finance chapter 1 smartbook

Quartz Instruments had Retained Earnings of $145,000 at December 31, 2020. Net Income for 2021 was $90,000, and Dividends for 2021 were $30,000. What amount of Retained Earnings should be reported at December 31, 2021?

$205,000

The TCJA established a flat corporate tax rate of:

21 percent

One change brought by TCJA is that only the interest on the first ----------- of mortgage debt is deductible.

7500000

Which one of these best defines a general partnership?

A brother and sister form a business. Both share jointly unlimited personal liability for the debts of the firm.

What is the definition of a fiduciary relationship?

A fiduciary relationship is a legal duty between two parties where one party must act in the interest of the other party.

What is the definition of a general partnership?

A general partnership involves multiple business owners who are each personally responsible for all of the partnership's debts.

Which is the best definition of a hybrid organization?

A hybrid organization is a business form that has some attributes of a corporation and some of proprietorships/partnerships.

How is a public corporation defined?

A public corporation is a firm owned by a large number of stockholders from the general public.

What is the definition of a sole proprietorship?

A sole proprietorship is a business entity that is not legally separate from its owner.

Which of these provides the best description of the difference between accounting and finance?

Accounting records past activities of a firm while finance helps with decisions regarding the firm's future.

Which one of these relationships best fits the definition of a fiduciary relationship?

Al's retirement funds are managed by the trust department at the local bank.

Which of these parties monitor corporate activities from outside as part of corporate governance? Select all that apply.

Auditors Credit analysts Investment analysts

Which one of these best defines corporate governance?

Corporate governance is the ongoing process of monitoring managers and aligning their incentives with shareholder go

Which of these features could accurately be included in the definition of a corporation? Select all that apply.

Double taxation Separate legal entity Division of ownership and control

Which of the following are the well-developed viewpoints that have arisen regarding the goal of a firm?

Emphasize social responsibility Maximize shareholder wealth

Which of these factors are credited for providing financial institutions with high profit margins?

Expertise and unique assets

Which of these is an example of how finance is used throughout a firm?

Finance can be used for cost/benefit analysis.

Financial management relates to which one of the following?

Financial management relates to a firm's decisions regarding the acquisition and use of funds.

Which one of the following statements correctly identifies a group that supplies money to the financial markets?

Individuals saving for retirement provide money to the financial markets.

Which of these correctly defines a role of investments?

Investments address the timing of cash flows most desired by investors.

Which firm is a borrower of funds in the financial markets?

Ken's has a new product that it is ready to market to the public as soon as financing can be arranged.

Which one of these is an example of a borrower in the financial markets?

Lester's wants to expand its operations but has insufficient cash to do so.

Which of the following are finance functions that fall under the supervision of the treasurer?

Managing cash Capital spending Interest rate hedging

Which one of these functions is a treasury function?

Managing the firm's pension plan

The net impact of the lower individual income tax rates brought by TCJA is expected to be (choose all that apply):

More free cash for consumers to spend Downward pressure on housing sales in the high-value market More potential savings on the part of investors

Which group has individual investors as participants and is a lender of funds to the financial markets?

People with money and no ideas lend funds to the financial markets.

Which of these is a monitor of corporate governance? Select all that apply.

Securities and Exchange Commission Board of directors

Corporate governance is the set of laws, policies, incentives, and monitors designed to handle issues arising from which one of these?

Separation of ownership and control

Which one of the following is an advantage offered by a hybrid organization?

Single taxation

What are the two key characteristics of a hybrid organization?

Single taxation and limited liability

The profitability of financial market intermediaries depends upon which of these?

Successful execution of unique professional services

Which one of the following best illustrates the definition of a sole proprietorship?

Ted was forced to sell his personal home in order to pay the debts of a business he owned in entirety.

What are two primary sources of friction that decrease cash flows from companies to their investors?

The two primary sources of friction are retained earnings and taxes

The current value of a financial asset is determined by which of the following cash flows?

The value of a financial asset is determined by the asset's expected future cash flows.

True or false: Managerial finance helps managers make decisions related to cash management, capital investments, and risk reduction.

True

What result should you expect from firms that make wise financial decisions?

You should expect the wealth of individuals to increase in the future.

If expenses are greater than revenues, Retained Earnings will

decrease

The primary business activity that encompasses all the activities concerned with obtaining money and using it effectively is

finance

Financial institutions contribute to the dynamics of which one of the following rates?

interest rates

When a firm experiences economies of scale, it can:

lower its average cost by producing more output

Finance is primarily concerned with all the activities related to Blank______.

obtaining money and using it effectively

Adam Smith's theory that the actions of independent self-interested buyers and sellers will often result in the most efficient allocation of resources is

the theory of the invisible hand.

True or false: After TCJA, U.S. companies are more likely to "bring home" foreign profits due to the new flat tax rate.

true

True or false: Money that firms either retain or pay to the government are sources of friction that reduce cash flows to investors in the financial markets.

true