FIN 1-2

As of 2015, which one of the following statements concerning corporate income taxes is correct? A. The largest corporations have an average tax rate of 39 percent. B. The lowest marginal rate is 25 percent. C. A firm's tax is computed on an incremental basis. D. A firm's marginal tax rate will generally be lower than its average tax rate once the firm's income exceeds $50,000. E. When analyzing a new project, the average tax rate should be used.

A firm's tax is computed on an incremental basis

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? A. $76,320 B. $81,700 C. $95,200 D. $103,460 E. $121,680

A. $76,320

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? A. $8,080 B. $8,130 C. $8,155 D. $8,170 E. $8,190

A. $8,080

Drew owns The What-Not Shop, which he is trying to sell so that he can retire and travel. The shop owns the building in which it is located. This building was built at a cost of $647,000 and is currently appraised at $819,000. The counters and fixtures originally cost $148,000 and are currently valued at $65,000. The inventory is valued on the balance sheet at $319,000 and has a retail market value equal to 1.1 times its cost. Jake expects the store to collect 96 percent of the $21,700 in accounts receivable. The firm has $26,800 in cash and has total debt of $414,700. What is the market value of this firm? A. $867,832 B. $900,166 C. $695,832 D. $775,632 E. $1,190,332

A. $867,832

Winston Industries had sales of $843,800 and costs of $609,900. The firm paid $38,200 in interest and $18,000 in dividends. It also increased retained earnings by $62,138 for the year. The depreciation was $76,400. What is the average tax rate? A. 32.83 percent B. 33.33 percent C. 38.17 percent D. 43.39 percent E. 48.87 percent

A. 32.83 percent

The Widget Co. purchased new machinery three years ago for $4 million. The machinery can be sold to the Roman Co. today for $2 million. The Widget Co.'s current balance sheet shows net fixed assets of $2,500,000, current liabilities of $1,375,000, and net working capital of $725,000. If all the current assets were liquidated today, the company would receive $1.9 million in cash. The book value of the Widget Co.'s assets today is _____ and the market value of those assets is _____. A. $4,600,000; $3,900,000 B. $4,600,000; $3,125,000 C. $5,000,000; $3,125,000 D. $5,000,000; $3,900,000 E. $6,500,000; $3,900,000

A. 4,600,000; $3,900,000

7. A business created as a distinct legal entity and treated as a legal "person" is called a: A. Corporation. B. Sole proprietorship. C. General partnership. D. Limited partnership. E. Unlimited liability company.

A. Corporation

Which one of these is a working capital management decision? A. Determining the minimum level of cash to be kept in a checking account. B. Determining the best method of producing a product. C. Determining the number of employees needed to work during a particular shift. D. Determining when to replace obsolete equipment. E. Determining if a competitor should be acquired.

A. Determining the minimum level of cash to be kept in a checking account

The higher the degree of financial leverage employed by a firm is, the: A. Higher is the probability that the firm will encounter financial distress. B. Lower is the amount of debt incurred. C. Less debt a firm has per dollar of total assets. D. Higher is the number of outstanding shares of stock. E. Lower is the balance in accounts payable.

A. Higher is the probability that the firm will encounter financial distress

Which of the following are results related to the enactment of the Sarbanes-Oxley Act of 2002? I. Increased foreign stock exchange listings of U.S. stocks. II. Decreased compliance costs. III. Increased privatization of public corporations. IV. Increased public disclosure by all corporations. A. I and III only. B. II and IV only. C. I, II, and III only. D. II, III, and IV only. E. I, III, and IV only.

A. I and III only

4. Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time? A. Income statement. B. Balance sheet. C. Statement of cash flows. D. Tax reconciliation statement. E. Market value report.

A. Income Statement

Which one of the following grants an individual the right to vote on behalf of a shareholder? A. Proxy. B. Bylaws. C. Indenture agreement. D. Stock option. E. Stock audit.

A. Proxy

3. Which one of the following is defined as a firm's short-term assets and its short-term liabilities? A. Working capital. B. Debt. C. Investment capital. D. Net capital. E. Capital structure.

