Question & Answer

1.       Go to the team and tell them what you’ve been asked to do. If they refuse to support you, threaten to reveal the true numbers to the CEO and board members.

Statement of Financial Accounting Concepts No. 5 identifies four characteristics that an item must have before it is recognized in the financial statements. What are these four characteristics?

Why is it necessary to convert accrual-based net income to a cash basis when preparing a statement of cash flows?

Do investors in high tax brackets or those in low tax brackets benefit more from tax-exempt securities? Why? At a given point in time, which offers a higher before-tax yield: municipal bonds or corporate bonds? Why? Which has the higher after-tax yield? If taxes did not exist, would Treasury bonds offer a higher or lower yield than municipal bonds with the same maturity? Why? (LO1)

Explain the difference between obtaining funds from a venture capital firm and engaging in an IPO. Explain how the IPO may serve as a means by which the venture capital firm can cash out. (LO1)

Discuss the entrance of savings institutions into the market for consumer and commercial lending. What are the potential risks and rewards of this strategy? Discuss the conflict between diversification and specialization of SIs. (LO2)

Most securities firms experience poor profit performance during periods in which the stock market performs poorly. Given what you know about securities firms, offer some possible reasons for these reduced profits. (LO3)

How do speculators use call options? Describe the conditions under which their strategy would backfire. What is the maximum loss that could occur for a purchaser of a call option? (LO3)

Describe the general characteristics of a futures contract. How does a clearinghouse facilitate the trading of financial futures contracts? (LO1)

Look in a business periodical for news about a recent financial transaction involving two financial institutions. For this transaction, determine the following: a. How will each institution’s balance sheet be affected? b. Will either institution receive immediate income from the transaction? c. Who is the ultimate user of funds? d. Who is the ultimate source of funds? (LO3)

Assume that Switzerland has a very strong economy, putting upward pressure on both its inflation and interest rates. Explain how these conditions could place pressure on the value of the Swiss franc, and determine whether the franc’s value will rise or fall. (LO2)

1.       : Using Hackman and Oldham’s core job dimensions, compare and contrast the jobs of these two state employees: (1) Jared, who spends much of his time researching and debating energy policy to make recommendations that will eventually be presented to the state legislature, and (2) Anise, who spends her days planting and caring for the flower gardens and grounds surrounding the state capitol building.

What is glazing in traditional ceramics processing?

Explain why hedge funds may be able to achieve higher returns for their investors than mutual funds do. Explain why hedge funds and mutual funds may have different risks. When the market is overvalued, why might hedge funds be better able to capitalize on the excessive market optimism than mutual funds can? (LO1, LO4)

How are a polymer's properties affected when it takes on a crystalline structure?

Explain the importance of entrepreneurship to the global economy.

Using the facts from the previous problem, how would your answer change if instead, Duff adopted the cash method of accounting to allow him to better control the timing of his cash receipts and disbursements?

When tensions rise or war erupts in the Middle East, bond prices in many countries tend to decline. What is the link between problems in the Middle East and bond prices? Would you expect bond prices to decline more in Japan or in the United Kingdom as a result of the crisis? (The answer is tied to how interest rates may change in those countries.) Explain. (LO2)

What is the difference between the nominal interest rate and real interest rate? What is the logic behind the implied positive relationship between expected inflation and nominal interest rates? (LO2)

Consider the existing economic conditions, including inflation and economic growth. Do you think the Fed should increase interest rates, reduce interest rates, or leave interest rates at their present levels? Offer some logic to support your answer. (LO2; LO3)

Explain how the Financial Reform Act of 2010 and the rules issued to implement it attempted to reduce the risk in the financial system resulting from the use of credit default swaps. (LO7)

Georgette has identified a 1983 court case that appears to answer her research question.  What must she do to determine if the case still represents “current” law?

Will a general item of expenditure such as food or clothing have a price-elastic or inelastic demand? (Consider both the determinants we have considered so far.)

Assume that the Fed adopts an inflation-targeting strategy. Describe how the Fed’s monetary policy would be affected by an abrupt 15 percent rise in oil prices in response to an oil shortage. Do you think an inflation targeting strategy would be more or less effective in this situation than a strategy of balancing inflation concerns with unemployment concerns? Explain. (LO3)

Do taxpayers always add back the standard deduction when computing alternative minimum taxable income?  Explain.