FINA 365 exam 1

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

A) Auction markets match buy and sell orders.

Which one of the following represents a cash outflow from a corporation? A) Payment of dividends B) Receipt of tax refund C) Initial sale of common stock D) New loan proceeds E) Issuance of new securities

A) Payment of dividends

Which one of the following is classified as a tangible fixed asset? A) Production equipment B) Patent C) Cash D) Accounts receivable E) Inventory

A) Production equipment

Which of the following is NOT an advantage of a sole proprietorship? A) unlimited liability B) single taxation C) no separation of ownership and control D) ease of setup

A) unlimited liability

Which one of the following terms is defined as the mixture of a firm's debt and equity financing? A) Cost analysis B) Capital structure C) Capital budgeting D) Cash management E) Working capital management

B) Capital structure

Which one of these identifies the relationship between the return on assets and the return on equity? A) Debt-equity ratio B) DuPont identity C) Profitability determinant D) Profit margin E) Balance sheet multiplier

B) DuPont identity

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time? A) Market value report B) Income statement C) Balance sheet D) Statement of cash flows E) Tax reconciliation statement

B) Income statement

What is the process of double taxation for the stockholders in a C corporation? A) The corporation must pay taxes on any profits it makes, and the capital raised by the sale of shares is also subject to taxation. B) The corporation is taxed on the profits it makes, and the owners are taxed when this profit is distributed to them. C) Their shares are taxed when they are both bought and sold. D) The owners of a corporation are taxed when they receive dividend payments and when they make a profit from the sale of shares

B) The corporation is taxed on the profits it makes, and the owners are taxed when this profit is distributed to them.

According to the statement of cash flows, an increase in interest expense will ________ the cash flow from ________ activities. A) decrease; financing B) decrease; operating C) Increase; investment D) increase; operating E) increase; financing

B) decrease; operating

The percentage of the next dollar you earn that must be paid in taxes is referred to as the ________ tax rate. A) total B) marginal C) residual D) mean E) average

B) marginal

Which one of the following is a source of cash? A) Payment to a supplier B) Purchase of inventory C) Acquisition of debt D) Granting credit to a customer E) Repurchase of common stock

C) Acquisition of debt

The cash flow related to interest payments less any net new borrowing is called the: A) operating cash flow. B) capital spending cash flow. C) cash flow to creditors. D) cash flow from assets. E) net working capital

C) cash flow to creditors.

A sole proprietorship is owned by _________. A) shareholders B) bankers C) one person D) two or more persons

C) one person

Which one of the following statements is correct? A) Shareholders directly elect the corporate president. B) Corporate profits are taxable income to the shareholders when earned. C) Shareholders are protected from all potential losses. D) Corporations can have an unlimited life. E) The majority of firms in the U.S. are structured as corporations.

D) Corporations can have an unlimited life

An increase in which of the following must increase the return on equity, all else constant? A) Equity multiplier and total equity B) Total assets and sales C) Net income and total equity D) Total asset turnover and debt-equity ratio E) Debt-equity ratio and total debt

D) Total asset turnover and debt-equity ratio

The book value of a firm is: A) adjusted to the market value whenever the market value exceeds the stated book value. B) equivalent to the firm's market value provided that the firm has some fixed assets. C) more of a financial than an accounting valuation. D) based on historical cost. E) generally greater than the market value when fixed assets are included.

D) based on historical cost.

A business owned by a solitary individual who has unlimited liability for the firm's debt is called a: A) limited partnership. B) limited liability company. C) general partnership. D) sole proprietorship. E) corporation.

D) sole proprietorship.

Which one of the following statements concerning a sole proprietorship is correct? A) A sole proprietorship is designed to protect the personal assets of the owner. B) There are very few sole proprietorships remaining in the U.S. today. C) The profits of a sole proprietorship are subject to double taxation. D) A sole proprietorship is structured the same as a limited liability company. E) The owner of a sole proprietorship is personally responsible for all of the company's debts

E) The owner of a sole proprietorship is personally responsible for all of the company's debts

a decrease in the quick ratio of a company indicates

the increased risk the company will experience a cash shortfall in the near future