FINC 3610 Auburn Test 1

A business owned by a solitary individual who has unlimited liability for its debt is called a: corporation. sole proprietorship. general partnership. limited partnership. limited liability company.

sole proprietorship.

Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction: took place in the primary market. occurred in a dealer market. was facilitated in the secondary market. involved a proxy. was a private placement.

was facilitated in the secondary market.

Which one of the following is defined as a firm's short-term assets and its short-term liabilities? working capital debt investment capital net capital capital structure

working capital

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

management greed and abuses.

The percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate. mean residual total average marginal

marginal

Given the tax rates as shown, what is the average tax rate for a firm with taxable income of $311,360?

.3362

Dee Dee's Marina is obligated to pay its creditors $6,400 today. The firm's assets have a current market value of $5,900. What is the current market value of the shareholders' equity?

0

Use the Corporate Tax tables found elsewhere in this quiz or your notes. Compute the Federal Corporate Taxes owed on 20232712 of taxable income.

7081449.2000

Beach Front Industries has sales of $546,000, costs of $295,000, depreciation expense of $37,000, interest expense of $15,000, and a tax rate of 32 percent. The firm paid $59,000 in cash dividends. What is the addition to retained earnings?

76320

The tax rates are as shown. Nevada Mining currently has taxable income of $97,800. How much additional tax will the firm owe if taxable income increases by $21,000?

8080

Which of the following help convince managers to work in the best interest of the stockholders? Assume there are no golden parachutes. I. compensation based on the value of the stock II. stock option plans III. threat of a company takeover IV. threat of a proxy fight

All of the above

Which one of the following statements is correct? A general partnership is legally the same as a corporation. Both sole proprietorship and partnership income is taxed as individual income. Partnerships are the most complicated type of business to form. All business organizations have bylaws. Only firms organized as sole proprietorships have limited lives.

Both sole proprietorship and partnership income is taxed as individual income.

Which of the following represents a significant disadvantage to the corporate form of organization? Level of difficulty corporations face in obtaining large amounts if capital in financial markets. Difficulty in transferring ownership. Exposure to taxation of both corporate earnings and stockholder dividend income. Degree of liability to which corporate owners and managers are exposed.

Exposure to taxation of both corporate earnings and stockholder dividend income.

The common set of standards and procedures by which audited financial statements are prepared is known as the: matching principle. cash flow identity. Generally Accepted Accounting Principles. Financial Accounting Reporting Principles. Standard Accounting Value Guidelines.

Generally Accepted Accounting Principles.

Which of the following individuals have unlimited liability based on their ownership interest? I. general partner II. sole proprietor III. stockholder IV. limited partner

I and II only

Which of the following are included in current liabilities? I. note payable to a supplier in eight months II. amount due from a customer next month III. account payable to a supplier that is due next week IV. loan payable to the bank in fourteen months I and III only II and III only I, II, and III only I, III, and IV only I, II, III, and IV

I and III only

Which of the following accounts are included in working capital management? I. accounts payable II. accounts receivable III. fixed assets IV. inventory

I, II, and IV only

Which of the following are advantages of the corporate form of business ownership? I. ease of formations II. double taxation III. ability to raise capital IV. unlimited firm life

III and IV only

Which one of the following statements related to taxes is correct? The marginal tax rate must be equal to or lower than the average tax rate for a firm. The tax for a firm is computed by multiplying the firm's current marginal tax rate times the taxable income. Additional income is taxed at a firm's average tax rate. Given the corporate tax structure in 2012, the highest marginal tax rate is equal to the highest average tax rate. The marginal tax rate for a firm can be either higher than or the same as the average tax rate.

The marginal tax rate for a firm can be either higher than or the same as the average tax rate.

Which of the following is an example of an agency problem? Your "friend" tries to copy your answers on a test. A sports agent tries to negotiate the highest possible salary for his client. Lucilla has always dreamed of being on the cover of Vogue, but is rejected by a modeling agency. You hire Frank's Lawn Service to maintain your yard while you are out of town for two months. When you return you find that your plants are all dead.

You hire Frank's Lawn Service to maintain your yard while you are out of town for two months. When you return you find that your plants are all dead.

Which one of the following accounts is the most liquid? inventory building accounts receivable equipment land

accounts receivable

Why is the stock price considered to be the best measure of a company's performance? it incorporates all available information about the company's financial standing it incorporates all available information about the company's cash flows it incorporates non-financial information that is relevant to the company's performance all of the above

all of the above

Which one of the following terms is defined as the management of a firm's long-term investments? working capital management financial allocation agency cost analysis capital budgeting capital structure

capital budgeting

Which one of the following terms is defined as the mixture of a firm's debt and equity financing? working capital management cash management cost analysis capital budgeting capital structure

capital structure

A business created as a distinct legal entity and treated as a legal "person" is called a: corporation. sole proprietorship. general partnership. limited partnership. unlimited liability company.

corporation

Which form of business structure is most associated with agency problems? sole proprietorship general partnership limited partnership corporation limited liability company

corporation

Which one of the following business types is best suited to raising large amounts of capital? sole proprietorship limited liability company corporation general partnership limited partnership

corporation

Net working capital is defined as: total liabilities minus shareholders' equity. current liabilities minus shareholders' equity. fixed assets minus long-term liabilities. total assets minus total liabilities. current assets minus current liabilities.

current assets minus current liabilities.

Which one of the following is a capital budgeting decision? determining how many shares of stock to issue deciding whether or not to purchase a new machine for the production line deciding how to refinance a debt issue that is maturing determining how much inventory to keep on hand determining how much money should be kept in the checking account

deciding whether or not to purchase a new machine for the production line

Which one of the following is an agency cost? accepting an investment opportunity that will add value to the firm increasing the quarterly dividend investing in a new project that creates firm value hiring outside accountants to audit the company's financial statements closing a division of the firm that is operating at a loss

hiring outside accountants to audit the company's financial statements

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time? income statement balance sheet statement of cash flows tax reconciliation statement market value report

income statement

A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a: generally partner. sole proprietor. limited partner. corporate shareholder. zero partner.

limited partner.

Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo will be involved as an active consultant and manager and will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. Which form of business entity should these individuals adopt? sole proprietorship joint stock company limited partnership general partnership corporation

limited partnership

Which one of the following best states the primary goal of financial management? maximize current dividends per share of common stock maximize the current value per share of common stock increase cash flow and avoid financial distress minimize operational costs while maximizing firm efficiency maintain steady growth while increasing current profits

maximize the current value per share of common stock

Ownership in a corporation is evidenced by owning the corporation's bonds. owning the corporation's common stock. owning either the corporation's bonds or common stock. being a member of management of the corporation.

owning the corporation's common stock.

Of the choices below, only one is a characteristic of the corporation. Which one? only one owner taxed once personal assets of owner(s) may not be seized by creditors limited life

personal assets of owner(s) may not be seized by creditors

Which one of the following is a primary market transaction? sale of currently outstanding stock by a dealer to an individual investor sale of a new share of stock to an individual investor stock ownership transfer from one shareholder to another shareholder gift of stock from one shareholder to another shareholder gift of stock by a shareholder to a family member

sale of a new share of stock to an individual investor