Question 1

Business risk refers to​
1) use of accelerated depreciation
2) the risk inherent in the nature of the business
3) the sources of the firm's finances

Accepted Answer

A) ​1 and 2 
B) 1 and 3​ 
C) 2 and 3​ 
D) only 2​ 
A) ​1 and 2 
B) 1 and 3​ 
C) 2 and 3​ 
D) only 2​

Question 2

Break‑even analysis is not concerned with​

Accepted Answer

A)  ​the relationship between financial leverage and risk 
B)  the relationship between sales and profits​ 
C)  the relationship between total costs and revenues​ 
D)  the relationship between fixed costs and output​ 
A)  ​the relationship between financial leverage and risk 
B)  the relationship between sales and profits​ 
C)  the relationship between total costs and revenues​ 
D)  the relationship between fixed costs and output​

Question 3

The numerical value of the slope of the fixed cost schedule is 1.0.​

Accepted Answer

A) True 
 B)False

Question 4

The total revenue function TR = .5Q implies the price of the product is constant.​

Accepted Answer

A) True 
 B)False

Question 5

Break‑even analysis may be used to show​

Accepted Answer

A)  ​the relationship between debt financing and earnings 
B)  ​the level of sales necessary to avoid losses 
C)  ​the level of output required to maximize profits 
D)  the relationship between sales and equity​ 
A)  ​the relationship between debt financing and earnings 
B)  ​the level of sales necessary to avoid losses 
C)  ​the level of output required to maximize profits 
D)  the relationship between sales and equity​

Question 6

The payback method fails to consider​
1) the timing of the cash inflow from an investment
2) the cost of an investment
3) the return on alternative investments

Accepted Answer

A) ​1 and 2 
B) 1 and 3​ 
C) 2 and 3​ 
D) 1, 2, and 3​ 
A) ​1 and 2 
B) 1 and 3​ 
C) 2 and 3​ 
D) 1, 2, and 3​

Question 7

Which of the following is usually a variable expense?​

Accepted Answer

A)  ​salaries 
B)  rent​ 
C)  wages​ 
D)  insurance premiums​ 
A)  ​salaries 
B)  rent​ 
C)  wages​ 
D)  insurance premiums​

Question 8

If a firm has no sales, it has no costs.​

Accepted Answer

A) True 
 B)False

Question 9

The payback method does not consider the time value of money when ranking investments.

Accepted Answer

A) True 
 B)False

Question 10

An upward shift in the fixed cost curve or a downward shift in the total revenue curve will increase the break even level of output.

Accepted Answer

A) True 
 B)False

Question 11

Variable costs​

Accepted Answer

A)  ​are greater than fixed costs 
B)  are greater than total costs​ 
C)  are paid after fixed costs​ 
D)  change with the level of output​ 
A)  ​are greater than fixed costs 
B)  are greater than total costs​ 
C)  are paid after fixed costs​ 
D)  change with the level of output​

Question 12

​Given the following information, answer the following questions.​
TR = $3Q
TC = $1,500 + $2Q
a. What is the break-even level of output?
b. If the firm sells 1,300 units, what are its earnings or losses?
c. If sales rise to 2,000 units, what are the firm's earnings or losses?
d. If the total cost equation were TC = $2,000 + $1.80Q what happens to the break-even level of output units?

Accepted Answer

a. Break-even level of output:
$1,500 /(

Question 13

Linear break‑even analysis assumes that variable costs rise with reductions in output.​

Accepted Answer

A) True 
 B)False

Business risk refers to 1) use of accelerated depreciation 2) the risk inherent in the nature of the business 3) the sources of the firm's finances

Break‑even analysis is not concerned with

The numerical value of the slope of the fixed cost schedule is 1.0.

The total revenue function TR = .5Q implies the price of the product is constant.

Break‑even analysis may be used to show

The payback method fails to consider 1) the timing of the cash inflow from an investment 2) the cost of an investment 3) the return on alternative investments

Which of the following is usually a variable expense?

If a firm has no sales, it has no costs.

The payback method does not consider the time value of money when ranking investments.

An upward shift in the fixed cost curve or a downward shift in the total revenue curve will increase the break even level of output.

Variable costs

Linear break‑even analysis assumes that variable costs rise with reductions in output.

The Role of Financial Markets and Financial Intermediaries

Investment Banking

Securities Markets

The Federal Reserve

International Currency Flows

The Time Value of Money

Risk and Its Measurement

Analysis of Financial Statements

The Features of Stock

Stock Valuation

The Features of Long-Term Debt - Bonds

Bond Pricing and Yields

Preferred Stock

Convertile Securities

Investment Returns

Investment Companies

Forms of Businss and Corporate Taxation

Leverage

Cost of Capital

Capital Budgeting

Forecasting

Cash Budgeting

Management of Current Assets

Management of Short-Term Liabilities

Intermediate-Term Debt and Leasing

Options: Puts and Calls

Futures and Swaps

Filters

Exam 19: Break-Even Analysis and the Payback Period

Business risk refers to​ 1) use of accelerated depreciation 2) the risk inherent in the nature of the business 3) the sources of the firm's finances

Break‑even analysis is not concerned with​

The numerical value of the slope of the fixed cost schedule is 1.0.​

The total revenue function TR = .5Q implies the price of the product is constant.​

Break‑even analysis may be used to show​

The payback method fails to consider​ 1) the timing of the cash inflow from an investment 2) the cost of an investment 3) the return on alternative investments

Which of the following is usually a variable expense?​

If a firm has no sales, it has no costs.​

The payback method does not consider the time value of money when ranking investments.

An upward shift in the fixed cost curve or a downward shift in the total revenue curve will increase the break even level of output.

Variable costs​

Linear break‑even analysis assumes that variable costs rise with reductions in output.​

The Role of Financial Markets and Financial Intermediaries

Investment Banking

Securities Markets

The Federal Reserve

International Currency Flows

The Time Value of Money

Risk and Its Measurement

Analysis of Financial Statements

The Features of Stock

Stock Valuation

The Features of Long-Term Debt - Bonds

Bond Pricing and Yields

Preferred Stock

Convertile Securities

Investment Returns

Investment Companies

Forms of Businss and Corporate Taxation

Leverage

Cost of Capital

Capital Budgeting

Forecasting

Cash Budgeting

Management of Current Assets

Management of Short-Term Liabilities

Intermediate-Term Debt and Leasing

Options: Puts and Calls

Futures and Swaps

Filters

Business risk refers to 1) use of accelerated depreciation 2) the risk inherent in the nature of the business 3) the sources of the firm's finances

Break‑even analysis is not concerned with

The numerical value of the slope of the fixed cost schedule is 1.0.

The total revenue function TR = .5Q implies the price of the product is constant.

Break‑even analysis may be used to show

The payback method fails to consider 1) the timing of the cash inflow from an investment 2) the cost of an investment 3) the return on alternative investments

Which of the following is usually a variable expense?

If a firm has no sales, it has no costs.

Variable costs

Linear break‑even analysis assumes that variable costs rise with reductions in output.