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BEC PDF DEMO:

QUESTION NO: 1
The theory underlying the cost of capital is primarily concerned with the cost of:
A. Long-term funds and old funds.
B. Short-term funds and new funds.
C. Long-term funds and new funds.
D. Any combination of old or new, short-term or long-term funds.
Answer: D
Explanation:
Choice "d" is correct. The cost of capital considers the cost of all funds - whether they are short-term, long-term, new or old.
Choices "a", "b", and "c" are incorrect, per above.

QUESTION NO: 2
In 1992, Anchor, Chain, and Hook created ACH Associates, a general partnership. The partners orally
agreed that they would work full time for the partnership and would distribute profits based on their capital
contributions. Anchor contributed $5,000; Chain $10,000; and Hook $15,000.
For the year ended December 31, 1993, ACH Associates had profits of $60,000 that were distributed to
the partners. During 1994, ACH Associates was operating at a loss. In September 1994, the partnership
dissolved.
In October 1994, Hook contracted in writing with Ace Automobile Co. to purchase a car for the partnership.
Hook had previously purchased cars from Ace Automobile Co. for use by ACH Associates partners.
ACH
Associates did not honor the contract with Ace Automobile Co. and Ace Automobile Co. sued the partnership and the individual partners.
Determine whether (A) or (B) is correct. Select the answer that corresponds to the correct statement.
A. ACH Associates and Hook would be the only parties liable to pay any judgment recovered by Ace
Automobile Co.
B. Anchor, Chain, and Hook would be jointly and severally liable to pay any judgment recovered by
Ace
Automobile Co.
Answer: B
Explanation:
Choice "b" is correct. Since Ace brought suit against both the partnership and the individual partners, if
judgment is rendered against the partnership, all partners could be held jointly and severally liable.

QUESTION NO: 3
Which one of the following is not a characteristic of a negotiable certificate of deposit?
Negotiable
certificates of deposit:
A. Have a secondary market for investors.
B. Are regulated by the Federal Reserve System.
C. Are usually sold in denominations of a minimum of $100,000.
D. Have yields considerably greater than bankers' acceptances and commercial paper.
Answer: D
Explanation:
Choice "d" is correct. Negotiable CDs generally carry interest rates slightly lower than bankers' acceptances (which are drafts drawn on deposits at a bank) or commercial paper (which is unsecured debt issued by credit worthy customers).
Choice "a" is incorrect. Negotiable CDs have a formal secondary market.
Choice "b" is incorrect. Negotiable CDs are a product of the banking industry, which is regulated by the
Federal Reserve Board.
Choice "c" is incorrect. Negotiable CDs are usually sold in denominations of a minimum of $100,000.

QUESTION NO: 4
The president of a company has signed a $10 million contract with a construction company to build a new
corporate office. Which of the following corporate documents sets forth the scope of authority under which
this transaction is governed?
A. Certificate of Incorporation.
B. Charter.
C. Bylaws.
D. Proxy statement.
Answer: C
Explanation:
Choice "c" is correct. The bylaws usually contain the rules for running the corporation. Choices "a" and "b"
are incorrect. These are possible choices, but not as good an answer as "c". A corporation's articles of incorporation (called a charter in a few states) must set out certain information relevant to formation of the
corporation, but it may include any other information that it is not illegal. However, usually details about
intracorporate power are set out in bylaws rather than in the articles or charter.
Choice "d" is incorrect. A proxy statement is a request to shareholders to allow their shares to be voted by
a specified person in a specified way. It has nothing to do with a corporate president's authority.

QUESTION NO: 5
Which of the following is incorrect with regard to value chain analysis?
A. Value chain analysis must be used in conjunction with the strategic plan of the organization.
B. Value chain analysis is critical to assessing the competitive advantage of a firm.
C. Value chain analysis is a strategic tool that assists the firm in determining how important the perceived
value of the buyers is with respect to the market the firm operates in.
D. The value chain starts with the firm and goes all the way through to the end users of the product.
Answer: D
Explanation:
Choice "d" is an incorrect statement and the correct choice. The best description of a value chain is that
value starts with the suppliers who provide the raw materials for a production process, continues with the
firm and its strategic plan, continues with the value created by the customers, and then ends with th e
disposal and recycling of the materials.
Choices "a", "b", and "c" are incorrect, as all are correct statements with regard to value chain analysis.

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Updated: May 26, 2022