1. STR581 – Strategic Planning and Implementation – Final Exam
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100. Occurs when inaccurate information can falsely exist.
A. free-rider problem
B. adverse selection
C. moral hazard
D. The Principle of Valuable Ideas
101. Which principle states that extraordinary returns are achievable with new ideas?
A. The Principle of Valuable Ideas
B. The Principle of Risk-Return Trade-Off
C. The Principle of Incremental Ideas
D. The Notional Principle
102. Which of the following statements is true?
A. The difference between the value of one action and the value of the best alternative is called an
opportunity cost.
B. An agent-manager can never make bad decisions.
C. A security is a claim issued by a firm that pays owners interest but not dividends.
D. A call option analyzes conflicts of interest and behavior in a principal-agent relationship.
103. Generally accepted accounting principles (GAAP) refers to
A. the extent to which something can be sold for cash quickly and easily without loss of value.
B. the length of an asset’s life when it is issued.
C. a technical accounting term that encompasses the conventions, rules, and procedures necessary to
define accepted accounting practice at a particular time.
D. a report issued annually by a firm that includes, at a minimum, an income statement, a balance
sheet, a statement of cash flows, and accompanying notes.
104. Remaining maturity refers to:
A. the amount of time remaining until its maturity.
B. the length of an asset’s life when it is issued.
C. a technical accounting term that encompasses the conventions, rules, and procedures necessary to
define accepted accounting practice at a particular time.
D. a report issued annually by a firm that includes, at a minimum, an income statement, a balance
sheet, a statement of cash flows, and accompanying notes.
105. The annual report refers to
A. the extent to which something can be sold for cash quickly and easily without loss of value.
B. a report issued annually by managers to primarily convey information about select working capital
ratios.
C. the length of time remaining until an asset’s maturity.
D. a report issued annually by a firm that includes, at a minimum, an income statement, a balance
sheet, a statement of cash flows, and accompanying notes.
106. The firm’s assets in the balance sheet refer to:
A. the extent to which something can be sold for cash quickly and easily without loss of value.
B. the productive resources in the firm’s operations.

2. C. the statement of a firm's financial position at one point in time, including its assets and the claims
on those assets by creditors (liabilities) and owners (stockholders' equity).
107. Book value (or Net book value) refers to: A. the net amount shown in the accounting
statements. B. the length of an asset’s life when it is issued. C. the statement of a firm's financial
position at one point in time, including its assets and the claims on those assets by creditors
(liabilities) and owners (stockholders' equity). D. the price for which something could be bought
or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of
the item’s liquidity.
108. Original maturity refers to: A. the net amount (net book value) for something shown in
quarterly accounting statements. B. the length of an asset’s life when it is issued. C. a technical
accounting term that encompasses the conventions, rules, and procedures necessary to define
accepted accounting practice at a particular time. D. the price for which something could be
bought or sold in a reasonable length of time, where “reasonable length of time” is defined in
terms of the item’s liquidity. FIN/571 Corporate Finance Final Exam Progress: (0/57)
109. Preferred stock payment obligations are typically __________. A. viewed like debt
obligations. B. issued with a maturity date. C. valued as an annuity. D. none of these
110. Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is
9% and the current yield is 10%. Which of the following statements is true? A. The current yield
was a lot greater than 9% when the bond was first issued B. The current yield was a lot less than
9% when the bond was first issued C. The market value of the bond is less than $1,000 D. The
market value of the bond is more than $1,000
111. If the yield to maturity for a bond is less than the bond's coupon rate, then the market
value of the bond is __________. A. less than the par value. B. greater than the par value. C.
cannot tell D. equal to the par value.
