Chapter 1, 2, 4 Financial Policies

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

Accounts Receivable.

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

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

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

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

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

Corporations delisting from major exchanges.

A firm is operating at 90 percent of capacity. This information is primarily needed to project which one of the following account values when compiling pro forma statements? Sales. Cost of goods sold. Accounts receivable. Fixed assets. Long-term debt.

Fixed assets.

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

General partnership.

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.

II, III, and IV only.

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.

II, III, and IV only.

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

It is easy to create a sole proprietorship.

The percentage of the next dollar you earn that must be paid in taxes is referred to as the _____ tax rate. Mean. Residual. Total. Average. Marginal.

Marginal.

Which one of the following terms can be defined as the net income that a firm reinvests in itself? Retention ratio. Dividend yield. Dividend payout ratio. Internal growth rate. Cash plowback.

Retention ratio.

Financial plans generally tend to ignore which one of the following? Dividend policy. Manager's goals and objectives. Risks associated with cash flows. Operating capacity levels. Capital structure policy.

Risks associated with cash flows.

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? Primary, dealer market. Secondary, dealer market. Primary, auction market. Secondary, auction market. Secondary, OTC market.

Secondary, auction market.

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

Shareholders.

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

Vice president of finance.

The external financing need: Will limit growth if unfunded. Is unaffected by the dividend payout ratio. Must be funded by long-term debt. Ignores any changes in retained earnings. Considers only the required increase in fixed assets.

Will limit growth if unfunded