A. Working Capital

A general partner: A. Is personally responsible for all the partnership debts. B. Has no say over a firm's daily operations. C. Faces double taxation whereas a limited partner does not. D. Has a maximum loss equal to his or her equity investment. E. Receives a salary in lieu of a portion of the profits.

A. is personally responsible for all the partnership debts.

Kaylor Equipment Rental paid $75 in dividends and $511 in interest expense. The addition to retained earnings is $418 and net new equity is $500. The tax rate is 35 percent. Sales are $15,900 and depreciation is $680. What are the earnings before interest and taxes? A. $589.46 B. $1,269.46 C. $1,331.54 D. $9,560.85 E. $10,949.46

B. $1,269.46

Your firm has total assets of $4,900, fixed assets of $3,200, long-term debt of $2,900, and short-term debt of $1,400. What is the amount of net working capital? A. -$100 B. $300 C. $600 D. $1,700 E. $1,800

B. $300

The following information pertains to Galaxy Interiors: What is the cash flow to creditors for 2015? A. -$530 B. $432 C. $1,839 D. $2,132 E. $3,094

B. $432

Andre's Bakery has sales of $613,000 with costs of $479,000. Interest expense is $26,000 and depreciation is $42,000. The tax rate is 25 percent. What is the net income? A. $42,750 B. $49,500 C. $39,000 D. $81,000 E. $74,550

B. $49,500

A firm has $680 in inventory, $2,140 in fixed assets, $210 in accounts receivables, $250 in accounts payable, and $80 in cash. What is the amount of the net working capital? A. $970 B. $720 C. $640 D. $3,110 E. $2,860

B. $720

Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year. Common stock increased by $1,200 and retained earnings decreased by $310. What is the net income for the year? A. -$210 B. $990 C. $1,610 D. $1,910 E. $2,190

B. $990

Boyer Enterprises had $200,000 in taxable income. What is the firm's average tax rate based on the rates shown in the following table? Taxable income Tax rate $0 - 50,000 15% 50,001 - 75,000 25% 75,001 - 100,000 34% 100,001 - 335,000 39% A. 28.25 percent B. 30.63 percent C. 32.48 percent D. 36.50 percent E. 39.00 percent

B. 30.63 percent

Bonner Automotive has shareholders' equity of $218,700. The firm owes a total of $141,000 of which 40 percent is payable within the next year. The firm has net fixed assets of $209,800. What is the amount of the net working capital? A. $149,900 B. $93,500 C. $125,600 D. -$47,500 E. $56,500

B. 93,500

Which one of the following statements is correct concerning a corporation with taxable income of $125,000? A. Net income minus dividends paid will equal the ending retained earnings for the year. B. An increase in depreciation will increase the operating cash flow. C. Net income divided by the number of shares outstanding will equal the dividends per share. D. Interest paid will be included in both net income and operating cash flow. E. An increase in the tax rate will increase both net income and operating cash flow.

B. An increase in depreciation will increase the operating flow

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

B. Deciding whether or nor to purchase a new machine for the production line

Which one of the following is a working capital management decision? A. Determining the amount of equipment needed to complete a job. B. Determining whether to pay cash for a purchase or use the credit offered by the supplier. C. Determining the amount of long-term debt required to complete a project. D. Determining the number of shares of stock to issue to fund an acquisition. E. Determining whether or not a project should be accepted.

B. Determining whether to pay cash for a purchase or use the credit offered by the supplier

Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value? A. Real estate investment. B. Good reputation of the company. C. Equipment owned by the firm. D. Money due from a customer. E. An item held by the firm for future sale.

B. Good reputation of the company

22. Which of the following individuals have unlimited liability based on their ownership interest? I. General partner II. Sole proprietor III. Stockholder IV. Limited partner A. II only. B. I and II only. C. II and IV only. D. I, II, and III only. E. I, II, and IV only.

B. I and II only.

Which of the following are current assets? I. Cash II. Trademark III. Accounts receivable IV. Notes payable A. II and III only. B. I and III only. C. I, II, and IV only. D. I, II, and IV only. E. II, III, and IV only.

