Question : 1) A firm can finance its purchase of new capital : 1384295

Economics

1) A firm can finance its purchase of new capital equipment (investment) in the following ways:

1) purchasing financial capital;

2) borrowing from a bank;

3) using its retained earnings.

A) 1 only

B) 2 only

C) 3 only

D) 1 and 3

E) 2 and 3

2) The concepts of stock and flow are involved in firms’ demand for labour and for capital. Which of the following statements is correct?

A) A firm hires a stock of labour services; and purchases a stock of physical capital, which provides a flow of services.

B) Labour and capital are both flow variables because their values change over time.

C) A firm hires a flow of labour services; and purchases a stock of physical capital, which provides a flow of services.

D) Labour and capital are both stock variables because they are providing service at any given moment in time.

E) A firm’s demand for both labour and capital is determined by the marginal value each provides to the stock of labour and capital, respectively.

3) Financial intermediaries are often the “middlemen” between households and firms and, as such,

A) they reduce the amount of trade by charging high fees for their services.

B) they are not essential for the workings of an economy.

C) they specialize in assessing the risk of various borrowers.

D) are the fundamental determinant of the supply of capital.

E) are the fundamental determinant of the demand for capital.

4) What is the most fundamental purpose of the “capital market”?

A) To connect the savings decisions of households with the borrowing decisions of firms.

B) To provide the means by which firms can acquire physical capital.

C) To provide the means by which households and firms can invest financial capital.

D) To connect firms and households who wish to borrow with financial institutions.

E) To connect households who wish to borrow with banks who wish to lend.

5) Consider the physical equipment that a printing company would purchase in order to print glossy magazines. The equipment itself is considered a(n) ________, while the printing services the equipment provides is considered a(n) ________.

A) asset; liability

B) flow; opportunity cost

C) stock; flow

D) retained asset; spent asset

E) flow; stock

6) A firm must evaluate the value of the services that a piece of capital equipment can deliver to the firm over its lifetime. The firm does this by estimating its

A) rate of depreciation.

B) marginal product.

C) marginal revenue product.

D) future value.

E) present value.

7) The term “present value” refers to the

A) value that a capital good will have in the future.

B) current interest rate.

C) current purchase price of a capital good.

D) value today of a payment or receipt to occur in the future.

E) value in the future of a payment made today.

8) When we consider any future stream of benefits, and we seek to determine its value today, we ________ that steam of benefits using the market interest rate.

A) capitalize

B) collateralize

C) depreciate

D) discount

E) appreciate

9) The present value of a given future stream of benefits will be lower when the benefits are ________ and the interest rate is ________.

A) nearer in time; lower

B) accruing in the first time period only; lower

C) more distant in time; higher

D) equalized over a ten-year period; zero

E) more distant in time; lower

10) The textbook presentation of present value involves an important simplification of reality in order to analyze the concept. That simplification is in assuming that

A) the future stream of MRPs lasts for one period only.

B) the future stream of MRPs of a unit of capital is known with certainty.

C) all units of capital generate an identical stream of MRPs.

D) the future stream of MRPs is constant over time.

E) the interest rate is constant over time.

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11) Net income appears on the worksheet:

A) only in the balance sheet credit column.

B) only in the income statement credit column

C) in the income statement debit column and balance sheet debit column

D) in the income statement debit column and balance sheet credit column

12) Net loss appears on the worksheet:

A) in the income statement credit column and balance sheet debit column.

B) only in the income statement credit column.

C) in the income statement debit column and balance sheet credit column.

D) only in the balance sheet debit column.

13) The prepaid rent account has a balance that is $400 less in the worksheet's balance sheet debit column than in the worksheet's trial balance debit column. This would be the result of a:

A) $400 entry to prepaid rent in the worksheet's adjustments debit column.

B) $400 entry to prepaid rent in the worksheet's adjustments credit column.

C) $400 entry to rent expense in the worksheet's adjustments credit column.

D) mistake in cross-adding the worksheet.

14) Salary expense has a balance of $65,400 in the trial balance debit column of a worksheet. The adjustments credit column contains a $500 credit to salary payable. The adjusted trial balance column will show:

A) salary expense with a debit balance of $64,900.

B) salary expense with a debit balance of $6,500.

C) salary expense with a debit balance of $65,900.

D) salary payable with a credit balance of $65,900.

15) Interest expense on a worksheet's trial balance debit column has a $3,400 balance and a $4,000 balance on the worksheet's income statement debit column. The difference is due to:

A) an entry in the adjustments credit column for $600 to interest expense.

B) an entry in the adjustments debit column for $4,000 to interest expense.

C) an entry in the adjustments credit column for $4,000 to interest expense.

D) an entry in the adjustments credit column for $600 to interest payable.

16) On a worksheet, the income statement debit column equals $190,800 and the income statement credit column equals $195,600. From this data, it can be determined that:

A) the company had a net loss of $4,800 added to the income statement credit column.

B) the company had a net income of $4,800 added to the income statement debit column.

C) the company had a net loss of $4,800 added to the income statement debit column.

D) the company had a net income of $4,800 added to the income statement credit column.

17) Which of the following appears in the balance sheet debit column of a worksheet?

A) service revenue

B) income summary

C) owner withdrawals

D) accounts payable

18) Which of the following appears in the income statement credit column of a worksheet?

A) service revenue

B) income summary

C) owner withdrawals

D) accounts receivable

19) If the unearned service revenue account had an unadjusted normal balance of $4,800, and an adjustment was made debiting the account for $1,500, the account would appear on the adjusted trial balance of the worksheet as a:

A) $4,800 debit.

B) $6,300 credit.

C) $3,300 credit.

D) $3,300 debit.

20) After all the account balances have been extended to the balance sheet columns of the worksheet, the totals of the debit and credit columns are $35,350 and $38,750, respectively. It can be concluded the company has a:

A) net income of $3,400.

B) net loss of $3,400.

C) $74,100 net loss.

D) $74,100 net income.