Business finance
The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?
Agency
Which one of the following statements concerning the balance sheet is correct?
Assets are listed in descending order of liquidity.
The financial statement that summarizes a firm's accounting value as of a particular date is called the:
Balance sheet
Jordan and Carmen created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?
Corporation
Production equipment is classified as:
a tangible fixed asset.
Net working capital includes:
an invoice from a supplier.
Security dealers:
buy and sell from their own inventory.
Highly liquid assets:
can be sold quickly at close to full value.
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
Net working capital is defined as:
current assets minus current liabilities.
The goal of financial management is to increase the:
current market value per share.
Cash flow to stockholders is defined as:
dividends paid minus net new equity raised.
Net capital spending is equal to:
ending net fixed assets minus beginning net fixed assets plus depreciation.
Which one of the following is an advantage of being a limited partner?
Losses limited to capital invested
What is the primary goal of financial management for a sole proprietorship?
Maximize the market value of the equity
Which one of these is correct?
Net income is distributed either to dividends or retained earnings.
Which one of the following statements correctly applies to a sole proprietorship?
Obtaining additional equity is dependent on the owner's personal finances
Vera opened a used bookstore and is both the 100 percent owner and the store's manager. Which type of business entity does Vera own if she is personally liable for all the store's debts?
Sole proprietorship
An employee has a claim on the cash flows of Westlake Machines. This claim is defined as a claim by one of the firm's:
Stakeholders.
Which one of the following correctly defines a common chain of command within a corporation?
The controller reports directly to the chief financial officer.
Which one of the following statements about a limited partnership is correct?
There must be at least one general partner.
Net working capital decreases when:
a dividend is paid to current shareholders.
Shareholders' equity is equal to:
net fixed assets minus long-term debt plus net working capital.
Paid-in surplus is classified as:
owners' equity.
Limited liability companies are primarily designed to:
provide limited liability while avoiding double taxation.
A negative cash flow to stockholders indicates a firm:
received more from selling stock than it paid out to shareholders.
An income statement prepared according to GAAP:
records expenses based on the matching principle.
Market values:
reflect expected selling prices given the current economic situation.
Net income increases when:
revenue increases.
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.
Which of the following statements is false?
Acorns is a creative crowdfunding app, allowing smaller investors to join together to fund design ventures.
Which one of the following functions is generally a responsibility assigned to the corporate treasurer?
Capital expenditures
Which one of the following occupations best fits into the corporate area of finance?
Chief financial officer
Which one of the following is an intangible fixed asset?
Copyright
The Sarbanes-Oxley Act in 2002 was primarily prompted by which one of the following from the 1990s?
Corporate accounting and financial fraud
Which of the following statements is true with regard to this principle?
Revenue is recognized at the time of sale. Costs associated with the sale of that product likewise would be recognized at that time.
Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a dividend. The cash flow statement for last year must have which one of the following assuming that no new shares were issued?
Positive cash flow to stockholders
Which one of the following is contained in the corporate bylaws?
Procedures for electing corporate directors
Which one of the following is included in the market value of a firm but not in the book value?
Reputation of the firm
GAAP, as they relate to the income statement includes the recognition principle: to recognize revenue when the earnings process is virtually complete, and the value of an exchange of goods or services is known or can be reliably determined.
Revenue is recognized at the time of sale. Costs associated with the sale of that product likewise would be recognized at that time.
Deandre and Mason 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. Deandre and Mason 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
Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital:
had to decrease.
A sole proprietorship:
has its profits taxed as personal income.
Corporate shareholders:
have the ability to change the corporation's bylaws.
The accounting statement that measures the revenues, expenses, and net income of a firm over a period is called the:
income statement.
A firm's liquidity level decreases when:
inventory is purchased with cash.
Net working capital increases when:
inventory is sold at a profit.
The primary goal of financial management is to maximize:
the market value of existing stock.
Shareholders' equity is best defined as:
the residual value of a firm.
In a general partnership, each partner is personally liable for:
the total debts of the partnership, even if he or she was unaware of those debts.
Raleigh 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.