112. According to the CAPM, the expected return for a portfolio is determined by the portfolio's.
A. variance. B. beta. C. standard deviation. D. none of these
113. Certain countries have restrictions. In practice, U.S. investors have NOT invested very much
internationally. Possible factors include __________. A. lower transaction costs. B. expropriation
risk. C. firm-specific risk. D. all of these
114. Certain countries have restrictions. In practice, U.S. investors have NOT invested very much
internationally. Possible factors include __________. A. non-listing of foreign securities on U.S.
stock exchanges. B. foreign tax considerations. C. efficiency in converting currencies. D. all of
these
115. Dimensions of risk include ___________. A. the certainty of a negative outcome B.
uncertainty about the future outcome C. uncertainty about yesterday’s outcome D. the
impossibility of the same return
116. One problem with using negative values for w1 (the proportion invested in the riskless
asset) to represent a borrowed amount is that the implied borrowing rate of interest is the same
as __________. A. the current rate of interest B. the prime rate of interest C. the nominal rate of
interest D. the lending rate of interest
117. The Principle of __________ implies that the expected return for an asset equals its
required return. A. Risk-Return Trade- B. Capital Market Efficiency C. Signaling D. Comparative
Advantage FIN/571 Corporate Finance Final Exam Progress: (0/57)

3. 118. __________ says to calculate the incremental after-tax cash flows connected with working
capital decisions. A. The Principle of Incremental Benefits B. The Signaling Principle C. The
Options Principle D. The Principle of Time Value of Money
119. Stony Products has an inventory conversion period (ICP) of about 60.83 days. The
receivables collection period (RCP) is 36.50 days. The payables deferral period (PDP) is about
30.42 days. What is Stony's cash conversion cycle (CCC)? A. about 69 days B. about 66 days C.
about 67 days D. about 68 days
120. Firms make short-term financial decisions just about every day solving such questions as
__________. A. Where should we borrow? B. Where should we invest our cash? C. How much
liquidity should we have? D. all of these
121. __________ says to calculate the incremental after-tax cash flows connected with working
capital decisions. A. The Options Principle B. The Signaling Principle C. The Principle of
Incremental BenefitsD. The Principle of Time Value of Money
122. Main sources of short-term funds include __________. A. trade credit and commercial
paper B. futures and bank loans C. bonds and trade credit D. none of these
123. Which of the following statements is (are) true? A. The "dating 120" or the "60 extra" mean
that the clock does not start until 120 or 60 days after the invoice date. B. Prox or proximate
refers to the next month. C. Invoices with "10th prox" must be paid by the 10th of the next
month. D. all of these
124. Which (if any) of the following statements is false? A. The invoice is a written statement
about goods that were ordered, along with their prices and the payment dates. In other words,
the invoice is simply the bill for purchases. B. For the 4/10, net 40 credit terms, you are offering a
total credit period of 30 days from the date of the invoice, a discount period of 10 days, and a 4%
discount if paid on or before the discount period expires. C. When a firm is using invoice billing,
the invoice that accompanies shipment is a separate bill to be paid. D. none of these
125. Most credit sales are made on an open account basis, which means __________. A. that
suppliers cannot dictate the terms of the purchase. B. that customers simply purchase what they
want.C. that suppliers dictate the terms of the purchase. D. that customers cannot simply
purchase what they want. FIN/571 Corporate Finance Final Exam Progress: (0/57)
126. An all-equity-financed firm would __________. A. pay corporate income taxes if its taxable
income is positive. B. not pay any income taxes because interest would exactly offset its taxable
income. C. pay corporate income taxes because it would have interest expense. D. not pay
corporate income taxes because it would have no interest expense.
127. A profitable firm would __________. A. pay corporate income taxes because it would have
interest expense. B. pay corporate income taxes because it would not have interest expense. C.
pay corporate income taxes if it had a positive taxable income. D. none of these
128. An investor's risky portfolio is made up of individual stocks. Which of the following
statements about this portfolio is true? A. Each stock in the portfolio will have a beta greater than
one. B. Each stock in the portfolio has its own beta. C. Selling any stock in this portfolio will lower
the beta of the portfolio. D. An investor cannot change the risk of this portfolio by her choice
about personal leverage (lending or borrowing).
