a time.

sensitivity

To investigate the impact on NPV of a change in one variable, you would employ Blank______.

sensitivity analysis

The goal of single-minute exchange of die (SMED) is to reduce the time.

setup

Shorter Blank______ allow the operation to switch between models more frequently, thereby helping synchronize the process with demand and making the operation lean.

setups

With interest, the interest is not reinvested.

simple

The larger the process capability index, the _blank​_ the target variation.

smaller

The narrower the design specification (e.g. the smaller the quantity USL - LSL) the _blank​_ the process capability index.

smaller

The target capacity for a resource is the _blank​_ capacity that does not reduce the flow rate of the process.

smallest

Production is used to smooth out variability in demand. (Enter only one word per blank.)

smoothing

A situation when different units in a business are allocated some fixed amount of money each year for capital spending is called Blank______.

soft rationing

According to the Blank______ principle, once the incremental cash flows from a project have been identified, the project can be viewed as a \minifirm.\""

stand-alone

Compounding during the year can lead to a difference between the rate and the effective rate. (Enter only one word per blank.)

stated

EAR = (1 + rate/m)m âˆ' 1

stated

The S in SPC stands for .

statistical

If the length of time required by an external setup increases then the batch size should _blank​_.

stay the same

What is the TPS philosophy consider the best pace of a production process?Â

steady, even if it is slow

In TPS, quality problems are exposed and fixed through a process called detect--alert

stop

Under a voting mechanism, the minimum number of votes required to acquire a seat on a board is PLUS .

straight,50%,1

For a given time period (t) and interest rate (r), the present value factor is Blank______ the future value factor.Â

the reciprocal of,1 divided by

The term structure of interest rates describes Blank______.

the relationship between nominal rates and time to maturity,the pure time value of money

Which of the following are rights of common stock holders?

the right to share proportionally in any residual value in the event of liquidation.,the right to vote on matters of importance.,the right to share proportionally in any common dividends paid.

What right does a proxy give to a shareholder?

the right to vote on behalf of another shareholder

The degree of interest rate risk depends on Blank______.

the sensitivity of the bond's price to interest rate changes

What approach does the following formula describe?

the tax-shield approach

Which of the following are usually included in a bond's indenture?

the total amount of bonds issued,the repayment arrangements

Time value of money tables are not as common as they once were because:

they are available for only a relatively small number of interest rates.,it is easier to use inexpensive financial calculators instead.

If unpaid preferred dividends must be \caught up\" before any common dividends can be paid

they are called Blank______ dividends."

Control charts plot data over .

time

To understand how much improvement potential there is one must first measure what percentage of a machine's or a worker's is used productively.

time

The sensitivity of a bond's price to interest rate changes is dependent on which of the following two variables?

time to maturity,coupon rate

The real world has moved away from using Blank______ for calculating future and present values.

time value of money tables

What is the purpose of a sinking fund?

to create a fund to repay bonds when they fall due

Ideally, the time a flow unit spends in processing is _blank​_ time.

value-added

Achieving consistency by controlling is critical for achieving high quality.Â

variations

Capability analysis helps one infer that one process is better than another by measuring the process . (Enter one word in the blank.)

variations

The time a flow unit spends in inventory is _blank​_ time.

wasted

The basic approach to evaluating cash flow and NPV estimates involves asking Blank______.

what-if questions

Soft rationing is a type of capital rationing that occurs Blank______.

when units in a business are allocated a certain amount of financing for capital budgeting

Most of the time, a floating-rate bond's coupon adjusts Blank______.

with a lag to some base rate

If the growth rate (g) is zero, the capital gains yield is Blank______.

zero

The IRR is the discount rate that makes NPV equal to Blank______.

zero

Three special case patterns of dividend growth discussed in the text include:

zero growth.,nonconstant growth.,constant growth.

Which of the following is the correct Excel function to calculate the present value of $300 due in five years at a discount rate of 10 percent?

186.2763969

For a p-chart the upper control limit is standard deviations above the center line.

3

The DuPont identity breaks ROE into parts.

3

When a process has a capability index of one, it can be thought of as a sigma process.

3

Suppose demand is for 200 gallons of chicken noodle soup and 100 gallons of tomato soup. What fraction of a batch should be dedicated to chicken noodle soup?

3-Feb

Which of the following spreadsheet functions will calculate the $614.46 present value of an ordinary annuity of $100 per year for 10 years at 10 percent per year?

