Summer 2018 Exit Assessment Test - BBA

Finance & Accounting Major

1. Which of the following items is reported under current liability on the balance sheet?
o A) unearned revenue
o B) sales
o C) income tax
o D) cash
2. When an item of expense has been incurred but not yet paid, it is normally called: *
o A) prepaid expense
o B) adjusted expense
o C) estimated expense
o D) none of these (correct answer Accrued expenses)
3. Which of the following is not a selling expense? *
o A) advertising expense
o B) delivery expense
o C) income tax expense
o D) shipping expense
4. Patents and copyrights should be classified on a balance sheet as: *
o A) current assets
o B) property, plant, and equipment
o C) intangible assets
o D) long-term investments
5. Treasury stock should be reported on the balance sheet as part of: *
o A) intangible assets
o B) current assets
o C) current liabilities
o D) stockholders' equity

Questions Solved by:

George Aldrin Ghosh
Department of Accounting & Finance, Marketing
Bachelors of Business Administration
North South University
 6. When a corporation pays a note payable *
o A) the account notes payable will be increased
o B) the account notes payable will be decreased
o C) the account accounts payable will be increased
o D) the account cash will be increased
7. The major elements of the income statement are *
o A) revenues, gains, and prepaid expenses
o B) revenues, expenses, gains, and losses
o C) cash, losses, and expenses
o D) assets and liabilities
8. Which is the correct order of preparing a multiple-step income statement? *
o A) Operating Section, Income Tax, Non-Operating Section
o B) Non-Operating Section, Income Tax, Operating Section
o C) Operating Section, Non-Operating Section, Income Tax
o D) Income Tax, Operating Section, Non-Operating Section
9. What is the correct order of items to be reported under stockholder's equity? *
o A) Additional paid-in capital, Retained earnings, Capital stock
o B) Capital stock, Additional paid-in capital, Retained earnings
o C) Retained earnings, Capital stock, Additional paid-in capital
o D) Retained earnings, Additional paid-in capital, Capital stock
10. The difference between the cost of a fixed asset and its accumulated depreciation is: *
o A) book value
o B) market value
o C) contra asset
o D) liability
11. The statement of cash flows provides information related to changes in: *
o A) all asset and all equity accounts
o B) working capital
o C) operating, investing, and financing activities
o D) non-cash activities
12. Which of the following will be an investing activity in the cash flow statement? *
o A) purchase of fixed assets
o B) paying dividends to stockholders

Questions Solved by:

George Aldrin Ghosh
Department of Accounting & Finance, Marketing
Bachelors of Business Administration
North South University
o C) borrowing loans from a bank
o D) selling stocks to a friend
13. Cash equivalents are: *
o A) treasury bills
o B) investments with original maturities of three months or less
o C) readily convertible into known amounts of cash
o D) all of the above
14. Which of the following costs are classified as administrative cost? *
o A) Wages paid to a factory custodian
o B) Wages paid to a production department supervisor
o C) Wages paid to an assembly line worker
o D) Wages paid to a cost accounting department supervisor
15. The difference between selling price and unit variable cost is known as *
o A) Operating profit
o B) Gross profit
o C) Contribution margin
o D) Net profit

16. A 30-year bond issued by Gary's Plaid Pants Warehouse, Inc., in 2010 would now trade in the *
o A) Primary money market
o B) Euro currency market
o C) Derivative market
o D) Secondary capital market
17. NASDAQ is a(n) ........... *
o A) Auction market
o B) Euro currency market
o C) Derivative market
o D) Secondary capital market
18. Investment bankers *
o A) Accepts deposits from savers and lend them out to companies
o B) Act as intermediaries between issuers of stock and investors
o C) both (A) and (B)
o D) None of the above

Questions Solved by:

George Aldrin Ghosh
Department of Accounting & Finance, Marketing
Bachelors of Business Administration
North South University
 19. The risk that cannot be eliminated through diversification is called ................ *
o A) Diversifiable risk
o B) Unsystematic risk
o C) Systematic risk
o D) None of the above

20. A security's indicates how the security's return responds to fluctuations in

market returns *
o A) Standard deviation
o B) Correlation
o C) Beta
o D) Variance

21. Assume you are considering security Z with a beta of 1.25. The risk-free rate is 6% and the market return is 10%.
What is the required rate of return according to CAPM? *
o A) 11%
o B) 12%
o C) 13%
o D) 9%
22. Portfolio risk is *
o A) equal to the sum of the standard deviations of each of the securities in the portfolio
o B) the possibility that an investment portfolio may not achieve its objectives
o C) not mitigated by diversification
o D) result of the average of the risk of each asset in the portfolio

