FIN 300 Ch 8

A firm has $820 in inventory 3200 in fixed assets, $1210 in accounts receivable, $890 in accounts payable and 360 in cash, what is the amount of net working capital? a) 2390 b) 4700 c) 3600 d) 1500

Incorrect

Depreciation for a profitable firm a) Decreases net fixed assets net income and operating cash flows b) Reduces both the net fixed assets and costs of a firm c) Decreases net income by less than 1$ for every 1$ of depreciation expense d) Is a non cash expense which increases the net operation income e) Increases the net fixed assets as shown on the balance sheet

Incorrect

Financial managers primarily create firm value by a) Maximizing current dividends b) Lowering the earnings per share c) Investing in assets that generates cash in excess of their cost d) Increasethe firms market share

Incorrect

The cash flow to creditors includes the firm's cash: a) Outflow when interest is paid on outstanding debt b) Inflow when accounts payable increase c) Outflow when payments are paid to suppliers d) Outflow when new debt is acquired

Incorrect

The ultimate control of a corporation lies in the hands of the corporate a) Chairman of the board b) Stockholders c) Chief executive officer d) President e) Board of directors

Incorrect

Which of the following statements is true of corporate bylaws? a) To open their doors and start their operations corporations are legally required only to file their bylaws with the appropriate agency in the state where they incorporate. b) The declaration of the activities that a firm will pursue and the number of directors are included in the corporate bylaws. c) Corporate bylaws are a set of rules drawn up by the state to enable managers to run the firm in accordance with state laws. d) Procedures for electing corporate directors are contained in corporate bylaws. e) Procedures that govern changes in corporate bylaws are contained in the corporate charter.

Incorrect

Your firm has total sales of $22,980 costs of $14,715 and depreciation of $6,045 the tax rate is 34% there are no interest expenses or other income. What is the operating cash flow? a) 1465.20 b) 2410.80 c) 8340.00 d) 7,510.20

Incorrect

____ is an example of a long term investment in the firm a) Accounts receivable b) Retained earnings c) Long term bonds d) Common stock e) Equipment

Incorrect Long term or fixed assets include investments that help generate cash flows over longer periods (2-2)

Mart's Boutique has sales of $820,000 and costs of $540,000. Interest expense is $36,000 and depreciation is $59,000 the tax rate is 35% What is the net income? a) 158,600 b) 120,250 c) 179,259 d) 105,000

b) 120,250

The process of planning and managing a firm's long term assets is called a) Agency cost analysis b) Capital budgeting c) Working capital management d) Capital structure e) Financial depreciation

b) Capital budgeting

As seen on an income statement a) Interest is deducted form income and increases the total taxes incurred b) Depreciation reduces both the pretax and the net income c) Depreciation is shown as an expense but does not affect the tax expense d) The tax rate is applied to the earnings before interest and taxes when the firm has both depreciation and interest expense

b) Depreciation reduces both the pretax and the net income

Which of the following functions deals with the management of money a) Human resources b) Financial services c) Information systems d) Marketing e) Research and development

b) Financial Services

A business entity operated and taxed like a partnership but with limited liability is called a) Limited liability company b) General partnership c) Corporation d) Limited proprietorship e) Limited partnership

a) Limited liability company

If a limited liability company LLC is Taxed like a partnership ______. a) The shareholders pay taxes on dividends they receive after the company pays taxes on the money that is distributed b) Income passes through to the owner c) The owners have unlimited tax liability d) Income is taxed twice e) Dividends are taxed at the capital gain rate

b) Income passes through to the owner (1-2)

Which of the following should be the primary goal pursued by the financial manager of a firm? a) Maximizing the firms net worth or book value b) Maximizing the market value of the firm's stock c) Minimize variable operating expenses d) Maximizing net income (profits) e) Maximizing dividends paid to common stockholders

b) Maximizing the market value of the firm's stock the appropriate goal for management decisions: Consider the risks and timing associated with exected cash flows to maximize the price of the firms common stock (1-3)

Which of the following is an example of a current asset a) Common stock b) Plant and equipment c) Inventory d) Accounts payable e) Retained earnings

c) Inventory Current assets generally include items that the firm expects to liquidate and thus convert into cash within a year. (2-2)

Which of the following is a disadvantage of the corporate form of business? a) A corporation faces difficulty in attracting substantial amounts of funds. b) Ownership interests cannot be transferred as easily as proprietorship or partnership interests. c) Setting up a corporation is more complex and time consuming than setting up a proprietorship or a partnership. d) A corporation is said to have limited life. e) The owners of a corporation are subject to unlimited personal liability for the business' debt

c) Setting up a corporation is more complex and time consuming than setting up a proprietorship or a partnership.

Awning incorporated as beginning net fixed assets of $234,100 and ending net fixed assets of $243,600. Assets valued at $42,500 were sold during that year. Depreciation was 62,500. What is the amount of net capital spending? a) 42,5000 b) 53,000 c) 9,500 d) 72,000

d) 72,000

An increase in which one of the following will cause the operating cash flow to increase for a profitable firm a) Net working capital b) Changes in the amount of net fixed capital c) Taxes d) Depreciation

d) Depreciation

All else equal in which of the following forms of business would the possibility of an agency problem be the greatest? a) A partnership in which all the partners share management and decision-making responsibilities equally b) A us corporation that gives company shares as incentives to its managers c) A foreign corporation with concentrated ownership that is it has relatively few owners d) A proprietorship in which the owners is actively managing the business operation e) A us corporation in which individual stockholders own extremely small proportions of the company.

e) A us corporation in which individual stockholders own extremely small proportions of the company. Stok holders of large corporations "permit" (empower) the excutives to make decisions about how the firms are run for the stockholders' goal of wealth maximization. An agency problem is a potential conflict of interest between outside shareholders (owners) and managers who make decisions about how to operate the firm (1-3)