614.4567106

If the demand rate for a process is 80 units per hour and the rate of the bottleneck in a process is 90 units per hour then the target capacity is _blank​_ units per hour.

80

The spreadsheet function for calculating net present value is Blank______.

=NPV(rate,CF1, ..., CFn) + CF0

What is a bond's current yield?

Current yield = Annual coupon payment/Price

R = Blank______.

D1/P0 + g

P1 = (Blank______ + P2)/(1 + R)

D2

For a farmer growing corn, what kind of variable is the weather?

Environmental

True or false: A PE ratio that is based on estimated future earnings is called a regressive PE ratio.

FALSE

True or false: All classes of stock issued by a firm must have equal voting rights.

FALSE

True or false: An advantage of the AAR is that it is based on book values, not market values.

FALSE

True or false: At a step that doesn't require a setup, more product variety leads to more inventory.

FALSE

True or false: Bond ratings are concerned only with the possibility of price changes.

FALSE

True or false: Common stock has a set maturity.

FALSE

True or false: Current assets plus current liabilities equals net working capital.

FALSE

True or false: Daily stock prices can only be found by looking up the stock in newspapers.

FALSE

True or false: For investors in the stock market, dividends from stocks are fixed and guaranteed, while capital gains are variable and not guaranteed.

FALSE

True or false: Future value refers to the amount of money an investment is worth today.

FALSE

True or false: Given the PV, FV, and payment amount, you can determine the number of periods.

FALSE

True or false: If all points are within the control limits then the process must be in control.

FALSE

True or false: The annual percentage rate (APR) is calculated as the interest rate charged per period on a loan divided by the number of periods per year.

FALSE

True or false: The annuity due calculation assumes cash flows occur evenly throughout the period.

FALSE

True or false: The annuity present value factor equals one minus the discount rate all divided by the present value factor.

FALSE

True or false: The discounted cash flow (DCF) valuation estimates future value as the difference between the market price and the cost of the investment.

FALSE

True or false: The effective annual rate is the interest rate expressed in terms of the interest payment made each period.

FALSE

True or false: The number of positive NPV projects is unlimited for any given firm.

FALSE

True or false: The payback period takes into consideration the time value of money.

FALSE

True or false: The payment for an annuity can be calculated using the annuity present value, the present value factor, and the interest rate.

FALSE

True or false: The present value is the sum of all expenses in a project.

FALSE

True or false: The price-earnings ratio is price per share times earnings per share.

FALSE

True or false: The process of leaving your money and any accumulated interest in an investment for more than one period is called multiplied interest.

FALSE

True or false: The profitability index (PI) is calculated by dividing the present value of an investment's future cash flows by its future cost.

FALSE

True or false: The profitability index rule for an independent project states that, if a project has a positive NPV, then the present value of the future cash flows must be smaller than the initial investment.

FALSE

True or false: The times interest earned ratio is EBIT minus interest.

FALSE

True or false: The value of managerial options is taken into account when performing conventional NPV analysis.

FALSE

True or false: There is a solid and prescriptive method to select which ratios to use in financial statement analysis.

FALSE

True or false: There is only one way to calculate the modified IRR.

FALSE

True or false: To find the annuity future value factor, you only need the cash flows and the discount rate.

FALSE

True or false: Using the spreadsheet formula to convert a quoted rate (or an APR) to an effective rate, use the formula NOMINAL(effect_rate, npery).

FALSE

True or false: Value-add time is always the same as processing time.

FALSE

True or false: When entering the interest rate in a financial calculator, you should key in the interest rate as a decimal.

FALSE

True or false: With interest-only loans, the principal is never repaid.

FALSE

True or false: You can make capacity as large as you want by making the batch size higher.

FALSE

True/False: Taylor viewed the factory floor worker as an asset who could assist with the design of efficient work and promises.

FALSE

Which of the following is the multi-period formula for compounding a present value into a future value?

FV = PV × (1 + r)t

What is an important drawback of traditional NPV analysis?

It ignores managerial options in investment decisions.

What does the dirty price represent?

It includes the quoted price and accrued interest.

What are the two main benefits of performing sensitivity analysis?

It reduces a false sense of security by giving a range of values for NPV instead of a single value. ,It identifies the variable that has the most effect on NPV.

What will happen to the current ratio if current assets increase, while everything else remains unchanged?

It will increase.

Which term refers to shutting down a machine upon detection of a problem?