23. Given the following information in the image below, determine which beta coefficient for Stock A is consistent
with equilibrium:
o A) 0.86
o B) 1.26
o C) 1.10
o D) 0.80

Equation for Question 23

24. Given the following probability distribution given below, what is the expected return for Security A? *
o A) 13%

Questions Solved by:

George Aldrin Ghosh
Department of Accounting & Finance, Marketing
Bachelors of Business Administration
North South University
 o B) 12%
o C) 15%
o D) 20%

Probability Distribution for Question # 24

25. A share of common stock has just paid a divident of $2.00. If the expected long-run growth rate for this stock is 15
percent, and if investors require a 19% rate of return, what is the price of the stock? *
o A) $57.50
o B) $62.25
o C) $71.86
o D) $64.00

26. A 10-year corporate bond has an annual coupon payment of 9 percent. The bond is currently selling at par ($1,000).
Which of the following statements is most correct? *
o A) The bond’s yield to maturity is 9 percent.
o B) The bond's current yield is 9 percent
o C) If the bond's yield to maturity remains constant, the bond's price will remain at par
o D) all of the above
27. Which of the following software can you use to calculate the risk of a stock? *
o A) Microsoft Access
o B) Microsoft Word
o C) Microsoft Excel
o D) Microsoft Visio

28. Which of the following bonds will have the greatest percentage increase in value if all interest rates decrease
by 1 percent? *
o A) 20 year, zero coupon bond
o B) 10 year, zero coupon bond
o C) 20 year, 10 percent coupon bond
o D) None of the above

Questions Solved by:

George Aldrin Ghosh
Department of Accounting & Finance, Marketing
Bachelors of Business Administration
North South University
 29. Suppose you have invested in BMW shares and expect to receive dividend (€10) in the next year. At the time of
your purchase exchange rate was USD $1.2/€ but next year the exchange
rate become USD 1.1/€. What will happen to your dividend income in term of US dollar? *
o A) It will go up
o B) It will go down
o C) It will remain unchanged
o D) Cannot be determined
30. An investor can use the fundamental analysis to determine if a stock is *
o A) Overvalued
o B) Undervalued
o C) Trading at fair market value
o D) All of the above
31. Relationships determined from a firm's financial information and used for comparison purposes are known as: *
o A) financial ratios
o B) identities
o C) dimensional analysis
o D) scenario analysis

32. The formula which breaks down the return on equity into three component parts is referred to as which one of the
following? *
o A) equity equation
o B) profitability determinant
o C) SIC formula
o D) Du Pont identity

33. If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the following? *
o A) 0.0
o B) 0.5
o C) 1.0
o D) 1.5
34. Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to
as ratios. *
o A) asset management
o B) long-term solvency
o C) short-term solvency

Questions Solved by:

George Aldrin Ghosh
Department of Accounting & Finance, Marketing
Bachelors of Business Administration
North South University
o D) profitability

35. Last year, T-bills returned 2 percent while your investment in large-company stocks earned an average of 5 percent.
Which one of the following terms refers to the difference between these two rates of return? *
o A) risk premium
o B) geometric return
o C) arithmetic
o D) risk premium
36. Standard deviation is a measure of which one of the following? *
o A) average rate of return
o B) volatility
o C) probability
o D) risk premium

37. The systematic risk of the market is measured by: *

o A) a beta of 1.0
o B) a beta of 0.0
o C) a standard deviation of 1.0
o D) a standard deviation of 0.0

38. Your grandmother has promised to give you $5,000 when you graduate from college. She is expecting you to graduate
two years from now. What happens to the present value of this gift if you delay your graduation by one year and graduate
three years from now? *
o A) remains constant
o B) increases
o C) decreases
o D) becomes negative

39. What is the beta of the following portfolio? Use the data in the table below (see image)
o A) 1.04
o B) 1.07
o C) 1.13
o D) 1.16

Table for Question # 39

Questions Solved by:

George Aldrin Ghosh
Department of Accounting & Finance, Marketing
Bachelors of Business Administration
North South University
 40. Considering the “Price” column of the following table, which type of chart would be best to use if you want to visually
represent the contribution of each item as part of the total? Table is provided below (see image) *
o A) Column chart
o B) Line chart
o C) Pie chart
o D) Area chart

Table for Question 40

Questions Solved by:

George Aldrin Ghosh
Department of Accounting & Finance, Marketing
Bachelors of Business Administration
North South University