finance ch 1-3 test

agency problem

*only happens in corporations -involves a conflict of interest as a corp has stockholders who elect the board of directors who appoint the management -however, management often owns stock so if a conflict of interest

5. Which one of the following is a capital budgeting decision? A. determining how many shares of stock to issue B. deciding whether to purchase a new equipment C. deciding how to refinance a debt issue that is maturing D. determining how much inventory to keep on hand

B-deciding whether to purchase new equipment -this is a long term investment

Which one of the following correctly defines the upward chain of command in a typical corporate organizational structure? Multiple Choice The vice president of finance reports to the chairman of the board. The chief executive officer reports to the president. The controller reports to the chief financial officer. The treasurer reports to the president. The chief operations officer reports to the vice president of production.

Controller reports to the chief financial officer

3. Which one of the following is defined as a firm's short-term assets minus its short-term liabilities? A. working capital B. debt C. investment capital D. net capital

a-working capital

8. Abe's Deli has cash of $150, accounts receivable of $95, accounts payable of $228, and inventory of $490. What is the value of the quick ratio? A. 0.31 B. 1.07 C. 0.71 D. 1.04

b-1.07

4. A business owned by an individual who has unlimited liability for its debt is called a: A. corporation. B. sole proprietorship. C. general partnership. D. limited partnership.

b-sole proprietorship

6. The common set of standards and procedures by which audited financial statements are prepared is known as the: A. matching principle. B. cash flow identity. C. Generally Accepted Accounting Principles. D. Financial Accounting Reporting Principles.

c-GAAP

The decision to issue additional shares of stock is an example of: working capital management. a net working capital decision. capital budgeting. a controller's duties. a capital structure decision.

capital structure

A _____ has all the respective rights and privileges of a legal person. sole proprietorship general partnership limited partnership corporation limited liability company

corporation

7. The _____ tax rate is equal to total taxes divided by total taxable income. A. deductible B. residual C. total D. average

d-average

1. Which one of the following terms is defined as the management of a firm's long-term investments? A. working capital management B. financial allocation C. agency cost analysis D. capital budgeting

d-capital budgeting

2. Which one of the following terms is defined as the mixture of a firm's debt and equity financing? A. working capital management B. cash management C. cost analysis D. capital structure

d-capital structure

for cash flow: when assets increase, cash _________ when liabil increase, cash _______-

decrease increases

One disadvantage of the corporate form of business ownership is the: limited liability of its shareholders for the firm's debts. double taxation of distributed profits. firm's greater ability to raise capital than other forms of ownership. firm's potential for an unlimited life. firm's ability to issue additional shares of stock.

double taxation of distributed profits

total debt ratio

for every $1 in assets has .___ in debt ex-.27 -can then do 1-.__ to get equity 1-.27=.73 -can then get debt to equity ratio by dividing .27/73=.37 to get equity mult do 1+debt to equity ratio 1+.37=1.37

Which one of the following statements is correct concerning the NYSE? Multiple Choice The publicly traded shares of a NYSE-listed firm must be worth at least $250 million. The NYSE is the largest dealer market for listed securities in the United States. The listing requirements for the NYSE are more stringent than those of NASDAQ. Any corporation desiring to be listed on the NYSE can do so for a fee. The NYSE is an OTC market functioning as both a primary and a secondary market.

he listing requirements for the NYSE are more stringent than those of NASDAQ.

Capital structure decisions include determining: which one of two projects to accept. how to allocate investment funds to multiple projects. the amount of funds needed to finance customer purchases of a new product. how much debt should be assumed to fund a project.

how much debt should be assumed to fund a project

Which one of the following questions is a working capital management decision? Should the company issue new shares of stock or borrow money? Should the company update or replace its older equipment? How much inventory should be on hand for immediate sale? Should the company close one of its current stores? How much should the company borrow to buy a new building?

how much inventory should be on hand for immediate sale?

The Sarbanes-Oxley Act of 2002 is a governmental response to: decreasing corporate profits. the terrorist attacks on 9/11/2001. a weakening economy. deregulation of the stock exchanges. management greed and abuses.

management of greed and abuses

Decisions made by financial managers should primarily focus on increasing the: size of the firm. growth rate of the firm. gross profit per unit produced. market value per share of outstanding stock. total sales.

market value per share of outstanding stock

for cash flow write of operating activ. write:

net income + depreciation +/ all current assest/liabilities ******EXCEPT NOTES PAYABLE******

Which one of the following is a means by which shareholders can replace company management? Stock options Promotion Sarbanes-Oxley Act Agency play Proxy fight

proxy fight

Financial managers should primarily focus on the interests of: stakeholders. the vice president of finance. their immediate supervisor. shareholders. the board of directors.

shareholders

The primary advantage of being a limited partner is: the receipt of tax-free income. the partner's active participation in the firm's activities. the lack of any potential financial loss. the daily control over the business affairs of the partnership. the partner's maximum loss is limited to their capital investment.

the partner's maximum loss is limited to their capital investment

The treasurer of a corporation generally reports to the...

vice president of finance

When evaluating the timing of a project's projected cash flows, a financial manager is analyzing: the amount of each expected cash flow. only the start-up costs that are expected to require cash resources. only the date of the final cash flow related to the project. the amount by which cash receipts are expected to exceed cash outflows. when each cash flow is expected to occur.

when each cash flow is expected to occur