Jidoka

Which term refers to an inventory control system where parts delivery instructions are triggered by the consumption of parts at the downstream step?

Kanban

_blank​_ is the process control system wherein an upstream resource replenishes what demand has withdrawn from the downstream.

Kanban

If FV = PV × (1 + r) is the single-period formula for future value, which of the following is the single-period present value formula?

PV = FV/(1 + r)

Which of the following is the correct formula for calculating the present value of a future amount, expected in t years at r percent interest?

PV = FV/(1 + r)t

The basic present value equation is Blank______.

PV = FVt/(1 + r)t

What are the cash flows involved in the purchase of a five-year zero coupon bond that has a par value of $1,000 if the current price is $800? Assume the market rate of interest is 5 percent.

Pay $800 today and receive $1,000 at the end of five years.

Which of the following are ways to amortize a loan?

Pay the principal and interest every period in a fixed payment.,Pay the interest each period plus some fixed amount of the principal.

Which principle of operational excellence refers to respectful interactions with employees that emphasize skill development and growth?

People and partners

What does historical data suggest about the nature of short-term and long-term interest rates?

Sometimes short-term rates are higher and sometimes long-term rates are higher.

Blank______ financial statements enable one to compare firms that differ in size.

Standardized

True or false: A disadvantage of the AAR is that it does not take into account the time value of money.

TRUE

True or false: A project with nonconventional cash flows will produce two or more IRRs.

TRUE

True or false: An ordinary annuity consists of a level stream of cash flows for a fixed period of time.

TRUE

True or false: Given the PV, FV, and life of the investment, you can determine the discount rate.

TRUE

True or false: If you invest at a rate of r for two periods, under compounding, your investment will grow to (1 + r)2 per dollar invested.

TRUE

True or false: In a common-size income statement, each item is expressed as a percentage of total sales.

TRUE

True or false: Increasing the batch size at a step with a setup can increase utilization.

TRUE

True or false: Interest paid minus net new borrowing equals cash flow to creditors.

TRUE

True or false: Interest rates can be quoted in various ways.

TRUE

True or false: Investment in net working capital may arise from the need to cover credit sales.

TRUE

True or false: Investors require a premium for the risk that issuers other than the Treasury may not make all promised payments on the issued bonds.

TRUE

True or false: It is important to investigate trends in financial ratios to identify the reason for the trend.

TRUE

True or false: Long-term debt has maturities greater than one year.

TRUE

True or false: Long-term liabilities are not due in the current year (from the date of the balance sheet).

TRUE

True or false: Low-grade bonds are rated below investment grade by the major rating agencies.

TRUE

True or false: Operating cash flow does not include depreciation or interest.

TRUE

True or false: Profit margin equals net income divided by sales.

TRUE

True or false: Some projects, such as mines, have cash outflows followed by cash inflows and cash outflows again, giving the project multiple internal rates of return.

TRUE

True or false: The annuity present value of an amount C is calculated as c*{1âˆ'1/(1+r)tr}c*1-1/1+rtr<math xmlns=\http://www.w3.org/1998/Math/MathML\"><mi>c</mi><mo>*</mo><mfenced open=\"{\" close=\"}\"><mfrac><mrow><mn>1</mn><mo>-</mo><mfenced open=\"\" close=\"\"><mrow><mn>1</mn><mo>/</mo><msup><mfenced><mrow><mn>1</mn><mo>+</mo><mi>r</mi></mrow></mfenced><mi>t</mi></msup></mrow></mfenced></mrow><mi>r</mi></mfrac></mfenced></math>"

TRUE

True or false: The cash ratio is found by dividing cash by current liabilities.

TRUE

True or false: The formula for a present value factor is  1/(1+r)t1/1+rt<math xmlns=\http://www.w3.org/1998/Math/MathML\"><mn>1</mn><mo>/</mo><msup><mfenced><mrow><mn>1</mn><mo>+</mo><mi>r</mi></mrow></mfenced><mi>t</mi></msup></math>."

TRUE

True or false: The government sells Treasury notes and bonds to the public every month.

TRUE

True or false: The measure of average accounting profit is in the numerator of the average accounting return (AAR) formula.

TRUE

True or false: The perpetuity present value can be found using the perpetual cash flow and the discount rate.

TRUE

True or false: The total debt ratio equals the total assets minus total equity divided total assets.

