1. In perfect competition...

a. each firm is a large part of the industry

b. the price equals the marginal revenue

c.a firm profit maximizes where total revenue equals total variable cost

d. firms use advertising to differentiate products

2. In monopoly...

a. the marginal revenue is greater than the average revenue

b. abnormal profits can be earned in the long run

c. firms are allocatively efficient

d. firms produce where average costs equal marginal costs

3. When a firm charges a different price for the same product this is called:

a. Price discrimination

b. Price differentiation

c. Price determination

d. Price distinction

3. If a business is charging different prices depending on demand conditions, it will have the highest price when the price elasticity of demand is:

a. - 2

b. - 5

c. - 0.8

d. - 0.01

4. Which of the following is NOT a barrier to entry?

a. patents

b. the need for a licence to operate

c. low economies of scale

d. well established brands

Discuss the trends in the revenue for McDonalds. Is this a problem?

2/ impact in the equity of revenue and expenses

Fill in the missing numbers from some slightly modified recent Financial Statements. If I list an account area, that account areas is correct.

Deferred income taxes (current asset) 5,

Total current liabilities 93,

Total current assets 101,

Deferred revenue (Current liability) 10,

Long-term investments 4,

Short-term investments 4,

Total liabilities 218,

Other current assets 3,

Short-term borrowings 21,

Total assets 318,

Accounts payable 49,

Gross margin 195,

Preferred stock ($5 par) 12,

Merchandise inventory 76,

Deferred income taxes (Long term liability) 2,

Current maturities of long-term debt 5,

Other Long Term Assets 13,

Net earnings 27,

Capital in excess of par value 4,

Retained earnings 76,

Accumulated other comprehensive loss (Equity) -2,

Cost of sales 366,

Dividends 8,

Other Long Term liabilities 8,

Pre-tax earnings 43,

Selling, general and administrative 132,

EBIT 48,

Deferred revenue – long-term protection plans (Long term Liability) 7,

Addition to Retained Earnings ________, Total liabilities and shareholders' equity ________, Cash and cash equivalents _______ , Income tax provision ________, Net sales _________ , Long-term debt ________, Common stock ($.50 par) __________ , Interest Expense – net ________, Depreciation ________ , Accrued compensation ________, Property, less accumulated depreciation _______ .

ANSWER OPTIONS (MATCH LETTERS AND NUMBERS):

Identifying and Analyzing Financial Statement Effects of Share-Based Compensation
Weaver Industries implements a new share-based compensation plan in 2014. Under the plan, the company's CEO and CFO each will receive non-qualified stock options to purchase 100,000, no par shares. The options vest ratably (1/3 of the options each year) over three years, expire in 10 years, and have an exercise (strike) price of $27 per share. Weaver uses the Black-Scholes model to estimate a fair-value per option of $18.  

(a) Use the financial statement effects template to record the compensation expense related to these options for each year 2014 through 2016.

Use negative signs with answers, when appropriate.

(b) In 2017, the company's stock price is $24. If you were the Weaver Industries CEO, would you exercise your options? Explain.

Because the stock price is per share, the Weaver CEO should exercise the options because she can immediately sell them for that amount.

Because the stock price is per share, the Weaver CEO can immediately recognize a gain of $3 per share by exercising the options.

Because the stock price is per share, no gain or loss would be recognized if the Weaver CEO exercises her options and immediately sold her shares.

Because the stock price is per share, the options are under-water (out of the money) and the Weaver CEO should not exercise the options.

(c) In 2019, the company's stock price is $46 and the CEO exercises all of her options. Use the financial statement effects template to record the exercise.

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A. Jol is a small economy. The information on the categories of the people in this economy is from a recent issue of the Jol Economic Watcher Agency shown in below:

Millions

                        Have a full-time job                                                                          790

                 Don't have a job but are looking for one                         335

                 Don't have a job and are not looking for one                  675

Based on the given information:

1. Calculate the Labour Force Participation Rate for this economy.     (3.5 Marks)
2. Calculate the Unemployment Rate for this economy.   (1.5 Marks)
3. Based on your answer in (b), what can you conclude about the economic situation in Jol? Briefly explain your answer.

