How To Talk Finance Getting To Grips With The Numbers In Business 1st Edition Ted Wainman - Solutions

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China faces relatively inelastic demand for oil. Most of China’s oil demand is met through imports from oil producing countries. Do you think the depreciation of Chinese yuan against the US dollar will have a favorable impact on its balance of payments in the short run? Explain.
In Munich, a bratwurst costs 5 euros; a hot dog costs $4 at Boston’s Fenway Park.At an exchange rate of $1.05/per euro, what is the price of a bratwurst in terms of a hot dog? All else equal, how does this relative price change if the dollar depreciates to $1.25 per euro? Compared with the
Go to the BEA website at http://www.bea.gov/newsreleases/international/intinv/intinvnewsrelease.htm and download annual data starting in 1976 on the United States’ end-of-year international investment position. For the same time period, download annual data on U.S. nominal GDP from
We studied that in case of a closed economy, the saving-investment equality holds true. Explain why in case of an open economy the saving investment identity does not hold true? In an open economy, if savings is greater than investments, what will happen to the foreign capital movement and the
Assume that China and India’s CAD remains unchanged for a prolonged period.If both countries devaluated their currencies against dollar—Chinese Yuan devaluated more compared to Indian Rupee—what will be the likely impact of currency devaluation on the CAD in China and India?
If you go to the BEA website (http://www.bea.gov) and look at the Survey of Current Business for July 2013, the table on “U.S. International Transactions,” you will find that in 2012, U.S. income receipts on its foreign assets were $770.1 billion(line 13), while the country’s payments on
Suppose the U.S. net foreign debt is 25 percent of U.S. GDP and foreign assets and liabilities pay an interest rate of 5 percent per year. What would be the drain on U.S. GDP (as a percentage) from paying interest on the net foreign debt? Do you think this is a large number? What if the net foreign
Is it possible for a country to have a current account deficit at the same time it has a surplus in its balance of payments? Explain your answer, using hypothetical figures for the current and nonreserve financial accounts. Be sure to discuss the possible implications for official international
Many developing countries have experienced depreciation in their currency during 2013. Do you think the widening current account deficit (CAD) is a reason for such depreciation? If so, explain how the CAD influences the exchange rate?
The nation of Pecunia had a current account deficit of $1 billion and a nonreserve financial account surplus of $500 million in 2014.a. What was the balance of payments of Pecunia in that year? What happened to the country’s net foreign assets?b. Assume that foreign central banks neither buy nor
A New Yorker travels to New Jersey to buy a $100 telephone answering machine.The New Jersey company that sells the machine then deposits the $100 check in its account at a New York bank. How would these transactions show up in the balance of payments accounts of New York and New Jersey? What if the
Explain how each of the following transactions generates two entries—a credit and a debit—in the American balance of payments accounts, and describe how each entry would be classified:a. An American buys a share of German stock, paying by writing a check on an account with a Swiss bank.b. An
Equation (2-2) tells us that to reduce a current account deficit, a country must increase its private saving, reduce domestic investment, or cut its government budget deficit. Nowadays, some people recommend restrictions on imports from China (and other countries) to reduce the American current
GDP usually includes final goods and services produced in a year. Suppose Honda produces a product in Japan in the year 2013 but sold it in 2014. Would this be included in Japan’s GDP calculation for 2014? Explain. Can we include the value of stocks and bonds sold in the same year in GDP? Discuss.
Recount how the 18 countries using the euro have fared so far in their currency union, and the steps they are taking in response to their prolonged economic crisis.