TRUE

True or false: To find the future value of multiple cash flows, calculate the future value of each cash flow first and then sum them.

TRUE

True or false: To prepare proforma financial statements, estimates of quantities such as unit sales, selling price per unit, variable cost per unit, and total fixed costs are required.

TRUE

True or false: Total return is calculated by adding the dividend yield and the capital gains yield.

TRUE

True or false: When calculating NPV, the present value of the nth cash flow is found by dividing the nth cash flow by 1 plus the discount rate raised to the nth power.

TRUE

True or false: When calculating the present value of an annuity using the financial calculator, you enter the cash flows of the annuity in the PMT key.

TRUE

True or false: While performing sensitivity analysis, we recompute NPV several times by changing one input variable at a time.

TRUE

Which of the following best explains why financial managers use a common-size income statement?

The common-size income statement can show which costs are rising or falling as a percentage of sales.

Which of the following are weaknesses of the payback method?

The cutoff date is arbitrary.,Time value of money principles is ignored.,Cash flows received after the payback period are ignored.

What does it mean when a firm has a days' sales in receivables of 45?

The firm collects its credit sales in 45 days on average.

What does the AAA rating assigned by S&P mean?

The firm is in a strong position to meet its debt obligations.

Which of the following create problems with financial statement analysis?

The firm or its competitors are global companies.,The firm or its competitors are conglomerates.,The firm and its competitors operate under different regulatory environments.

Which of the following are features of municipal bonds?

The interest on municipal bonds is exempt from federal taxes.,They are issued by state and local governments.,The interest on municipal bonds is, in some cases, exempt from state taxes in the state of issue.

What is the primary difference between time value of money data entries in your calculator and in a spreadsheet function?

The interest rate in your calculator is entered as a whole number, while in the spreadsheet function it is entered as a decimal.

What are the advantages of the payback period method for management?

The payback period method is ideal for minor projects.,It allows lower-level managers to make small decisions effectively.,The payback period method is easy to use.

In the Excel setup of a loan amortization problem, which of the following occurs?

The payment is found with = PMT(rate, nper, -pv, fv).,To find the principal payment each month, you subtract the dollar interest payment from the fixed payment.

Which of the following defines the primary market?

The primary market is where stocks are issued for the first time.

Specifying variables in the Excel NPV function differs from the manner in which they are entered in a financial calculator in which of the following ways?

The range of cash flows specified in Excel begins with Cashflow 1, not Cashflow 0.,The discount rate in Excel is entered as a decimal, or as a percentage with a percent sign.,With the Excel NPV function, Cashflow 0 must be handled outside the NPV function.,The Excel NPV function is actually a PV function.

Which of the following items are used to compute the current ratio?

accounts payable,cash

An annuity with payments beginning immediately rather than at the end of the period is called an Blank______.

annuity due

To find the total bond value, add the present value of the amount paid at maturity to the Blank______ of the annual coupon payments.

annuity present value

One of the weaknesses of the payback period is that the cutoff date is a(n) Blank______ standard.

arbitrary

The goals of risk analysis in capital budgeting include Blank______.

assessing the degree of forecasting risk,identifying critical components

If bonds for AT&T are quoted at 115, they can be purchased:

at 115 percent of par value plus accrued interest.

If a $1,000 face value U.S. Treasury bond is quoted at 99.5, then the bond can be purchased Blank______.

at 99.5 percent of face value plus any accrued interest

An annuity due is a series of payments that are made Blank______.

at the beginning of each period

The probability of a unit falling below the LSL and the probability of a unit being above the USL is the same when the of the distribution is in the middle of the tolerance interval.

average

The average accounting return is defined as:

average net income/average book value.

To calculate the future value of $100 invested for t years at r interest rate, you enter the present value in your calculator as a negative number. Why?

because the $100 is an outflow from you which should be negative

As the flow rate at a step with a setup decreases, the utilization _blank​_.

becomes lower

Opportunity costs are Blank______.

benefits lost due to taking on a particular project

What are municipal bonds?

bonds that have been issued by state or local governments

A person who brings buyers and sellers together is called a(n) Blank______.

broker

Capital Blank______ is the decision-making process for accepting and rejecting projects.

budgeting

Drag the source of each type of limit to the limit it relates to.

business tolerances for when a unit is a defect,measurements of past process outcomes

If a bond is issued with a provision it allows the issuer to repurchase part or all of the bond at defined prices and times.

call

A provision in the bond indenture giving the issuing company the option to repurchase the bonds before maturity is termed a Blank______.

call provision

When directors elected by common shareholders defer preferred dividends indefinitely, Blank______.

common shareholders must also forego dividends

Common-size statements are best used for comparing:

competitors.,firms of different sizes.,year-to-year for your firm.

