finance 300 exam 1 questions

double taxation

disadvantage to a corporation bc it is a legal person it must pay taxes. Money paid out to stockholders in the form of dividends is taxed again as income to those stockholders. This is double taxation meaning: -that corporate profits are taxes twice

the process of determining the present value of future cash flows in order to know their value today is referred to as a. compound interest valuation b. interest on interest valuation c. discounted cash flow valuation d. future value interest factoring e. complex factoring

c. discounted cash flow valuation

the decision to issue additional shares of stock is an example of

capital structure decision

one disadvantage of the corporate form of business ownership is the

double taxation of distributed profits

which one of the following will produce the lowest present value interest factor a. 6% interest for 5 years b. 6% interest for 8 years c. 6% interest for 10 years d. 8% interest for 5 years e. 8% interest for 10 years

e. 8% interest for 10 years ** PV = $1 x [1/(1 + r)^t = $1 / (1 + r)^t *** larger denominator = lower value of the ratio

public offerings of debt and equity must be registered with the

securities and exchange commission

which of the following parties has ultimate control of a corporation

shareholders

depreciation for a tax-paying firm a. increases expenses and lowers taxes b. increases the net fixed assets as shown on the balance sheet c. reduces both the net fixed assets and the costs of a firm d. is a non cash expense that increases the net income e. decreases net fixed assets, net income, and operating cash flows

a. increases expenses and lowers taxes

which one of the following is an expense for accounting purposes but is not an operating cash flow for financial purposes? a. interest expense b. taxes c. cost of goods sold d. labor costs e. administrative expenses

a. interest expenses

finance managers should strive to maximize the current value per share of the existing stock to a. guarantee the company will grow in size at the max possible rate b. best represent the interest of the current stockholders c. inc the dividends per share

b. best represent the interest of the current stockholders

which of the following best states the primary goal of finance management a. max current dividends per share b. max the current value per share c. min operational costs while max firm efficiency d. maintain steady growth while increasing current profit

b. maximize the current value per share

which one of the following functions should be the responsibility of the control rather than the treasurer a. depositing cash receipts b. processing cost reports c. analyzing equipment purchases d. approving credit for a customer e. paying a vendor

b. processing cost reports

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

an example of a capital budgeting decision is deciding a. how many shares of stock to issue b. whether or not to purchase a new machine for the production line c. how to refinance a debt issue that is maturing d. how much inventory to keep on hand e. how much money should be kept in the checking account

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

which one of the following statements is correct a. the majority of firms in the us are structured as corporations b. corporate profits are taxable income to the shareholders when earned c. corporations can have an unlimited life d. shareholders are protected from all potential losses e. shareholders directly elect the corporate president

c. corporations can have an unlimited life

net working capital is defined as

current assets minus current liabilities

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

decisions made by financial managers should primarily focus on increasing the 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 of the following is the current goal of finance management a. max profit b. min costs c. max market share in an industry d. max shareholder wealth

d. maximize shareholder wealth

corporate bylaws

determine how a corporation regulates itself

which one of the following terms is defined as the picture 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 interest earned on both the initial principal and the interest reinvested from prior periods is called a. free interest b. dual interest c. simple interest d. interest on interest e. compound interest

e. compound interest

which of the following best illustrates that the management of a firm is adhering to the goal of finance management a. increase in the amount of the quarterly dividend b. dec in the per unit production costs c. inc in the number of shares outstanding d. dec in the net working capital e. inc in the market value per share

e. increasing the market value per share

what is the relationship between the present value and future value interest factors? a. the present value and future value factors are equal to each other b. the present value factor is the exponent of the future value factor c. the future value factor is the exponent of the present value factor d. there is no relationship between these two factors e. the factors are reciprocals of each other

e. the factors are reciprocals of each other

non cash items refer to

expenses that do not directly affect cash flows

your mom promised to give you $50 when you graduate from college. if you speed up your graduation by one year and graduate two years from now rather than the expected three years, the present value of this gift will

increase

a business owned by a solitary individual who has unlimited liability for the firm's debt is called

sole proprietorship

which business organizations has their income taxed as individual income

sole proprietorship and partnerships

shareholder wealth is usually measured as

stock price per share

shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction:

was facilitated in the secondary market

"should the firm pay cash for a purchase or use the credit offered by the supplier" is an example of

working capital management decision