B. I and III only

Which of the following represent cash outflows from a corporation? I. Issuance of securities. II. Payment of dividends. III. New loan proceeds. IV. Payment of government taxes. A. I and III only. B. II and IV only. C. I and IV only. D. I, II, and IV only. E. II, III, and IV only.

B. II and IV only

Which of the following are included in current liabilities? I. Note payable to a supplier in 13 months. II. Amount due from a customer last week. III. Account payable to a supplier that is due next week. IV. Loan payable to the bank in 10 months. A. I and III only. B. III and IV only. C. I, II, and III only. D. I, III, and IV only. E. I, II, III, and IV.

B. III and IV only

Which one of the following functions should be the responsibility of the controller rather than the treasurer? A. Daily cash deposit. B. Income tax returns. C. Equipment purchase analysis. D. Customer credit approval. E. Payment to a vendor.

B. Income Tax Returns

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

B. Income from both sole proprietorship and partnerships is taxed as individual income

Which one of the following is true according to generally accepted accounting principles? A. Depreciation is recorded based on the market value principle. B. Income is recorded based on the realization principle. C. Costs are recorded based on the realization principle. D. Depreciation is recorded based on the recognition principle. E. Costs of goods sold are recorded based on the matching principle.

B. Income is recorded based on the realization principle

Which one of the following statements related to liquidity is correct? A. Liquid assets tend to earn a high rate of return. B. Liquid assets are valuable to a firm. C. Liquid assets are defined as assets that can be sold quickly regardless of the price obtained. D. Inventory is more liquid than accounts receivable because inventory is tangible. E. Any asset that can be sold is considered liquid.

B. Liquid assets are valuable to a firm

Which one of the following best states the primary goal of financial management? A. Maximize current dividends per share. B. Maximize the current value per share. C. Increase cash flow and avoid financial distress. D. Minimize operational costs while maximizing firm efficiency. E. Maintain steady growth while increasing current profits.

B. Maximize the current value per share

Which one of the following is classified as a tangible fixed asset? A. Accounts receivable. B. Production equipment. C. Cash. D. Patent. E. Inventory.

B. Production equipment

Which one of the following is a primary market transaction? A. Sale of currently outstanding stock by a dealer to an individual investor. B. Sale of a new share of stock to an individual investor. C. Stock ownership transfer from one shareholder to another shareholder. D. Gift of stock from one shareholder to another shareholder. E. Gift of stock by a shareholder to a family member.

B. Sale of a new share of stock to an individual investor

4.A business owned by a solitary individual who has unlimited liability for its debt is called a: A. Corporation. B. Sole proprietorship. C. General partnership. D. Limited partnership. E. Limited liability company.

B. Sole Proprietorship

The book value of a firm is: A. Equivalent to the firm's market value provided that the firm has some fixed assets. B. Based on historical cost. C. Generally greater than the market value when fixed assets are included. D. More of a financial than an accounting valuation. E. Adjusted to the market value whenever the market value exceeds the stated book value.

Based on historical cost

Why should financial managers strive to maximize the current value per share of the existing stock? A. Doing so guarantees the company will grow in size at the maximum possible rate. B. Doing so increases employee salaries. C. Because they have been hired to represent the interests of the current shareholders. D. Because this will increase the current dividends per share. E. Because managers often receive shares of stock as part of their compensation.

Because they have been hired to represent the interests of the current shareholders

The Overside Market is obligated to pay its creditors $11,800 today. The firm's assets have a current market value of $10,900. What is the current market value of the shareholders' equity? A. -$600 B. -$500 C. $0 D. $500 E. $600

C. $0

Use the below information to answer the following question. Cost of goods sold $6,409 Interest 315 Dividends 420 Depreciation 811 Change in retained earnings 296 Tax rate 34% What is the taxable income given the above information? A. $1,051.00 B. $1,367.78 C. $1,084.85 D. $2,776.41 E. $636.36

C. $1,084.85

A firm has common stock of $6,200, paid-in surplus of $9,100, total liabilities of $8,400, current assets of $5,900, and fixed assets of $21,200. What is the amount of the shareholders' equity? A. $6,900 B. $15,300 C. $18,700 D. $23,700 E. $35,500