129. Boeing Corporation is a world leader in commercial aircraft. In the face of competition,
Boeing often faces a critical __________ decision: whether to develop a new generation of
passenger aircraft. A. dividend B. present value C. payback D. capital budgeting

4. 130. The capital budgeting process can be broken down into five steps. These steps include
which of the following? A. Generate ideas for capital budgeting projects B. Prepare proposals C.
Review existing projects and facilities D. all of these
131. There are two important tax considerations for a capital budgeting project. These include
which (if any) of the following? A. It is indeed cash flow that’s irrelevant. B. The standard cash
flow estimation does not explicitly identify the financing costs. C. The Principle of Incremental
Benefits reminds us that it is the incremental cash flow that’s relevant. D. none of these
132. The __________ method breaks down when evaluating projects in which the sign of the
cash flow changes. A. Payback B. NPV C. PI D. IRR
133. Whenever projects are both independent and conventional, then the IRR and NPV methods
agree. Which of the following statements is true? A. A mutually exclusive project is one that can
be chosen independently of other projects. B. When undertaking one project prevents investing
in another project, and vice versa, the projects are said to have a positive payback. C. A
conventional project is a project with an initial cash outflow that is followed by one or more
expected future cash inflows. D. all of these
134. In practice, the __________ rule is preferred. A. PI B. NPV C. IRR D. Payback FIN/571
Corporate Finance Final Exam Progress: (0/57)
135. Studies show systematic differences in capital structures across industries. These are due
mostly to differences in __________. A. accounting practices. B. the firm’s inventory turnover
ratio. C. the ability of assets to support borrowing. D. management’s attitude toward what other
industries are doing.
136. Studies show systematic differences in capital structures across industries. These are due
mostly to differences in the availability of tax shelter provided by things other than debt, such as
__________. A. accelerated depreciation. B. operating tax loss carryforwards. C. investment tax
credit. D. all of these
137. Studies show systematic differences in capital structures across industries. These are due
mostly to differences in __________. A. hiring and firing practices. B. the availability of tax shelter
provided by things other than debt, such as accelerated depreciation, investment tax credit, and
operating tax loss carryforwards. C. what the arbitrage pricing theory tells us. D. none of these
138. There can be a variety of motives for stock repurchases including __________. A. a buyback
of overvalued stock. B. an increase in leverage. C. a decrease in anticipated earnings. D. all of
these
139. Some countries have __________ in which shareholders' returns are not fully taxed twice.
A. an imputation tax system B. a split tax system C. a two-tier tax system D. none of these
140. There can be a variety of motives for stock repurchases including __________. A. a
decrease in leverage. B. a buyback of undervalued stock. C. a decrease in anticipated earnings. D.
all of these
141. Mortgage bonds are __________. A. secured by a lien on general assets of the issuer B.
secured by a lien on specific assets of the issuer C. usually secured by assets such as common
shares of one of the issuer's subsidiaries D. none of these
142. Conditional sales contracts __________. A. are seldom issued to finance the purchase of
aircraft B. are similar to equipment trust certificates C. enable the borrower to obtain title to the
assets only before it fully repays the debt D. all of these

5. 143. The Time Value of Money Principle says __________. A. to look for the most advantageous
ways to finance the firm, such as the lowest-cost debt alternative B. to use discounted cash flow
analysis to compare the costs and benefits of financing decisions, such as alternative securities to
sell, lease versus borrow and buy, and bond refundingC. to set a price and other terms that
investors will find acceptable when issuing securities D. that announcing the firm's decision to
issue securities conveys information about the firm
144. __________ says to look for opportunities to develop asset-based financing arrangements
that offer new positive-NPV financing mechanisms. A. The Principle of Valuable Ideas B. The Time
Value of Money Principle C. The Principle of Self-Interested Behavior D. The Principle of
Comparative Advantage
145. The Principle of Self-Interested Behavior says __________. A. to calculate the net
advantage of leasing based on the incremental after-tax benefits that leasing will provide. B. to
look for profitable opportunities to lease (or rent) an asset, rather than borrow and buy it. C. to
use discounted cash flow analysis to compare the costs and benefits of leasing, relative to the
alternative of borrowing and buying. D. that leasing transfers the tax benefits of ownership from
the lessee to the lessor.
