Fin ch 1, ch 2
A firm has common stock of $99, paid-in surplus of $360, total liabilities of $455, current assets of $480, and net fixed assets of $690. What is the amount of the shareholders' equity?
715
What does shareholders' equity represent?
A residual claim against the firm's total assets.
Which one of the following is included in net working capital?
Accounts payable
Which one of the following terms is defined as the total tax paid divided by the total taxable income?
Average tax rate
Which one of the following functions is generally a responsibility assigned to the corporate treasurer?
Capital expenditures
Which one of the following is an intangible fixed asset?
Copyright
Maynard Enterprises paid $1,552 in dividends and $1,361 in interest over the past year. The common stock account increased by $1,416 and retained earnings decreased by $517. What was the company's net income?
$1,035
Based on the recognition principle, revenue is recorded on the financial statements when the: I. payment is collected for the sale of a good or service. II. earnings process is virtually complete. III. value of a sale can be reliably determined. IV. product is physically delivered to the buyer.
II and III only
Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners?
Limited partnership
classified as liabilities on a firm's balance sheet?
Long-term debt Accounts payable
Which of the following are classified as liabilities on a firm's balance sheet?
Long-term debt Accounts payable
Which one of the following is an advantage of being a limited partner?
Losses limited to capital invested
Which one of the following is the tax rate that applies to the next dollar of taxable income that a firm earns?
Marginal tax rate
The concept of marginal taxation is best exemplified by which one of the following?
Mitchell's Grocer increased its sales by $52,000 last year and had to pay an additional $16,000 in taxes.
Which one of the following statements concerning market and book values is correct?
The market value tends to provide a better guide to the actual worth of an asset than does the book value
On which side of the balance sheet do liabilities appear?
The right side
What is the purpose of the income statement?
To measure performance over a set period of time
Which one of the following statements concerning the balance sheet is correct?
Total assets equal total liabilities minus total equity.
Which of these questions can be answered by reviewing a firm's balance sheet?
What is the total amount of assets the firm owns? How much debt is used to finance the firm?
questions can be answered by reviewing a firm's balance sheet?
What is the total amount of assets the firm owns? How much debt is used to finance the firm?
Net working capital decreases when:
a dividend is paid to current shareholders.
A balance sheet reflects a firm's:
accounting value on a specific date
Net earnings refers to income earned ______.
after interest and taxes
Probably the least effective means of aligning management goals with shareholder interests is:
automatically increasing management salaries on an annual basis.
The financial statement that summarizes a firm's accounting value as of a particular date is called the:
balance sheet
The financial statement that summarizes a firm's accounting value as of a particular date is called the:
balance sheet.
On the balance sheet, assets are listed at their _____ value
book
Security dealers:
buy and sell from their own inventory
Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's:
capital structure.
Which one of the following will decrease the liquidity level of a firm?
cash purchase of inventory
Liabilities can be classified as _______ or long-term.
current
Assets can be categorized as (select all that are appropriate)
current and fixed assets tangible and intangible assets
Net working capital is defined as:
current assets minus current liabilities
Marginal tax rates are the most important tax rates because:
financial decisions are usually based on new cash flows incremental cash flows are taxed at marginal tax rates
The common set of standards and procedures by which audited financial statements are prepared are called:
Generally Accepted Accounting Principles (GAAP)
Which of the following is an example of a non-cash item on an income statement?
Depreciation
The three most important items to keep in mind when reviewing an income statement are:
GAAP, cash versus noncash items, and time and costs
Shareholders' equity is best defined as:
the residual value of a firm.
Liquidity has two dimensions which are the ability to:
quickly convert assets into cash without significant loss in value
One example of a primary market transaction would be the:
sale of 1,000 shares of newly issued stock by Alt Company to Miquel.
You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the:
secondary market.
Levi had an unexpected surprise when he returned home this morning. He found that a chemical spill from a local manufacturer had spilled over onto his property. The potential claim that he has against this manufacturer is that of a(n):
stakeholder.
An employee has a claim on the cash flows of Martin's Machines. This claim is defined as a claim by one of the firm's:
stakeholders.
Physical assets are termed ______________ assets
tangible
Assets can be categorized as
tangible and intangible assets current and fixed assets
The market value of an item is:
the cash value you'd get if you sold it
The primary purpose of the NYSE is to match buyers with sellers. T or F
true
Long-term liabilities are not due in the current year (from the date of the balance sheet). t or f
truth
Theo's BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts are referred to as:
working capital management.
Net working capital includes:
an invoice from a supplier.
Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the business profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts?
General partnership
The shareholders of Weil's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:
an agency conflict.
Shareholders' equity equals ________________.
assets + liabilities
Shareholders' equity equals ________________.
assets minus liabilities
An auction market:
has a physical trading floor
Under GAAP, assets are generally carried on a firm's balance sheet at ________.
historical cost book value
what is on the left side of the balance sheet ?
liabilities
The tax rate that determines the amount of tax that will be due on the next dollar of taxable income earned is called the:
marginal tax rate.
Long-term liabilities represent obligations of the firm lasting over _____.
one year
Limited liability companies are primarily designed to:
provide limited liability while avoiding double taxation.
