a a. True 8. Which of the following would be classified as a source of cash? An increase in accounts receivable b. A decrease in accrued expenses c. An increase in accounts payable d. An increase in inventory 9. The primary function of financial markets is to: a ensure that interest and dividend payments are made to stockholders and bondholders. b. facilitate the movement of cash from savers to companies that need money. c. facilitate the payment for goods and services between producers and consumers, d financial markets perform all of these functions 10. The purpose of the U.S. Federal Reserve is to stabilize the American economy. b. False 11. Which one of the following statements is correct? a. Depreciation has no effect on taxes. b. Interest paid is a noncash item. c. Taxable income must be a positive value. d. Net income is distributed as dividends to owners of the company or kept as retained earings e. Taxable income plus interest and depreciation equals carnings before interest and taxes. 12. Suppose two firms differ only in their use of debt; they have identical assets, sales, operating costs, interest rates on their debt, and tax rates. But one firm has a higher debt ratio. The firm that uses more debt will have a lower profit margin on sales and a lower return on assets. a True b. False 13. Which of the following is not considered to be an institutional investor? a insurance companies b. pension funds governments d. mutual funds c. 14. Which of the following statements is most correct? a. If individuals increase their savings rate, interest rates are likely to increase. b. If companies have fewer good investment opportunities, interest rates are likely to increase. c. Interest rates on debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities. d. If expected inflation increases, interest rates are likely to increase 15. Assets on the are organized in order of a.statement of cash flows, leverage b. balance sheet, liquidity c. income statement, liquidity d. income statement, profitability e. balance sheet, profitability 16. Cash flow from operating activities is increased by: an increase in accounts receivable b. an increase in inventory a decrease in accounts payable d. depreciation a