C. $18,700

Four years ago, Ship Express purchased a mailing machine at a cost of $218,000. This equipment is currently valued at $97,400 on today's balance sheet but could actually be sold for $92,900. This is the only fixed asset the firm owns. Net working capital is $41,300 and long-term debt is $102,800. What is the book value of shareholders' equity? A. $31,400 B. $47,700 C. $35,900 D. $249,400 E. $253,900

C. $35,900

Suppose you are given the following information for Bayside Bakery: sales = $30,000; costs = $15,000; addition to retained earnings = $4,221; dividends paid = $469; interest expense = $1,300; tax rate = 30 percent. What is the amount of the depreciation expense? A. $4,820 B. $5,500 C. $7,000 D. $8,180 E. $9,500

C. $7,000

Given the tax rates as shown, what is the average tax rate for a firm with taxable income of $289,740? A. 26.68 percent B. 35.87 percent C. 33.22 percent D. 34.67percent E. 39.00 percent

C. 33.22 percent

Which one of the following accounts is the most liquid? A. Inventory. B. Building. C. Accounts Receivable. D. Equipment. E. Land.

C. Accounts Receivable

Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers? A. Articles of incorporation. B. Corporate breakdown. C. Agency problem. D. Bylaws. E. Legal liability.

C. Agency Problem

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date? A. Income statement. B. Creditor's statement. C. Balance sheet. D. Statement of cash flows. E. Dividend statement.

C. Balance Sheet

A firm which opts to "go dark" in response to the Sarbanes-Oxley Act: A. Must continue to provide audited financial statements to the public. B. Must continue to provide a detailed list of internal control deficiencies on an annual basis. C. Can provide less information to its shareholders than it did prior to "going dark.". D. Can continue publicly trading its stock but only on the exchange on which it was previously listed. E. Ceases to exist.

C. Can provide less information to its shareholders than it did prior to "going dark"

Which one of the following business types is best suited to raising large amounts of capital? A. Sole proprietorship. B. Limited liability company. C. Corporation. D. General partnership. E. Limited partnership.

C. Corporation

Which one of the following is an unintended result of the Sarbanes-Oxley Act? A. More detailed and accurate financial reporting. B. Increased management awareness of internal controls. C. Corporations delisting from major exchanges. D. Increased responsibility for corporate officers. E. Identification of internal control weaknesses.

C. Corporation delisting from major exchanges

Which one of the following statements is correct? A. The majority of firms in the U.S. are structured as corporations. B. Corporate profits are taxable income to the shareholders when earned. C. Corporations can raise large amounts of capital generally easier than partnerships can. D. Stockholders face no potential losses related to their corporate investment. E. Corporate shareholders elect the corporate president.

C. Corporations can raise large amounts of capital generally easier than partnerships can

A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a: A. Corporation. B. Sole proprietorship. C. General partnership. D. Limited partnership. E. Limited liability company.

C. General partnership

Which one of these sets forth the common set of standards and procedures by which audited financial statements are prepared? A. The Matching Principle. B. The Cash Flow Identity. C. Generally Accepted Accounting Principles. D. Financial Accounting Reporting Principles. E. Standard Accounting Value Guidelines.

C. Generally accepted accounting principles

The growth of both sole proprietorships and partnerships is frequently limited by their: A. Double taxation. B. Bylaws. C. Inability to raise cash. D. Limited liability. E. Organizational articles.

C. Inability to raise cash

A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a: A. General partner. B. Sole proprietor. C. Limited partner. D. Corporate shareholder. E. Zero partner.

C. 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? A. Sole proprietorship. B. Joint stock company. C. Limited partnership. D. General partnership. E. Corporation.

C. Limited Partnership

Which one of the following statements concerning net working capital is correct? A. The lower the value of net working capital is, the greater is the ability of a firm to meet its current obligations. B. An increase in net working capital must also increase current assets. C. Net working capital increases when inventory is sold for cash at a profit. D. Firms with equal amounts of net working capital are also equally liquid. E. Net working capital is a part of the operating cash flow.