The time value of money states that:(a) £100 today is worth less than £100 in a year’s time (b) £100 today is worth more than £100 in a year’s time (c) £100 today is worth the same as £100 in a year’s time (d) time is money
The discount rate is the rate at which:(a) interest is earned on money in the bank (b) the business rates paid are discounted by the local authority to encourage enterprise(c) a business must offer a discount to increase sales (d) the future cash flows of a project are discounted
The formula for the discount rate in Excel is:(a) =1/(1-r)^n; where r = discount rate and n = the year (b) =1/(1×r)^n; where r = discount rate and n = the year (c) =1/(1+r)^n; where r = discount rate and n = the year (d) =1/(1/r)^n; where r = discount rate and n = the year
NPV stands for:(a) new present value (b) net purchasing value (c) new purchasing value (d) net present value
The NPV of a project is defined as:(a) the present day value of the future cash flows associated with that project(b) the future day value of the present cash flows associated with that project(c) the present day value of the present cash flows associated with that project(d) the future day value
IRR stands for:(a) international rate of return (b) internal real return (c) internal rate of return (d) internal rate of refund
Which of these statements is true?(a) The NPV is the discount rate that gives an IRR of nil (b) The IRR is the discount rate that gives an NPV of nil (c) The discount rate is the IRR that gives an NPV of nil (d) The discount rate is the NPV that gives an IRR of nil
WACC stands for:(a) the weighted absolute cost of capital (b) the weighted average cost of capex (c) the working average cost of capital (d) the weighted average cost of capital
The WACC is the:(a) average return that debt and equity investors require (b) total return that debt and equity investors require (c) mean return that debt and equity investors require (d) normal return that debt and equity investors require
The payback on a project determines:(a) its profitability (b) when it becomes cash positive (c) its alignment with business strategy (d) how successful the project will be
A budget might be described as:(a) something to keep the finance team busy (b) a reflection of what happened in the past (c) a plan of what you intend to do in the future (d) a waste of time
The relationship between the budget and the strategy is:(a) irrelevant (b) the strategy reflects the impact of delivering on the budget (c) the budget reflects the financial implications of delivering on the strategy(d) the more time spent on one, the less time is spent on the other
Good reasons for budgeting include:(a) planning, coordination, consistency motivation, control and evaluation(b) planning, coordination, communication, justification, control and evaluation(c) planning, coordination, communication, motivation, control and evaluation(d) profit setting, coordination,
An incremental budget is one that is:(a) phased correctly over the various months (b) based on what happened in previous periods (c) flexed, based on actual volume achieved (d) started from a blank sheet of paper
A zero-based budget is one that is:(a) phased correctly over the various months (b) based on what happened in previous periods (c) flexed, based on actual volume achieved (d) started from a blank sheet of paper
Month end involves(a) stressing out the finance team (b) hiding unspent budget (c) closing the books and preparing management reports (d) allocating costs to other departments
Variance analysis examines:(a) the difference between actual and budget (b) the difference between budget and forecast (c) the difference between actual and prior year(d) all of the above
Flexing the budget involves:(a) adjusting the actual level of output achieved to the budgeted amount(b) adjusting the budget for the actual level of output achieved (c) adjusting the actual costs to come into line with the original budget(d) updating the forecast
Forecasting involves:(a) projecting the budget forward (b) guessing how the year will turn out (c) using formulae in spreadsheets (d) updating the budget based on more up-to-date actual figures
Commercial awareness might be:(a) an awareness of finance (b) knowing how to get the best out of others (c) managing the business both financially and operationally (d) being able to cover for members of the finance team when they are away
Strategy involves:(a) formulating the direction of the business (b) learning from past mistakes (c) guessing what the future might hold (d) two weeks in Barbados
STEEPLE analysis is:(a) an accounting methodology (b) an inside out strategic thinking tool (c) an outside in strategic thinking tool (d) used to determine a core competence
Porter’s Five Forces include:(a) a SWOT analysis (b) identifying buyer and supplier power (c) setting the direction of the business (d) conducting online surveys
The vision of the business is:(a) what it does (b) what it did (c) where it has been (d) where it wants to go
The mission of the business is:(a) what it does (b) what it did (c) where it has been (d) where it wants to go
