FNB100 Midterm Section ________ Last Name __________________ First Name _________ 1. Which of the following is a correct statement?

Which of the following is a correct statement?

a. Inventory is not part of the current assets because they are physical innature.

b. Plant, equipment, building and land are non-current assets, but not fixedassets.

c. Marketable securities such as stocks & bonds are current assets.

d. Cash is the only liquid asset.

e. Physical assets are finance by equity only.

2. Which of the following is an incorrect statement?

a. Revenue – Operating Income = Gross Marginb. Revenue = Price

 Q’ty sold or TR = P*Q

c. EAT = EBT – Taxesd.

d.Income – Expenses = Operating Income

e. Revenue – CGS = Gross Profit

3. Expenses can be categorized by whether the cost incurred is directly related toproduction or not. Which of the following is correct?

a. If directly related, it will not change with the production level, thus calledFixed Cost.

b. If directly related, it will change with the production level, thus calledFixed Cost.c. If not directly related, it will not change with the production level, thuscalled Variable Cost.d. If not directly related, it will change with the production level, thus calledVariable Cost.e. None of the above is a correct statement.4. Which of the following is an incorrect statement?a. Income – Expenses = Operating Incomeb. Current Assets – Current Liabilities = Net Working Capitalc. Net Profit = EBT – Taxesd. Operating Income – Interest PMT = Gross Profite. Expenses = CGS + Operating Expenses5. Which item of the income statement represents the taxable income of the firm?a. EBIT b. Operating Income c. EBT d. CGS e. EAT6. Which of the following is a correct interpretation of “r = i – ”?a. Nominal interest rate is real interest rate adjusted for inflation.b. Real interest rate is inflation adjusted for nominal interest rate.c. Inflation is real interest rate adjusted for nominal interest rate.d. Negative real interest rate is possible.e. Negative real interest rate is favorable to the lenders.7. Which of the following is not a correct statement?a. Accounts receivable represents credit sale, and thus, cannot be collecteduntil maturity.b. Accounts receivable mainly consists of promissory notes and credit sales.c. Accounts receivable is part of the current assets.FNB100 Midterm2d. Accounts payable mainly consists of purchase of inventory on credit andnotes payable.e. Accounts payable is part of the current liabilities.8. Which of the following is not a correct statement?a. When promissory notes are factored, the full face value is not redeemed.b. Accounts receivable are discounted in the same way as promissory notes.c. When accounts receivable are factored, invoices are irrelevant.d. Promissory notes are a type of commercial paper.e. Commercial paper is a short-term corporate debt.9. Which of the following is not a correct statement?a. ST US gov’t debt instrument is called Treasury bill.b. LT US gov’t debt instrument includes Treasury note with maturity up to10 years and Treasury bond with maturity up to 30 years.c. ST refers to maturity up to 3 years.d. LT corporate debt instrument is called corporate bond.e. Bond is the term for LT debt instruments in general.10. Which of the following is not a correct statement about the bond?a. Bond can be either non-interest-bearing or interest-bearing.b. Non-interest-bearing bonds sell at discount upon issuance.c. Price of a discount bond will go up as it approaches maturity.d. There is an inverse relation between the bond price and interest rate.e. Baseline interest rate for the bond market is LIBOR rate.