Which of the Following Is Incorrect in Regard to Short

question 32

Multiple Choice

Which of the following is incorrect in regard to short selling?

• A) Naked short selling involves selling a stock short without first borrowing the stock.
• B) During the credit crisis, the SEC temporarily protected more than 800 firms from short selling.
• C) The SEC's uptick rule prevents speculators from taking a short position in stocks that have declined at least 15 percent for the day, except when the most trade resulted in an increase in the stock price.
• D) During the credit crisis, some short sellers focused particularly on the stocks of financial institutions.
• E) none of the above

Understand the impact of discounts on operating cycles and payment periods.

Calculate and analyze the effects of changes in accounts payable periods due to discounts.

Understand the principles of effective interest rates in borrowing scenarios.

Calculate the operating cycle based on inventory, accounts payable, and cash cycle periods.

---

Definitions:

Purchases Budget

A financial plan that estimates the amount of goods or inventory a business needs to buy over a certain period to meet its sales goals.

Production Budget

An estimation of the total output a company needs to meet its sales goals and inventory policies, expressed in units or monetary terms.

Merchandising Companies

Companies that purchase goods in finished form for resale to consumers, generating revenue primarily from the sale of merchandise.

Direct Materials Budget

A financial plan that estimates the quantity and cost of direct materials needed to meet production requirements.