Commercial awareness is important because:(a) you might get a job in the finance team (b) you will learn to develop complicated spreadsheets (c) you will be able to negotiate a higher salary (d) it helps to make informed business decisions based on sound financial analysis
A sole trader is someone who:(a) works for themselves(b) buys and sells fish – specialising in Dover Sole(c) is the sole owner of a company(d) trades goods but not services
A partnership is one where:(a) profits are shared equally between the partners(b) profits are shared equitably between the partners(c) profits are distributed to the shareholders before the partners get paid(d) the company cannot make a loss
A company is best described as:(a) the same as a sole trader(b) the same as a partnership(c) a separate legal entity(d) an organisation with employees
The veil of incorporation:(a) limits the liabilities of the shareholders to their investment(b) limits the liabilities of the debt providers to their investment(c) separates the executive from the non-executive(d) separates assets and liabilities
The role of the executive board is to:(a) work on a part-time basis(b) maximise their share options(c) formulate and implement strategy(d) formulate strategy and hold the non-executive to account
The statutory accounts:(a) show only the balance sheet(b) show only the profit & loss account(c) show only the cash flow statement(d) are a legal requirement of all limited companies
The role of the auditors is to:(a) do what the directors ask them to do(b) prepare the accounts ☐(c) check the accounts and sign them off as true and fair(d) minimise the tax of the company
The accounting equation states that:(a) assets must be greater than liabilities(b) assets will always be equal to liabilities(c) the difference between assets and liabilities is profit(d) shareholders’ funds will always be an asset
The balance sheet contains:(a) assets and liabilities(b) assets and expenses(c) income and liabilities(d) income and expenses
If a company makes a profit it can either:(a) spend it or reinvest it(b) reinvest it or return it to shareholders(c) return it to shareholders or pay a dividend(d) pay a dividend or spend it
Who appoints the auditors of a company?(a) The directors(b) The non-executive directors(c) The shareholders(d) The bankers
Shareholders’ funds are:(a) an asset(b) a liability(c) an income(d) an expense
The matching concept ensures that:(a) income and expenses are recognised in the period ordered(b) income and expenses are recognised in the period invoiced(c) income and expenses are recognised in the period paid(d) income and expenses are recognised in the period earned/incurred
Profit and cash are:(a) always the same(b) sometimes the same(c) never the same(d) inversely related
The business cycle shows:(a) how cash flows within a business(b) how goods and services flow within a business(c) the role of employees in a business(d) how a business responds to the global economic climate
A business can raise investment/cash from:(a) equity and shareholders(b) debt and equity(c) shareholders and employees(d) debt and banks/loans
Debt is:(a) riskier than equity(b) unlikely to be repaid(c) a loan, usually bearing interest(d) probably interest free
Equity is:(a) a combination of retained profit and dividends(b) the shareholders’ stake in the business(c) the concept of all shareholders being treated equally(d) an investment that will attract interest
The primary market is where:(a) companies raise money from investors(b) investors trade shares that they own(c) companies trade goods and services(d) companies resell goods and services
The secondary market is where:(a) companies raise money from investors(b) investors trade shares that they own(c) companies trade goods and services(d) companies resell goods and services
Capital is a combination of:(a) debt and equity(b) debt and dividends(c) dividends and equity(d) debt, equity and dividends
A derivative is:(a) something only bankers know about(b) a trade between two parties where neither owns the underlying asset(c) a trade between two parties where both own the underlying asset(d) a swap
An option is:(a) the right to buy an asset at a future point in time(b) the obligation to buy an asset at a future point in time(c) a swap(d) a derivative product that is traded only in the USA
Companies usually use derivatives to:(a) bet on markets going up(b) bet on markets going down(c) bet on markets going up and down(d) hedge risk
The financial objective of a business might include:(a) maximising the wealth of the shareholders(b) paying creditors early(c) maximising staff bonuses(d) tax evasion
Who of the following might be interested in a company’s annual report?(a) suppliers to competitors(b) suppliers(c) the general public(d) ex-employees
In which month must I show the cost of a service for the following?(a) purchase order raised in February(b) invoice received in March(c) service delivered in April(d) invoice paid in May
The financial statements are:(a) always correct(b) a clear picture of the future of a company(c) a clear picture of the past of a company(d) never to be relied upon due to accounting manipulation techniques☐