C. Net working capital increases when inventory is sold for cash at a profit

Which one of the following characteristics applies to a limited liability company? A. Available only to firms having a single owner. B. Limited liability for limited partners only. C. Taxed similar to a partnership. D. Taxed similar to a C corporation. E. All income generated is totally tax-free.

C. Taxed Similar to a partnership

31. Which one of the following statements related to an income statement is correct? Assume accrual accounting is used. A. The addition to retained earnings is equal to net income plus dividends paid. B. Credit sales are recorded on the income statement when the cash from the sale is collected. C. The labor costs for producing a product are expensed when the product is sold. D. Interest is a non-cash expense. E. Depreciation increases the marginal tax rate.

C. The labor costs for producing a product are expensed when the product is sold

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

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

Which one of the following statements concerning a sole proprietorship is correct? A. A sole proprietorship is designed to protect the personal assets of the owner. B. The profits of a sole proprietorship are subject to double taxation. C. The owner of a sole proprietorship is personally responsible for all of the company's debts. D. There are very few sole proprietorships remaining in the U.S. today. E. A sole proprietorship is structured the same as a limited liability company.

C. The owner of a sole proprietorship is personally responsible for all of the company debts.

Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction: A. Took place in the primary market. B. Occurred in a dealer market C. Was facilitated in the secondary market. D. Involved a proxy. E. Was a private placement.

C. Was facilitated in the secondary market

The following information pertains to Galaxy Interiors: What is the amount of the noncash expenses for 2015? A. $740 B. $1,282 C. $1,333 D. $1,611 E. $2,351

D. $1,611

Which one of the following represents the most liquid asset? A. $100 account receivable that is discounted and collected for $96 today. B. $100 of inventory which is sold today on credit for $103. C. $100 of inventory which is discounted and sold for $97 cash today. D. $100 of inventory that is sold today for $100 cash. E. $100 accounts receivable that will be collected in full next week.

D. $100 of inventory that is sold today for $100 cash

You have gathered this information on JJ Enterprises: 2014 2015 Sales $6,318 $7,202 COGS 3,945 4,460 Interest 303 277 Depreciation 1,204 1,196 Cash 672 418 Accounts receivables 601 578 Current liabilities 414 463 Inventory 1,215 1,598 Long-term debt 4,780 4,103 Net fixed assets 7,700 7,330 Shareholder's equity 4,994 5,358 Taxes 217 317 What is the net working capital for 2015? A. $859 B. $533 C. $1,262 D. $2,131 E. $2,074

D. 2,131

Which one of the following statements is generally correct? A. Private placements must be registered with the SEC. B. All secondary markets are auction markets. C. Dealer markets have a physical trading floor. D. Auction markets match buy and sell orders. E. Dealers arrange trades but never own the securities traded.

D. Auction markets match buy and sell orders

The _____ tax rate is equal to total taxes divided by total taxable income. A. Deductible. B. Residual. C. Total. D. Average. E. Marginal.

D. Average

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. E. Capital structure.

D. Capital Budgeting

You recently purchased a grocery store. At the time of the purchase, the store's market value equaled its book value. The purchase included the building, the fixtures, and the inventory. Which one of the following is most apt to cause the market value of this store to be lower than the book value? A. A sudden and unexpected increase in inflation. B. The replacement of old inventory items with more desirable products. C. Improvements to the surrounding area by other store owners. D. Construction of a new restricted access highway located between the store and the surrounding residential areas. E. Addition of a stop light at the main entrance to the store's parking lot.

D. Construction of a new restricted access highway located between the store and the surrounding residential areas

Which form of business structure is most associated with agency problems? A. Sole proprietorship. B. General partnership. C. Limited partnership. D. Corporation. E. Limited liability company.

D. Corporation

Which type of business organization has all the respective rights and privileges of a legal person? A. Sole proprietorship. B. General partnership. C. Limited partnership. D. Corporation. E. Limited liability company.