146. __________ says to transfer the tax benefits of ownership to other parties if they are
willing to pay for benefits your firm cannot use. A. The Principle of Two-Sided Transactions B. The
Principle of Incremental Benefits C. The Principle of Comparative Advantage D. The Capital
Market Efficiency Principle FIN/571 Corporate Finance Final Exam Progress: (0/57)
147. The wholesale price for Captain John’s is $1.00 per loaf, and the variable cost of production
is $0.50 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional
5.0 million loaves in the next year. What additional revenues minus expenses will be generated
from expansion? A. $25,000 B. $250,000 C. $550,000 D. none of these
148. The wholesale price for Captain John’s is $0.612 per loaf, and the variable cost of
production is $0.387 per loaf. Captain John’s is expecting that expansion will allow them to sell an
additional 4.5 million loaves in the next five years. What additional revenues minus expenses will
be generated from expansion? A. $1,102,000 B. $912,500 C. $1,012,500 D. $1,000,500
149. The wholesale price for Captain John’s is $3.00 per loaf. One million loaves will be sold in
the next year. What is the contribution margin? A. cannot tell B. $3.00 C. $3,000,000 D.
$3,000,000 minus fixed costs
150. Which of the following statements is true? A. Soft capital rationing refers to the rationing
imposed externally by limited funds for borrowing from outside sources. B. Hard capital rationing
refers to the rationing imposed internally by the firm. C. A post audit is a set of procedures for
evaluating a capital budgeting decision after the fact. D. all of these
151. Pursuing valuable ideas is the best way __________. A. to avoid risk. B. to achieve
extraordinary returns.C. to restrain your spending. D. to get yourself in trouble.
152. In efficient markets, as in the United States, you should think long and hard before you
conclude that a market price is __________. A. wrong. B. fair. C. followed by many analysts. D. all
of these
153. __________ says to forecast the firm’s cash flows, and analyze the incremental cash flows
of alternative decisions. A. The Principle of Risk-Return Trade-Off B. The Signaling Principle C. The
Principle of Incremental Benefits D. The Time Value of Money Principle

6. 154. ___________ says to use both bottom-up and top-down processes to increase the chance
of uncovering valuable ideas. A. The Principle of Valuable Ideas B. The Behavioral Principle C. The
Principle of Two-Sided Transactions D. The Principle of Comparative Advantage
155. __________ says to use common industry practices as a good starting place for the
planning process. A. The Behavioral Principle B. The Principle of Incremental Benefits C. The
Principle of Self-Interested Behavior D. The Principle of Valuable Ideas
156. The most important performance dimension for product development projects is: A.
Quality B. Product flexibility C. Time-to-market D. Productivity
157. When evaluating a new product development project using net present value analysis,
which of the following will make the project more attractive? A. Delaying the start of the project
B. Making the project run over a longer period of time C. Improving (bringing forward) the date
when revenue will begin D. A and B
158. Which of the following statements is true about value analysis/value engineering (VA/VE)?
A. The purpose of VA/VE is to simplify products and processes. B. The objective of VA/VE is to
achieve equivalent or better performance at a lower cost. C. VA is performed before the
production stage, while VE deals with products already in production. D. both A and B
159. The category given the maximum point value in the Baldrige award is: A. Business results B.
Process management C. Strategic planning D. Customer and market focus
160. Which of the following is not a dimension of design quality? A. ServiceabilityB.
Customization C. Features D. Durability
161. Which Quality Guru advocated that senior management is responsible for 94% of quality
problems? A. Ishikawa B. Juran C. Crosby D. Deming
162. Which of the following is not an assumption of the basic economic-order quantity model?
A. ordering or setup costs are constant B. quantity discounts are available C. annual demand is
constant and known D. lead time is constant
163. The basic difference between P and Q systems is: A. P models favor more expensive items
B. P model is more appropriate for important items such as critical repair parts C. Q models are
event triggered while P models are time triggered D. Q models are time triggered while P models
are event triggered
164. Which of the following statements is true about the Q-system? A. It does not have an EOQ,
since the quantity varies according to demand. B. The order interval is fixed not the order
quantity. C. It does not have a reorder point but rather a target inventory. D. The system is
completely determined by the two parameters, Q and R.
