Problem 1: Which of the following would be classified as a use of cash?
a. An increase in accounts payable.
b. A decrease in inventories.
c. A decrease in accounts receivable.
d. An increase in retained earnings.
e. An increase in inventories.
Problem 2: Empirical evidence shows that financial market price movements are essentially random. This is evidence that:
a. Financial markets are reasonable efficient markets.
b. Financial markets are NOT efficient markets.
c. This is irrelevant evidence, because the randomness of market price movements is NOT related to the efficiency of financial markets.
d. none of the above
Problem 3: Which of the following is an example (or are examples) of a sunk cost in a capital budgeting analysis? (read all alternatives prior to answering)
a. The amount paid for a building you currently own and intend to utilize for a project
b. The current market value of a building you own and intend to utilize for a project
c. the increase in inventory required to begin a new project
d. the price of a consultant's report that has not yet been paid, but will be paid regardless of whether the project is accepted or rejected
e. both a and d are examples of sunk costs