MGMT Exam 1 Review Qs

When planning for the long run, the planning horizon is usually a period of:

2 to 5 years

Which one of the following accounts is the most liquid? Inventory Building Accounts Receivable Equipment Land

Accounts receivable

For a corporation that earned positive taxable income, which one of the following statements is correct? Taxable income minus dividends paid will equal the ending retained earnings for the year. An increase in depreciation expense will increase the operating cash flow. Net income divided by the number of shares outstanding will equal the dividends per share. Interest paid will be included in both net income and operating cash flow. An increase in the tax rate will increase both net income and operating cash flow.

An increase in depreciation expense will increase the operating cash flow.

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

Auction markets match buy and sell orders

Which of the following actions could cause a company's change in net working capital to be negative for a given year? Increase the dividends paid to stockholders Pay off long-term debt before the due date Purchase additional inventory with cash Borrow money from the bank using a note payable in nine months Use long-term debt to buy a building

Borrow money from the bank using a note payable in nine months

______ are personally responsible for 100 percent of the firm's debts.

Both general partners and sole proprietors

A firm's mixture of debt and equity financing is the result of its ______ decisions.

Capital Structure

Which one of the following determines the standards and procedures with which audited financial statements are prepared? Generally Accepted Accounting Principles Matching principle Cash flow identity Financial Accounting Reporting Principles Standard Accounting Value Guidelines

Generally Accepted Accounting Principles (GAAP)

Which one of the following statements is correct? Book values should always be given precedence over market values. Financial statements are rarely used as the basis for performance evaluations. Historical information is useful when projecting a company's future performance. Potential lenders place little value on financial statement information. Reviewing financial information over time has very limited value.

Historical information is useful when projecting a company's future performance.

Which one of the following financial statements summarizes a firm's revenue and expenses during a period of time? Income statement Balance sheet Statement of cash flows Tax reconciliation statement Market value report

Income statement

Which one of the following is a source of cash for a tax-exempt firm? Increase in accounts receivable Increase in depreciation Decrease in accounts payable Increase in common stock Increase in inventory

Increase in common stock

Which one of the following would cause a cash outflow from a corporation? Issuing new securities Paying dividends Taking out a loan from a bank Receiving a tax refund from the government Assigning common stock to employees

Paying dividends

The controller, rather than the treasurer, is typically responsible for which one of the following functions? Depositing cash receipts Processing cost reports Analyzing equipment purchases Approving credit for a customer Paying a vendor

Processing Cost Reports

When preparing pro forma statements, which of the following is an analyst most likely to estimate first? Need for additional fixed assets Current fixed costs Projected sales Desired net income Desired dividend payments

Projected Sales

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

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

Shareholders can replace company management by implementing:

a proxy fight

The book value of a firm is:

based on historical transactions

The cash flow related to interest payments less any net new borrowing is called the:

cash flow to creditors

When utilizing the percentage of sales approach, managers: estimate company sales based on desired level of net income and the current net profit margin consider only those assets that vary directly with sales consider the current production capacity level can project net income but not cash flows. assume the liability accounts will remain constant.

consider the current production capacity level

A firm owned by two or more people who each have unlimited liability for all of the firm's debts is called a:

general partnership

The Sarbanes-Oxley Act of 2002 holds a public company's ______ responsible for the accuracy of the company's financial statemen

managers

Financial planning processes tend to place the least emphasis on a firm's:

market value

A partnership with four general partners: distributes profits based on percentage of ownership. has an unlimited life. limits the active involvement in the firm to a single partner. limits each partner's personal liability to 25 percent of the partnership's total debt. must distribute 25 percent of the profits to each partner.

must distribute 25 percent of the profits to each partner

Selio Home services combine investment proposals from each operational unit into one single project for planning purposes. This process is referred as:

aggregation

Financial managers should strive to maximize the current value per share of the existing stock to:

best represent the interests of the current owners of the firm

Financial Planning: focuses solely on the short-term outlook for a firm is a process that firms employ only when major changes to a firm's operations are anticipated is a process that firms undergo once every five years considers multiple options and scenarios provides minimal benefits for firms that are highly responsive to economic changes

considers multiple options and scenarios

A ______ has all the respective rights and privileges of a legal person.

corporation

A business that is a legal entity separate from the owners, yet treated as a legal person, is called a(n):

corporation

Agency problems are most likely to be associated with:

corporations

Bowman's Boats has an interval measure of 53. This means that the firm has sufficient liquid assets to :

cover its operating costs for the next 53 days.

Net working capital is defined as:

current assets minus current liabilities

The cash coverage ratio directly measures the ability of a company to meet its obligation to pay: an invoice to a supplier. wages to an employee. interest to a lender. principal to a lender. a dividend to a shareholder.

interest to a lender

A general partner: is personally responsible for 100 percent of the debts of the partnership. is responsible for 80 percent of the firm's debts if he or she owns 80 percent of the partnership. faces double taxation whereas a limited partner does not. has a maximum loss equal to his or her equity investment. receives a salary in lieu of a portion of the profits.

is personally responsible for 100 percent of the debts of the partnership

A limited liability company: can only have a single owner. is comprised of limited partners only. is taxed similarly to a partnership. is taxed similarly to a C corporation. generates totally tax-free income.

is taxed similarly to a partnership

A firm is currently operating at full capacity. Net working capital, costs, and all assets vary directly with sales. The firm does not wish to obtain any additional equity financing. The dividend payout ratio is constant 40 percent. If the firm has a positive external financing need, that need will be meet by:

long-term debt

A limited partnership: has a limited tax liability. can opt to be taxed as a corporation. is the newest form of business organization. must have at least one general partner. consists solely of limited partners.

must have at least one general partner

The cash flow that results from a company's ongoing, normal business activities is called:

operating cash flow

The portion of net income that a firm reinvests in itself is measured with the: retention ratio dividend yield dividend payout ratio internal growth rate cash influx ratio

retention ratio

Which one of the following statements concerning corporate income taxes is correct? U.S. corporations are exempt from federal taxation. Corporations pay no tax on their first $50,000 of income. The federal income tax is applied at a flat rate across all levels of taxable income. The marginal tax rate will always be lower than the average tax rate. The first 25 percent of corporate income is exempt from taxation.

the federal income tax rate is applied at a flat rate across all levels of taxable income

Usually, the treasurer of a corporation reports directly to the: board of directors. chair of the board. chief executive officer. president. vice president of finance.

vice president of finance

When evaluating the timing of a project's projected cash flows, a financial manager is analyzing:

when each cash flow is expected to occur

Which of the following actions would be considered an agency problem? An owner of a sole proprietorship takes company office supplies for personal use Both partners in a general partnership close the office early one day to go skiing A manager in a corporation buys shares of the company's stock when the price falls A manager in a corporation makes online personal travel arrangements during work hours A shareholder in a corporation sells shares of the company's stock when the price rises

a shareholder in a corporation sells shares of the company's stock when the price rises