165. The objectives of work-center scheduling include(s): A. To meet due dates B. To minimize
lead times C. To minimize finish goods inventory D. A and B
166. A _________ approach actually schedules in detail each resource using the setup and
runtime required for each order. A. Forward scheduling B. Backward scheduling C. Infinite loading
D. Finite loading
167. The assignment method is appropriate in solving problems that have the following
characteristics: A. There are 'n' things to be distributed to 'n' destinations B. Though each
destination may handle all the things, the final assignment has each thing assigned to one and
only one destination C. Only one criterion should be used (minimum cost, maximum profit, for
example) D. A and C

7. 168. Which of the following according to Goldratt is not a component of production cycle time?
A. Wait time B. Maintenance timeC. Setup time D. Process time
169. Goldratt's rule of production scheduling include all but: A. An hour saved at a non-
bottleneck is a mirage B. A process batch should be fixed both along its route and in timeC. Do
not balance the capacity - balance the flow D. Utilization and activation of a resource is not the
same thing
170. According to Goldratt and Fox, a useful performance measure to treat inventory is ______.
A. Inventory turnover B. Current ratio C. Quick ratio D. Dollar days
171. Which of the following would not be considered in deciding how far to minimum-cost
schedule (crash) a project? A. Project overrun penalties B. Incentives for early completion C.
Indirect project costs (e.g. interest on a construction loan) D. The normal duration times of tasks
not on a critical path
172. The advantages of pure project include all but: A. The project manager has full authority
over the project. B. Team pride, motivation, and commitments are high. C. Decisions are made
quickly. D. A team member can work on several projects.
173. Which of the following is not a typical project milestone? A. Completion of design B.
Production of a prototype C. Training of project members D. Completed testing of the prototype
Supply-chain response relates to the following: A. How quickly a customer order can be filled B.
How quickly a company can react to a new competing product C. How inexpensive the product is
D. A and B
174. According to Hau Lee, which of the following types of products need to be delivered with
efficient supply-chains? A. Custom products B. Innovative products C. Grocery productsD. High
technology products
175. The idea of the Value Density calculation is: A. Finding a carrier that can handle the weight
B. Matching the weight of the product with an appropriate carrier C. Determining how a product
should be shipped considering its weight and valueD. Finding the minimum cost carrier
176. Which of the following statements is not true about capacity management in operations? A.
When looking at capacity, operations managers need to look at both resource input and product
outputs. B. An operations management view also emphasizes the time dimension of capacity. C.
Capacity planning itself has different meaning to individuals at different levels within the
operations management hierarchy. D. The definition of capacity, in an operations management
context, makes a clear distinction between efficient and inefficient use of capacity.
177. The steps to determining capacity requirements include: A. Using decision trees to evaluate
capacity alternatives B. Calculating equipment and labor requirements to meet product line
forecasts C. Projecting labor and equipment availabilities over the planning horizon D. B and C
178. Capacity utilization rate can be computed as: A. Capacity used - best operating level B.
Capacity used x best operating level C. Capacity used / best operating level D. Capacity used +
best operating level
179. Which of the following is NOT one of the more successful applications of lean concepts in
services? A. Organize problem-solving groups B. Upgrade housekeeping C. Upgrade quality D.
Introduction of demand-push scheduling

8. 180. A kanban card is used to signal that: A. work is ready to be moved to the next station B. a
worker has run out of parts C. a machine has broken down D. work is authorized to replenish a
downstream station
181. Which of the following is not true about JIT systems? A. The JIT system is based on the
philosophy of eliminating waste and utilizing the full capability of the worker. B. Under JIT the
ideal lot size is one. C. JIT is typically applied to repetitive manufacturing. D. The goal of JIT is to
drive all inventory queues to a moderate level thus minimizing inventory investment and
shortening lead times.
