1. In the banking industry, the ratio of investor capital/gross assets, as defined by RAP, is the:

Multiple Choice

• capital asset ratio.

• capital adequacy ratio.

• gross asset ratio.

• indirect capital ratio.

2. Rate regulation provides incentives for public utility managers to:

Multiple Choice

• artificially decrease the asset base.

• artificially increase the asset base.

• artificially decrease operating expenses.

3. Potential conflicts of interest between shareholders and managers may be overcome if managers are given incentives which cause them to behave as if they were:

Multiple Choice

• creditors.

• owners.

• debtors.

• vendors.

4. Based on a comprehensive survey of U.S. companies, the most common financial performance measure used in annual and long-term incentive plans for senior executives is:

Multiple Choice

• return on equity.

• economic value added.

• return on capital.

• net income or revenues.

5. A change from the LIFO to the FIFO inventory method represents a(n)

Multiple Choice

• change in accounting principle.

• change in entity.

• change in accounting estimate.

• correction of error.