The effective annual rate (EAR) takes into account the Blank______ of interest that occurs within a year.

compounding

The idea behind Blank______ is that interest is earned on interest.

compounding

The process of accumulating interest in an investment over time to earn more interest is called Blank______.

compounding

Nasdaq has which of these features?

computer network of securities dealers,multiple market maker system

Managerial options are taken into consideration in planning.

contingency

Match the Japanese term with the TPS concept.

continuous improvement,Problem solving begins by going out to the front line and observing the problem yourself

The C in SPC stands for .

control

Product costs are usually shown on the income statement under the heading of Blank______.

cost of goods sold

The profitability index is also called the Blank______ ratio.

cost-benefit

A bond's payment is a fixed amount of interest that is paid annually or semiannually by the issuer to its bondholders.

coupon

The cash coverage ratio adds Blank______ to operating earnings (EBIT) for a better of measure of how much cash is available to meet interest obligations.

depreciation

One step in calculating an EAR is to the quoted rate by the number of times that the interest is compounded.

dividing

Another strategy for making a process robust is to set up warning signs for when input and environmental variables exhibit variation that could lead to a defect.

early

Operating cash flow is a function of _________.

earnings before interest and taxes,taxes,depreciation

The annual rate is the interest rate expressed as if it were compounded once per year.

effective

Inventory is controlled in a Kanban system because production occurs at an upstream resource only when it has an container.

empty

Spreadsheet functions used to calculate the present value of multiple cash flows assume, by default, that all cash flows occur at the Blank______ of the period.

end

Which of the following is not a way to amortize a loan?

fixed interest payments only

The target capacity for a resource is the smallest capacity that does not reduce the _blank​_ of the process.

flow rate

A limitation of bond ratings is that they Blank______.

focus exclusively on default risk

The possibility that errors in projected cash flows will lead to incorrect decisions is known as Blank______.

forecasting risk,estimation risk

A PE ratio that is based on estimated future earnings is known as a Blank______ PE ratio.

forward

At a step with a setup, which production schedule will have longer flow times?

four products for a total of 200 gallons

The present value is the current value of the cash flows discounted at the appropriate discount rate.

future

The profitability index is calculated by dividing the PV of the Blank______ cash inflows by the initial investment.

future

Using the PV, discount rate, and , you can determine the number of periods. (Enter abbreviation only.)

future value

Given an internal growth rate of 3 percent, a firm will Blank______.

grow by 3 percent or less without any additional external financing

The Blank______ can be interpreted as the capital gains yield.

growth rate

The basic philosophy of TPS is that the production process should _blank​_ production when a quality problem is discovered.

halt

As the processing time at a step with a setup increases, the utilization _blank​_.

increases

Increasing the batch size at a step that has a setup, but is not the bottleneck, and holding everything else constant, _blank​_ the maximum inventory level.

increases

A sukuk is in compliance with the Islamic law as the financing instrument is not charging any or making money from money.

interest

When finding the present or future value of an annuity using a financial calculator, the Blank______ should be entered as a percentage.

interest rate

Setup activities that can only be done when the machine is not producing are called tasks.

internal

According to Graham and Harvey's 1999 survey of 392 CFOs (published in 2001), which of the following two capital budgeting methods are widely used by firms in the United States and Canada?

internal rate of return,net present value

Stock price reporting has increasingly moved from traditional print media to the Blank______ in recent years.

internet

The \just right\" batch size makes a smart trade-off between capacity and ."

inventory

Which of the following is a current asset?

inventory

Investment in net working capital arises when Blank______.

inventory is purchased,cash is kept for unexpected expenditures,credit sales are made

Capital budgeting is probably the most important of the three key areas of concern to the financial manager because Blank______.

it defines the business of the firm

Though depreciation is a noncash expense, it is important to capital budgeting for these reasons:

it determines the book value of assets which affects net salvage value ,it affects a firm's annual tax liability,it determines taxes owed on fixed assets when they are sold

The payback period can lead to foolish decisions if it is used too literally because:

it ignores cash flows after the cutoff date.