182. Which phrase most closely describes the Delphi forecasting technique? A. consumer survey
B. random individual opinions D. test markets
183. Which of the following would not be classified as a component of demand? A. Cycle B.
Seasonality C. Trend D. Causal variation
184. Under exponential smoothing, if we want our forecast to be very responsive to recent
demand, the value of alpha should be: A. moderate B. zero C. small D. large E. No, Acme is not a
holder in due course because of some other reason.
185. One option for altering the pattern of demand is: A. carrying inventory B. using overtime C.
hiring employees D. pricing
186. Which of the following is not a cost relevant to aggregate production planning? A. Costs
associated with changes in the production rate B. Quantity discountsC. Basic production costs D.
Inventory holding costs
187. Aggregate planners balance: A. demand and capacity B. demand and inventories C. demand
and costs D. supply and inventories
188. Which MRP system input element specifies how many and when the firm plans to build
each end item? A. Master production scheduleB. Bills of material C. Inventory records file D.
Capacity planning
189. Which of the following most closely describes net material requirements? A. gross
requirements - on-hand - planned order receipts B. gross requirements - on-hand + planned
order receipts C. gross requirements - planned order receipts D. gross requirements - planned
order releases
190. Which of the following is true about MRP Systems? A. demand pattern is random B. lot
sizing is EOQ C. based on independent demand D. objective is to meet manufacturing needs
191. Which of the following statements is not true about capacity management in operations? A.
Capacity planning itself has different meaning to individuals at different levels within the
operations management hierarchy. B. An operations management view also emphasizes the time
dimension of capacity. C. When looking at capacity, operations managers need to look at both
resource input and product outputs. D. The definition of capacity, in an operations management
context, makes a clear distinction between efficient and inefficient use of capacity.
192. Service capacity: A. is highly time and location dependent B. is subject to less volatile
demand fluctuations C. utilization directly impacts service quality D. A and C
193. The steps to determining capacity requirements include: A. Using decision trees to evaluate
capacity alternatives B. Calculating equipment and labor requirements to meet product line
forecasts C. Projecting labor and equipment availabilities over the planning horizon D. B and C

9. 194. Which one of the following managerial accounting approaches attempts to allocate
manufacturing overhead.
A. Activity-based costing.
B. Just-in-time inventory.
C. Total-quality management
D. Theory of constraints.
195. Baden Company manufactures a product with a unit variable cost of $50 and a unit sales
price of $88. Fixed manufacturing costs were $240,000 when 10,000 units were produced and
sold. The company has a one-time opportunity to sell an additional 1,000 units at $70 each in a
foreign market which would not affect its present sales. If the company has sufficient capacity to
produce the additional units, acceptance of the special order would affect net income as follows:
A. Income would increase by $70,000.
B. Income would increase by $4,000.
C. Income would increase by $20,000
D. Income would decrease by $4,000.

10. 196. Which of the following is NOT one of the more successful applications of lean concepts in
services? A. Organize problem-solving groups B. Upgrade housekeeping C. Upgrade quality D.
Introduction of demand-push scheduling
197. ________ communicates a company’s intended value positioning of its product or brand to
the market. A. Promotion B. Packaging. C. Physical evidence. D. Place. E. Price
198. Which list below best describes the major services performed by public accountants?
A. Auditing, taxation, management consulting
B. Cost accounting, production scheduling, recruiting
C. Employee training, auditing, bookkeeping
D. Bookkeeping, mergers, budgets
199. The primary purpose of the statement of cash flows is to __________.
A. provide information about the investing and financing activities during a period
B. prove that revenues exceed expenses if there is a net income
C. facilitate banking relationships
D. provide information about the cash receipts and cash payments during a period
200. The cost principle requires that when assets are acquired, they be recorded at __________.
A. selling price
B. list price
C. appraisal value
D. exchange price paid