Assets are categorised as:(a) fixed and non-current(b) fixed, non-current and current(c) non-current and current(d) long-term and current
Cash will appear in(a) non-current assets(b) current assets(c) current liabilities(d) non-current liabilities
Plant and machinery will appear in:(a) non-current assets(b) current assets(c) current liabilities(d) non-current liabilities
Current assets are:(a) assets that the business needs to keep to do business(b) assets that the business is trying to sell(c) assets that the business is trying to turn into cash(d) not really assets at all
Non-current (or fixed) assets are:(a) assets that the business needs to keep to do business(b) assets that the business is trying to sell(c) assets that the business is trying to turn into cash(d) not really assets at all
Liabilities are categorised as:(a) current and fixed(b) non-current and fixed(c) current, non-current and shareholders’ funds(d) current, short-term, non-current and long-term
An overdraft is most likely to appear in:(a) non-current assets(b) current assets(c) current liabilities(d) non-current liabilities
An interest-only mortgage is most likely to appear in:(a) non-current assets(b) current assets(c) current liabilities(d) non-current liabilities
Current liabilities are:(a) liabilities that need to be repaid soon(b) liabilities that do not need to be repaid soon(c) amounts owed to shareholders(d) dividends payable
Non-current (or long-term) liabilities are:(a) liabilities that need to be repaid soon(b) liabilities that do not need to be repaid soon(c) amounts owed to shareholders(d) dividends payable
Equity is:(a) liabilities that need to be repaid soon(b) liabilities that do not need to be repaid soon(c) amounts owed to shareholders(d) dividends payable
Share capital is:(a) the initial investment in the business by shareholders(b) the nominal value of all investments in the business by shareholders(c) debt and equity(d) reinvested profits
Capital is:(a) debt and current assets(b) total assets and current liabilities(c) total liabilities and current assets(d) equity and current liabilities
Capital is used for:(a) investment capital and equity(b) debt and equity(c) debt and working capital(d) investment capital and working capital
Capital comes from:(a) investment capital and equity(b) debt and equity(c) debt and working capital(d) investment capital and working capital
The income statement contains:(a) assets and liabilities(b) assets and expenses(c) income and liabilities(d) income and expenses
Turnover is not also known as:(a) sales(b) deferred income(c) income(d) revenue
Cost of sales usually contains:(a) fixed costs(b) sunk costs(c) variable costs(d) marginal costs
Gross profit is sales less:(a) turnover(b) administration costs(c) cost of sales(d) cost of sales and administration costs
Administration costs usually contain:(a) fixed costs(b) sunk costs(c) variable costs(d) marginal costs
Operating profit is sales less:(a) turnover(b) administration costs(c) cost of sales(d) cost of sales and administration costs
Interest costs are:(a) the costs of servicing the equity investment(b) the costs of servicing the debt investment(c) the costs of servicing both debt and equity investments(d) only included on the balance sheet
Profit before tax is sales less:(a) cost of sales(b) cost of sales and administration costs(c) cost of sales, administration costs and dividends(d) cost of sales, administration costs and interest
Dividends are paid out of:(a) gross profit(b) net profit(c) operating profit(d) retained profit
Retained earnings appears:(a) in the balance sheet(b) in the cash flow statement(c) in the income statement(d) in the balance sheet and the income statement
The difference between brought forward and carried forward retained earnings is:(a) operating profit less interest(b) operating profit less dividends(c) net profit less interest(d) net profit less dividends
A retained loss is:(a) an asset(b) a liability(c) an income(d) an expense
The reason for a difference in accrual and cash profit will not be due to:(a) a sales invoice that has been paid(b) amortisation(c) a supplier’s invoice that has not yet been settled(d) rent that has been paid in advance
The cash flow statement will include:(a) a reconciliation between accrual profit and cash profit(b) a cash flow forecast(c) a reconciliation between actual and budgeted cash(d) a reconciliation between cash and overdraft balances
Depreciation will appear in the cash flow reconciliation because:(a) it is always a big figure(b) it affects cash profit but not accrual profit(c) it affects accrual profit but not cash profit(d) it affects both accrual and cash profit
The cash flow statement will also include sections covering:(a) cash from sales and investments(b) how cash was invested and cash from sales(c) cash from sales and cash from financing activities(d) how cash was invested and cash from financing activities

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How To Talk Finance Getting To Grips With The Numbers In Business 1st Edition Ted Wainman - Solutions

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