Long-term solvency ratios measure what aspect of the firm's financial position?

its financial leverage

Whenever Blank______ information is available, it should be used instead of accounting data.

market

Which one of the following is the most important source of risk from owning bonds?

market interest rate fluctuations

The price-earnings (PE) ratio is a Blank______ ratio.

market value

The annuity present value factor equals one the present value factor all divided by the discount rate.

minus

The needless waste of time and worker movements was defined by Ohno as .

muda(waste)

Imagine a process that produces four different products with a machine that requires a setup before each product change-over. To remove the need for any setups would require machines.

multiple

Bonds issued by state and local governments are called Blank______.

municipal bonds

When voting for the board of directors, the number of votes a shareholder is entitled to is generally determined as follows:

one vote per share held

Which of the following are components of project cash flow?

operating cash flow,capital spending,change in net working capital

Make-to- is the process control system wherein work is released into the system only after a customer order has occurred.

order

The business of the NYSE is to attract Blank______.

order flow

The fundamental business of the New York Stock Exchange is to attract Blank______.

order flow

The present value of an annuity due is equal to the present value of a(n) Blank______ annuity multiplied by (1 + r).

ordinary

Specifications are acceptable values for _blank​_ variables that indicate whether the output of a process is defective.

outcome

The output of a process can be measured using a number of _blank​_ variables.

outcome

A fishbone diagram graphically represents the causal relationship between input and environmental variables and a specific .

output

Designing a process so that it will be robust even under the most exceptional conditions is known as..

overengineering

Equity represents a(n) interest of a firm.

owner's

What four variables are required to calculate the value of a bond?

par value,time remaining to maturity,yield to maturity,coupon rate

Which of the following terms apply to a bond?

par value,time to maturity,coupon rate

A positive operating cash flow indicates that the firm is generating enough cash to:

pay everyday cash outflows.

The Blank______ method evaluates a project by determining the time needed to recoup the initial investment.

payback

The Blank______ is best suited for decisions on relatively small, minor projects, while Blank______ is more appropriate for large, complex projects.

payback period; NPV

Preferred stock has preference over common stock in the:

payment of dividends.,distribution of corporate assets.

For a p-chart the center line is the average _blank​_.

percentage of defects over all samples

C/r is the formula for the present value of a(n) Blank______.

perpetuity

If a company has had negative earnings for several periods, they might choose to use a Blank______.

price-sales ratio

Initial public offerings of stock occur in the Blank______ market.

primary

Shares of stock are first brought to the market and sold to investors in the market.

primary

Amortization is the process of paying off loans by regularly reducing the Blank______.

principal

The original amount of a loan is termed the loan Blank______.

principal

Resources with a setup generally have a shorter time than the next best alternative.

process

The output rate when producing equals one divided by the _blank​_ time

processing

Return on assets (ROA) is a measure of Blank______.

profitability

Return on equity (ROE) is a measure of Blank______.

profitability

Which of the following is an example of a sunk cost?

project consultation fee

A protective covenant is part of an indenture or loan agreement that limits certain actions a company may take during the term of the loan to the lender's interests.

protect

A part of the indenture limiting certain actions during the term of the loan are termed Blank______.

protective covenants

A written authorization for one shareholder to vote the stock of another shareholder is called a(n) Blank______.

proxy

What are the two major forms of long-term debt?

public issue,private issue

The first step in estimating cash flow is to determine the Blank______ cash flows.

relevant

With typical interest-only loans, the entire principal is:

repaid at some point in the future.

A production cycle is a sequence of produced flow units.

repeated

If a bond is issued with a call provision, it allows the issuer to Blank______ part or all of the bond at defined prices and times.

repurchase

If the IRR is greater than the Blank______, we should accept the project.

required return

Internal rate of return (IRR) must be compared to the Blank______ in order to determine the acceptability of a project.

required return

Which of the following is a disadvantage of the payback period rule?

requires an arbitrary cutoff point

New York Stock Exchange Designated Market Makers (DMMs) were formerly called Blank______.

specialists

Assignable cause variation occurs because of a _blank​_ change in input or environmental variables

specific

The output of a process is determined to be defective by comparing outcome variables against a set of .

specifications

Which type of voting procedure provides \institutional memory\"?"

staggered

Institutional memory can be enhanced by Blank______.

staggering board elections

Options for future, related business products or strategies are called options.

strategic

The defect probability is the _blank​_ of the probability that a unit falls below the LSL and the probability that a unit falls above the USL.

sum

Physical assets are termed Blank______ assets.

tangible

Assets can be categorized as:Â

tangible and intangible assets.,current and fixed assets.