D. Corporation

Which one of the following is a capital structure decision? A. Determining which one of two projects to accept. B. Determining how to allocate investment funds to multiple projects. C. Determining the amount of funds needed to finance customer purchases of a new product. D. Determining how much debt should be assumed to fund a project. E. Determining how much inventory will be needed to support a project.

D. Determining how much debt should be assumed to fund a project

Noncash items refer to: A. Accrued expenses. B. Inventory items purchased using credit. C. The ownership of intangible assets such as patents. D. Expenses which do not directly affect cash flows. E. Sales which are made using store credit.

D. Expenses which do not directly affect flows

A limited partnership: A. Has an unlimited life. B. Can opt to be taxed as a corporation. C. Terminates at the death of any limited partner. D. Has a greater ability to raise capital than a sole proprietorship. E. Consists solely of limited partners.

D. Has a greater ability to raise capital than a sole proprietorship

Which one of the following is an agency cost? A. Accepting an investment opportunity that will add value to the firm. B. Increasing the quarterly dividend. C. Investing in a new project that creates firm value. D. Hiring outside accountants to audit the company's financial statements. E. Closing a division of the firm that is operating at a loss.

D. Hiring outside accountants to audit the company's financial statement

Which of the following are expenses for accounting purposes but are not operating cash flows for financial purposes? I. Interest expense. II. Taxes. III. Cost of goods sold. IV. Depreciation. A. IV only. B. II and IV only. C. I and III only. D. I and IV only. E. I, II, and IV only.

D. I and IV only

Which of the following accounts are included in working capital management? I. Accounts Payable II. Accounts Receivable III. Fixed Assets IV. Inventory A. I and II only. B. I and III only. C. II and IV only. D. I, II, and IV only. E. II, III, and IV only.

D. I, II, and IV only

An increase in the depreciation expense will do which of the following for a firm with taxable income of $80,000? I. Increase net income. II. Decrease net income. III. Increase the cash flow from assets. IV. Decrease the cash flow from assets. A. I only. B. II only. C. I and III only. D. II and III only. E. II and IV only.

D. II and III only

Which of the following questions are addressed by financial managers? I. How should a product be marketed? II. Should customers be given 30 or 45 days to pay for their credit purchases? III. Should the firm borrow more money? IV. Should the firm acquire new equipment? A. I and IV only. B. II and III only. C. I, II, and III only. D. II, III, and IV only. E. I, II, III, and IV.

D. II, III, and IV only

Sally and Alicia currently are general partners in a business located in Atlanta, Georgia. They are content with their current tax situation but are both very uncomfortable with the unlimited liability to which they are each subjected. Which form of business entity should they consider to replace their general partnership assuming they wish to remain the only two owners of their business? Whichever organization they select, they wish to be treated equally. A. Sole proprietorship. B. Joint stock company. C. Limited partnership. D. Limited liability company. E. Corporation.

D. Limited Liability Company

Decisions made by financial managers should primarily focus on increasing which one of the following? A. Size of the firm. B. Growth rate of the firm. C. Gross profit per unit produced. D. Market value per share of outstanding stock. E. Total sales.

D. Market Value per share of outstanding stock

Which one of the following statements concerning net working capital is correct? A. Net working capital increases when inventory is purchased with cash. B. Net working capital excludes inventory. C. Total assets must increase if net working capital increases. D. Net working capital may be a negative value. E. Net working capital is the amount of cash a firm currently has available for spending.

D. Net working capital increases when inventory

Which one of these is most apt to be a fixed cost? A. Raw materials. B. Manufacturing wages. C. Management bonuses. D. Office salaries. E. Shipping and freight.

D. Office Salaries

Shareholder A sold shares of Maplewood Cabinets stock to Shareholder B. The stock is listed on the NYSE. This trade occurred in which one of the following? A. Primary, dealer market. B. Secondary, dealer market. C. Primary, auction market. D. Secondary, auction market. E. Secondary, OTC market.

D. Secondary, auction market

Public offerings of debt and equity must be registered with which one of the following? A. New York Board of Governors. B. Federal Reserve. C. NYSE Registration Office. D. Securities and Exchange Commission. E. Market Dealers Exchange.

