MBA 6230
Which of the following organization forms for a business does NOT avoid double taxation?
"C" corporation
You own 100 shares of a "C" corporation. The corporation earns $5.00 per share before taxes. Once the corporation has paid any corporate taxes that are due, it will distribute the rest of its earnings to its shareholders in the form of a dividend. If the corporate tax rate is 40% and your personal tax rate on (both dividend and non-dividend) income is 30%, then how much money is left for you after all taxes have been paid?
$210
You own 100 shares of a Sub Chapter "S" corporation. The corporation earns $5.00 per share before taxes. Once the corporation has paid any corporate taxes that are due, it will distribute the rest of its earnings to its shareholders in the form of a dividend. If the corporate tax rate is 40% and your personal tax rate on (both dividend and non-dividend) income is 30%, then how much money is left for you after all taxes have been paid?
$350
FV of Ordinary Annuity
(CF/R)((1+r)^t-1)
Finding Payments
(R)*(PV/(1+r)^t-1)
PV of Ordinary Annuity
(cf/r)(1-(1/(1+r)^t))
What type of company trades on an organized stock exchange?
A public company
Which of the following adjustments to net income is NOT correct if you are trying to calculate cash flow from operating activities? a. Add increases in accounts payable b. Add back depreciation c. Add increases in accounts receivable Correct d. Deduct increases in inventory
Add increases in accounts receivable
You overhear your manager saying that she plans to book an Ocean-view room on her upcoming trip to Miami for a meeting. You know that the interior rooms are much less expensive, but that your manager is traveling at the Company's expense. This use of additional funds comes about as a result of:
An agency problem.
Which of the following statements is FALSE? a. On Nasdaq, stocks can and do have multiple market makers who compete with each other. Each market maker must post bid and ask prices in the Nasdaq network where they can be viewed by all participants. b. Bid prices exceed ask prices. c. Because customers always buy at the ask and sell at the bid, the bid-ask spread is a transaction cost investors have to pay in order to trade. d. On the floor of the NYSE, market makers (known on the NYSE as specialists) match buyers and sellers.
Bid prices exceed ask prices
The Principal-Agent Problem arises:
Both because managers have little incentive to work in the interest of shareholders when this means working against their own self-interest and because of the separation of ownership and control in a corporation
Which of the following is/are an advantage of incorporation?
C" corporation
PV of Growing Perpetuity
CF/(R-G)
PV of Perpetuity
CashFlow/Rate (50,000/.07)
If you buy shares of Coca-Cola on the primary market:
Coca-Cola receives the money because the company has issued new shares. Correct
Accounts payable is a:
Current liability.
Present Value
FV/(1+r)^t
Which of the following is NOT an operating expense? a. Interest expense b. Depreciation and amortization c. Selling, general and administrative expenses d. Research and development
Interest expense
Which of the following is NOT an advantage of a sole proprietorship? a. Single taxation b. Ease of setup c. Limited liability Correct d. No separation of ownership and control
Limited liability
Future Value
PV (1+r)^t
If shareholders are unhappy with a CEO's performance, they are most likely to:
Sell their shares.
Which of the following organization forms accounts for the greatest number of firms?
Sole proprietorship
Which of the following statements regarding the income statement is INCORRECT?
The income statement shows the earnings and expenses at a given point in time.
Gross profit is calculated as:
Total sales - cost of sales
PV of growing annuity
[CF/(r-g)][(1-((1+g)/(1+r))^t)]
You overhear your manager saying that she plans to book an Ocean-view room on her upcoming trip to Miami for a meeting. You know that the interior rooms are much less expensive, but that your manager is traveling at the Company's expense. This use of additional funds comes about as a result of:
an agency problem.
Which of the following statements regarding net income transferred to retained earnings is correct? a. Net income = net income transferred to retained earnings - dividends b. Net income transferred to retain earnings = net income + dividends c. Net income = net income transferred to retain earnings + dividends d. Net income transferred to retain earnings - net income = dividends
c. Net income = net income transferred to retain earnings + dividends
An investment is said to be liquid if the investment:
can easily be converted into cash.
Which of the following statements regarding the balance sheet is INCORRECT? a. The balance sheet provides a snapshots of the firm's financial position at a given point in time. b. The balance sheet lists the firm's assets and liabilities. c. The balance sheet reports stockholders' equity on the right hand side. d. The balance sheet reports liabilities on the left hand side.
d. The balance sheet reports liabilities on the left hand side.
On the balance sheet, current maturities of long-term debt appears:
in the Current Liabilities section.
A sole proprietorship is owned by:
one person
The most senior financial manager in a corporation is usually called:
the chief financial officer.
If you buy shares of Coca-Cola on the secondary market:
you buy the shares from another investor who decided to sell the shares