Earnings over the coming year are expected to be $3 and a benchmark PE of 15 applies to earnings over the previous year. The Blank______, or forecast, price over the coming year is $45.

target

Using a benchmark PE ratio against current earnings yields a forecasted price called a Blank______ price.

target

The general formula for Blank______ is (1 + quoted rate/m)m âˆ' 1.

the EAR

What does a bond's rating reflect?

the ability of the firm to repay its debt and interest on time

When calculating NPV, the present value of the nth cash flow is found by dividing the nth cash flow by 1 plus Blank______ rate raised to the nth power.

the discount

Which of the following are methods of calculating the MIRR of a project?

the discounting approach,the combination approach,the reinvestment approach

Capital rationing exists when a company has identified positive NPV projects but cannot (or will not) find Blank______.

the necessary financing

Which option should be chosen if a project does not break even on a cash flow basis?

the option to abandon

Which option should be chosen if the sales demand for a particular product were to greatly exceed expectations?

the option to expand

Which of the following qualify as \managerial options\"?"

the option to expand,the option to abandon,the option to wait

Which of the following ratios might be used to estimate the value of a stock?

the price-earnings ratio

What are the three components that influence the Treasury yield curve?

the real rate of return,the interest rate risk premium,expected future inflation

A common-size balance sheet expresses accounts as a percentage of Blank______.

total assets

Because of Blank______ and Blank______, interest rates are often quoted in many different ways.

tradition; legislation

It is the duty of the bond to manage the sinking fund so that bonds can be repaid.

trustee

If you invest at a rate of r for periods, under compounding, your investment will grow to (1 + r)2 per dollar invested.

two

In a competitive market, positive NPV projects are Blank______.

uncommon

The first cash flow at the end of Week 1 is $100, the second cash flow at the end of Month 2 is $100, and the third cash flow at the end of Year 3 is $100. This cash flow pattern is a(n) Blank______ type of cash flow.

uneven

Estimates of which of the following are needed to prepare pro forma income statements?

unit sales,selling price per unit,variable costs

In order to analyze the risk of a project's NPV estimate, we should establish Blank______ for each important estimate variable.

upper and lower bounds

When long-term rates are higher than short-term rates, which of the following shapes will the term structure of interest rates usually have?

upward sloping

When setup time increase, what happens to capacity?

It decreases.

In the context of capital budgeting, what does sensitivity analysis do?

It examines how sensitive a particular NPV calculation is to changes in underlying assumptions.

What happens to inventory falls when a production step is in setup?

It falls.

The NYSE differs from the Nasdaq primarily because the NYSE has Blank______.

a physical location,a face-to-face auction market

The internal rate of return is a function of Blank______.

a project's cash flows

Which of the following is the simplest form of loan?

a pure discount loan

Which of the following are bonds that have actually been issued?

a put bond,a CoCo bond,a convertible bond

What does shareholders' equity represent?

a residual claim against the firm's total assets

The most common way to repay a loan is to pay Blank______.

a single fixed payment every period

According to the average accounting return rule, a project is acceptable if its average accounting return exceeds:

a target average accounting return.

We underestimate NPV because of the option(s) to Blank______.

abandon,expand

The profitability index (PI) rule for an independent project is to Blank______ the project if the PI is greater than 1.

accept

Based on the average accounting return rule, a project is Blank______ if its average accounting return exceeds a target average accounting return.

acceptable

A project should be Blank______ if its NPV is greater than zero.

accepted

The payback period rule Blank______ a project if it has a payback period that is less than or equal to a particular cutoff date.

accepts

A balance sheet reflects a firm's:

accounting value on a specific date.

According to the current U.S. corporate tax code, the corporate tax rate in effect for 2021 is Blank______ percent.

21

Which of the following is the balance sheet equation?

Assets equal liabilities plus stockholders' equity.

True or false: Financial ratios are computed using only balance sheet information.

FALSE

True or false: If a company has inventory, the quick ratio will always be greater than the current ratio.

FALSE

Which of the following are true of financial ratios?

They are used for comparison purposes.,They are developed from a firm's financial information.