4. Assume that nothing changed with respect to the population, i.e. those who were working kept their jobs and those who were looking for jobs kept looking for jobs.

State your answer whether INCREASE, DECREASE or NOT CHANGE for the following question:

i) Kef 35 years old, was discouraged by the poor job opportunities, so he was not working and not looking for a job. One day, his cousin calted him offering a job which he took.

• Unemployment rate will

(0.5 Mark)

Labour force participation rate will

(0.5 Mark)

ii) if a baby is born:

• Unemployment rate will

(0.5 Mark)

Labour force participation rate will

(0.5 Mark)

iii) After 50 years of hard work, Jack, 70 years old, retires.

• Unemployment rate will

(0.5 Mark)

Labour force participation rate will

(0.5 Mark)

B.

Fill in the blank

- cyclical - countervailing            - medium of exchange

           - expansionary        -expansionary monetary policy                 - trough

            - bank rate      - required reserve ratio                                        - frictional

              - dumping                                    - contractionary monetary policy      - automatic

             - excess reserve ratio           - store of value                          - contraction

a) Commercial banks hold a fraction of their deposits in cash in their vaults (or as deposits with the central bank). This fraction is known as the

b) The most direct way in which money replaces barter is through its use as a

c) A company of the Kenya has excess products that it does not want to sell into the Kenya market because it will bring down the domestic price and instead sells it in another country at below the cost of production. This situation is referred to as

d) The period of the business cycle in which real GDP is decreasing is called the

e) Workers at a steel plant are laid off because the economy is weak and the demand for       products         requiring         steel    has      is         an example   of unemployment.    

f) Declining oil prices from 2008 through the second quarter of 2010 has caused many economies to slow down. This has caused bank profits to decline, making Canadian banks vulnerable to a recession. The appropriate policy to be implemented is fiscal policy.

g) As housing prices began to drop and the economy slowed, the central bank began cutting its discount rate from 5.25% in June 2005 all the way to 0% by the end of 2006. With the economy still weak, it embarked on purchases of government securities from January 2007 until August 2012, for a total of $3.7 trillion. This is an example of

Required information

[The following information applies to the questions displayed below.]

All-Canadian, Ltd. is a multiproduct company with three divisions: Pacific Division, Plains Division, and Atlantic Division. The company has two sources of long-term capital: debt and equity. The interest rate on All-Canadian’s $404 million debt is 9 percent, and the company’s tax rate is 30 percent. The cost of All-Canadian’s equity capital is 10 percent. Moreover, the market value of the company’s equity is $606 million. (The book value of All-Canadian’s equity is $434 million, but that amount does not reflect the current value of the company’s assets or the value of intangible assets.)

The following data (in millions) pertain to All-Canadian’s three divisions.

Compute the economic value added (or EVA) for each of the company's three divisions. (Do not round intermediate calculations. Enter your final answers in dollars and not millions.)

McEwan Industries sells on terms of 3/10, net 20. Total sales for the year are $1,381,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 66 days after their purchases. Assume 365 days in year for your calculations. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

Open spreadsheet

1. What is the days sales outstanding? Round your answer to two decimal places.

   days

2. What is the average amount of receivables? Round your answer to the nearest cent. Do not round intermediate calculations.

   $  

3. What is the percentage cost of trade credit to customers who take the discount? Round your answers to two decimal places.

   %

4. What is the percentage cost of trade credit to customers who do not take the discount and pay in 66 days? Round your answers to two decimal places. Do not round intermediate calculations.

   Nominal cost:  %

   Effective cost:  %

5. What would happen to McEwan’s accounts receivable if it toughened up on its collection policy with the result that all nondiscount customers paid on the 20th day? Round your answers to two decimal places. Do not round intermediate calculations.

   DSO =  days

   Average receivables = $