D. Securities and Exchange Commission

Financial managers should primarily focus on the interests of: A. Stakeholders. B. The vice president of finance. C. Their immediate supervisor. D. Shareholders. E. The board of directors.

D. Shareholders

Which one of the following statements concerning stock exchanges is correct? A. NASDAQ is a broker market. B. The NYSE is a dealer market. C. The exchange with the strictest listing requirements is NASDAQ. D. Some large companies are listed on NASDAQ. E. Most debt securities are traded on the NYSE.

D. Some large companies are listed on NASDAQ

Which one of the following statements related to an income statement is correct? A. Interest expense increases the amount of tax due. B. Depreciation does not affect taxes since it is a non-cash expense. C. Net income is distributed to dividends and paid-in surplus. D. Taxes reduce both net income and operating cash flow. E. Interest expense is included in operating cash flow.

D. Taxes reduce both net income and operating cash flow

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

D. The treasurer reports to the vice president of finance

A firm has net working capital of $560. Long-term debt is $3,970, total assets are $7,390, and fixed assets are $3,910. What is the amount of the total liabilities? A. $2,050 B. $2,920 C. $4,130 D. $7,950 E. $6,890

E. $6,890

A stakeholder is: A. A person who owns shares of stock. B. Any person who has voting rights based on stock ownership of a corporation. C. A person who initially founded a firm and currently has management control over that firm. D. A creditor to whom a firm currently owes money. E. Any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm.

E. Any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm

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 budgeting. E. Capital structure.

E. Capital Structure

The decision to issue additional shares of stock is an example of which one of the following? A. Working capital management. B. Net working capital decision. C. Capital budgeting. D. Controller's duties. E. Capital structure decision.

E. Capital structure decision

Net working capital is defined as: A. Total liabilities minus shareholders' equity. B. Current liabilities minus shareholders' equity. C. Fixed assets minus long-term liabilities. D. Total assets minus total liabilities. E. Current assets minus current liabilities.

E. Current assets minus current liabilities

Corporate bylaws: A. Must be amended should a firm decide to increase the number of shares authorized. B. Cannot be amended once adopted. C. Define the name by which the firm will operate. D. Describe the intended life and purpose of the organization. E. Determine how a corporation regulates itself.

E. Determined how a corporation regulates itself

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. A. I and II only. B. III and IV only. C. I, II, and III only. D. I, III, and IV only. E. I, II, III, and IV.

E. I, II, III, and IV

Which of the following apply to a partnership that consists solely of general partners? I. Double taxation of partnership profits. II. Limited partnership life. III. Active involvement in the firm by all the partners. IV. Unlimited personal liability for all partnership debts. A. II only. B. I and II only. C. II and III only. D. I, II, and IV only. E. II, III, and IV only.

E. II, III, IV only.

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management? A. Increase in the amount of the quarterly dividend. B. Decrease in the per unit production costs. C. Increase in the number of shares outstanding. D. Decrease in the net working capital. E. Increase in the market value per share.

E. Increase in the market share

Which one of the following actions by a financial manager is most apt to create an agency problem? A. Refusing to borrow money when doing so will create losses for the firm. B. Refusing to lower selling prices if doing so will reduce the net profits. C. Refusing to expand the company if doing so will lower the value of the equity. D. Agreeing to pay bonuses based on the market value of the company stock rather than on the firm's level of sales. E. Increasing current profits when doing so lowers the value of the firm's equity.

E. Increasing current profits when doing so lowers the value of the firms equity

41. The Sarbanes-Oxley Act of 2002 is a governmental response to: A. Decreasing corporate profits. B. The terrorists attacks on 9/11/2001. C. A weakening economy. D. Deregulation of the stock exchanges. E. Management greed and abuses.

E. 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. A. Mean. B. Residual. C. Total. D. Average. E. Marginal.

E. Marginal

23. Which one of the following best describes the primary advantage of being a limited partner instead of a general partner? A. Tax-free income. B. Active participation in the firm's activities. C. No potential financial loss. D. Greater control over the business affairs of the partnership. E. Maximum loss limited to the capital invested.