Which one of these is considered to be the most liquid?

accounts receivable

Liquidity refers to the ease of changing Blank______.

assets to cash

On the balance sheet, assets are listed at their Blank______ value.

book

Under GAAP, assets are generally carried on a firm's balance sheet at Blank______.

book value,historical cost

The short run is a period when there are Blank______ costs.

both fixed and variable

Noncash items do not affect Blank______.

cash flow

In finance, the value of a firm depends on its ability to generate Blank______.

cash flows

The cash ratio is found by dividing cash by:

current liabilities.

Net capital spending is equal to the change in net fixed assets plus Blank______.

depreciation

Long-term solvency ratios are also known as:

financial leverage ratios.

Which of the following is not a component of cash flow from assets?

financing expenses

Costs that do not change in the short run arise because of Blank______.

fixed commitments

The purpose of a(n) Blank______ is to measure performance over a set period of time.

income statement

If sales increase while there is no change in accounts receivable, the receivables turnover ratio will Blank______.

increase

Period costs are the costs that are allocated to a specific Blank______.

interval of time

True or false: Ending net fixed assets plus beginning net fixed assets minus depreciation equals net investment in fixed assets.

FALSE

How is the average income tax rate computed?

total tax bill / total taxable income

The cash flow identity states that cash flows from Blank______ should equal cash flows to creditors and equity investors.

assets

A company's Blank______ tax rate is its tax bill divided by its total taxable income, and its Blank______ tax rate is the tax rate it pays on the next dollar of income.

average; marginal

Which of the following are components of cash flow from assets?

change in net working capital,capital spending,operating cash flow

Tax rates for proprietorships, partnerships, and LLCs Blank______ with the passage of the Tax Cuts and Jobs Act of 2017.

changed

The cash flow identity states that cash flow from assets equals cash flows to Blank______.

creditors and stockholders

The current ratio computes the relationship between Blank______.

current assets and current liabilities

The more debt a firm has, the greater its:

degree of financial leverage.

Cash flow to stockholders equals Blank______.

dividends paid minus net new equity raised

When a firm smooths earnings to please investors, it is called Blank______.

earnings management

Depreciation is the accountant's estimate of the cost of Blank______ used in the production process matched with the benefits produced from owning it.

equipment,fixed assets

Inventory turnover is cost of goods sold divided by .

inventory

Current assets are classified as relatively Blank______; these assets can be converted to cash within the next 12 months.

liquid

The price at which willing buyers and sellers would trade is called Blank______ value.

market

On a balance sheet, total assets must always equal total liabilities plus:

shareholders' equity.

The times interest earned ratio is a measure of long-term .

solvency

Operating cash flow _________.

tells us whether or not a firm's cash inflows from its operations are sufficient to cover its everyday cash outflows,is a sign of trouble if negative over a long period of time

The market value of an item is:

the cash value you'd get if you sold it.

Cash flow refers to Blank______.

the difference between the number of dollars that came in and the number that went out

What is the purpose of the income statement?

to measure performance over a set period of time

Which one of the following best explains why financial managers use a common-size balance sheet?

to track changes in a firm's capital structure

Financial leverage refers to a firm's Blank______.

use of debt in its capital structure

According to GAAP, when is income reported?

when it is earned or accrued

Earnings management is a controversial practice in which corporations Blank______ or Blank______ their earnings to \smooth out\" dips and surges and keep investors calm."

overstate; understate

Liquidity has two dimensions which are the ability to:

quickly convert assets into cash without significant loss in value.

In a common-size income statement, each item is expressed as a percentage of total .

sale

Ending net fixed assets minus beginning net fixed assets depreciation equals net investment in fixed assets.

+

True or false: The current ratio will decrease if current assets increase, while everything else remains unchanged.

FALSE

What is the impact on the total asset turnover ratio if sales increase significantly while there is no change in any of the other variables?

The total asset turnover ratio will increase.

The short run is Blank______.

an imprecise period of time

According to GAAP, when is revenue recognized on an income statement?

when the value of an exchange of goods or services is known or reliably determined,when the earnings process is virtually completed

What is depreciation?

a systematic expensing of an asset based on the asset's estimated life

The cash flow that results from the firm's day-to-day activities of producing and selling is called:

operating cash flow.

Shareholders' equity equals Blank______.

total assets minus total liabilities

Free cash flow is better described as Blank______.

total distributable cash flow

Which of the following is an example of a noncash item on an income statement?

depreciation

The Blank______ tax rate is the tax rate paid on the next dollar of income.

marginal