Biz Quiz 3

	to Poorna Pal's Pages at the Glendale Community College
Busad-101: Sample Test 3

Updated on 05/05/2015

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Thanks for visiting my pages at the Glendale Community College web site. You can learn here about the Business Administration and Oceanography classes that I teach here, and my other professional interests (e.g., Financial Economics, Resource Economics, Physical Geology, Environmental Geology etc.). These pages, and the links therein, will also give you information about globalization, outsourcing, rational exhuberance, earthquakes, particularly the seismicity in Southern California, volcanism, plate tectonism, El Nino, global climate change, atmospheric and ocean circulation, energy and other earth resources, and the related environmental issues.

with your questions

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True/False Propositions
Each question below is either TRUE or FALSE

On this
page:

Microsoft Office is the example of a decision support system.

Dow Jones (or Dow) is an index of 30 major stocks whereas S&P-500 is a more broad-based index that tracks the top 500 of the most capitalized publicly traded U.S. stocks.

A firm's balance sheet gives us the information we need to compute its price/earnings ratio.

Current ratio is the ratio of current assets to current liabilities.

"Federal Reserve Bank" is the U.S. central bank that determines the U.S. fiscal policy.

Multiple-Choice Questions
Each question-item below is a contextually relevant 'TRUE/FALSE' proposition.

Which of these can we identify as
data, as opposed to information?

Employment statistics at the U.S. bureau of labor statistics website http://www.bls.gov.

Occupational outlook or training/education needed, expected job prospects etc. for teachers, lawyers, nurses etc. at the BLS website http://www.bls.gov.

Finance statistics at http://finance.yahoo.com.

Which of these describe the basic accounting equation?

	The balance sheet that shows the financial position of a business at a given point in time.
	The assets that a firm owns always equal liabilities and the owners’ equity.
	The income statement lists all sales or revenues and expenses, during a period of time, the bottom line of which is the net income.

A typical financial ratio like
the popular ‘P/E ratio' ...

indicates the firm’s liquidity by measuring the ratio of
current assets to current liabilities.

is the ratio of a firm’s price to annual earnings and indicates
if a firm’s stock is overpriced or underpriced.

serves as an excellent accounting measure because it lets us understand how much debt a firm can carry without
having to declare bankruptcy.

As discussed in the class, the
investors' total returns on the stock
market comprise appreciation in price
plus the dividends received. Thus, the
graph alongside where average
annual returns are computed for
holding a stock for 10 years
shows that ...

the stock market gives the same high returns all the time.

the total returns on the S&P-500 index are unlikely
to be negative if you hold it for at least 10 years.

10-year treasuries have always given better returns
than the market.

The graph alongside shows the yield curves for corporate
bonds (in red) and the 10-years U.S. treasuries. Which of the
following can you infer from this graph?

The treasuries show an inversion of the yield curve that
occurred sometime between December 1999 and December 2000.

Corporate bonds yield poorer returns than the U.S. treasuries because investors are more likely to have the confidence in U.S. treasuries than in the corporate bonds.

The yield curves for corporate bonds slope upwards because lenders’ expected higher yields for the longer maturities.

Short notes

Write 150-200 words long answers, with sketches and illustrations, as and when appropriate and explaining the underlying concepts in detail.

What are the most commonly followed U.S. stock market indices? Explain why. What inferences can you draw from this graph of 10-years averages of inflation-adjusted monthly closing values for S&P-500 index since 1871? Discuss.

A furious debate is raging, nationwide,
about the pros and cons of bailing the
three U.S. automakers out ─ should we as a society bail them out or let the market take care of itself, by their
having to declare bankruptcy and
then reorganize. What is your stand?
Discuss.

The news this Monday (December 7, 2008), that Tribune Co. ─ owner of the Los Angeles Times, Chicago Tribune, Baltimore Sun and other dailies ─ filed for Chapter 11 bankruptcy. Chapter 11 would buy the Tribune Co. time to put its finances in order. Analysts said the company will almost certainly have to sell off some of its major holdings ─ and that could prove extremely difficult because of the bad economy and the poor outlook for newspapers. In filing for bankruptcy, the company reported $13 billion in debt and $7.6 billion in assets. To generate cash ─ and meet the next principal payment of $593 million, due in June ─ Tribune has been looking to sell the Cubs, Chicago's Wrigley Field and the company's 25 percent stake in a regional sports cable channel. But a tight credit market has made it tougher for potential buyers to obtain loans. "So, how did we get here? It has been, to say the least, the perfect storm," Zell, chairman and chief executive, wrote in a memo to employees. "A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt. All of our major advertising categories have been dramatically impacted."

Use the above and/or any other information to answer the following questions.

Estimate the "current ratio" for the Tribune Co.? Does this value indicate a satisfactory liquidity for Tribune Co. or shows that the company is indeed in a precarious financial situation? Can you compute the P/E ratio, profit margin and return on assets from the information given above? Why, or why not? Explain.

This news has shocked the newspaper business nationwide, particularly as it has come at a time when newspaper readership is at an all-time high, except that most of the readers read the newspaper on-line. What does this tell you about the limits of on-line business? Any suggestions about how Los Angeles Times and the other similar newspapers can improve their profitability?

This site was last updated on 05/05/15