E. Maximum loss limited to the capital invested.

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

E. Proxy fight

Shareholders' equity: A. Is referred to as a firm's financial leverage. B. Is equal to total assets plus total liabilities. C. Decreases whenever new shares of stock are issued. D. Includes patents, preferred stock, and common stock. E. Represents the residual value of a firm.

E. Represents the residual value of a firm

Which one of the following will decrease the value of a firm's net working capital? A. Using cash to pay a supplier. B. Depreciating an asset. C. Collecting an accounts receivable. D. Purchasing inventory on credit. E. Selling inventory at a loss.

E. Selling inventory at a loss

Which one of the following parties has ultimate control of a corporation? A. Chairman of the board. B. Board of directors. C. Chief executive officer. D. Chief operating office. E. Shareholders.

E. Shareholders

Corporate dividends are: A. Tax-free income because they represent a repayment of the cost to purchase corporate shares. B. Not taxed as shareholders pay taxes on corporate income when it is earned. C. Tax-free since the corporation pays tax on that income when it is earned. D. Taxed at both the corporate and the personal level when the dividends are paid. E. Taxable as personal income when received by shareholders even though that income was taxed at the corporate level.

E. Taxable as personal income when received by shareholders even though that income was taxed at the corporate level

32. Which one of the following statements related to taxes is correct? A. The marginal tax rate must be equal to or lower than the average tax rate for a firm. B. The tax for a firm is computed by multiplying the firm's current marginal tax rate times the taxable income. C. Additional income is taxed at a firm's average tax rate. D. Given the tax structure in 2014, the highest average corporate tax rate is 34 percent. E. The marginal tax rate for a firm can be either higher than or the same as the average tax rate.

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

The controller of a corporation generally reports directly to the: A. Board of directors. B. Chairman of the board. C. Chief executive officer. D. President. E. Vice president of finance.

E. Vice president of finance

Which one of the following statements concerning a sole proprietorship is correct? A. The life of a sole proprietorship is potentially unlimited. B. A sole proprietor can generally raise large sums of capital quite easily. C. Transferring ownership of a sole proprietorship is easier than transferring ownership of a corporation. D. A sole proprietorship is taxed the same as a C corporation. E. It is easy to create a sole proprietorship.

E. it is easy to create a sole proprietorship

The articles of incorporation: I. Describe the purpose of the firm. II. Are amended periodically. III. Set forth the number of shares of stock that can be issued. IV. Detail the method that will be used to elect corporate directors. A. I and III only. B. I and IV only. C. II and III only. D. II and IV only. E. I, III, and IV only.

I and III only

Which of the following parties are considered stakeholders of a firm? I. Employee II. Long-term creditor III. Government IV. Common stockholder A. I only. B. IV only. C. I and III only. D. II and IV only. E. II, III, and IV only.

I and III only

Which of the following should a financial manager consider when analyzing a capital budgeting project? I. Project start-up costs. II. Timing of all projected cash flows. III. Dependability of future cash flows. IV. Dollar amount of each projected cash flow. A. I and IV only. B. I, II, and IV only. C. I, II, and III only. D. II, III, and IV only. E. I, II, III, and IV.

I, II, III, and IV

Which of the following are cash flows from a corporation into the financial markets? I. Repayment of long-term debt. II. Payment of government taxes. III. Payment of loan interest. IV. Payment of quarterly dividend. A. I and II only. B. I and III only. C. II and IV only. D. I, III, and IV only. E. I, II, and III only.

I, III and IV

Which of the following are advantages of the corporate form of business ownership? I. Limited liability for firm debt. II. Double taxation. III. Ability to raise capital. IV. Unlimited firm life. A. I and II only. B. III and IV only. C. I, III, and IV only. D. II, III, and IV only. E. I, II, III, and IV.

I, III and IV only

Which of the following is (are) included in the market value of a firm but is (are) excluded from the firm's book value? I. Value of management skills. II. Value of a copyright. III. Value of the firm's reputation. IV. Value of employee's experience. A. I only. B. II only. C. III and IV only. D. I, II, and III only. E. I, III, and IV only.

I, III, and IV only