FINA2201 Review

Which one of the following represents the most liquid asset?

$500 account receivable that is discounted and collected for $480 today $500 worth of inventory that is sold today on credit for $515 $500 worth of inventory that is sold today for $500 in cash $500 worth of inventory that is discounted and sold today for $485 in cash $500 of accounts receivable that will be collected in full next week

You have gathered the following information on JJ Inc.. The firm neither sold nor repurchased any stock during the year.

$588 $0 $364 $709 $515

A firm has common stock of $6,200, paid-in surplus of $9,100, total liabilities of $8,400, current assets of $5,900, and fixed assets of $21,200. What is the amount of the shareholders' equity?

$6,900 $15,300 $18,700 $23,700 $35,500

At the beginning of the year, a firm had current assets of $121,306 and current liabilities of $124,509. At the end of the year, the current assets were $122,418 and the current liabilities were $103,718. What is the change in net working capital?

-$19,679 -$11,503 -$9,387 $1,809 $21,903

Given the tax rates as shown, what is the average tax rate for a firm with taxable income of $289,740?

26.68 percent 35.87 percent 33.22 percent 34.67percent 39.00 percent

Winston Industries had sales of $843,800 and costs of $609,900. The firm paid $38,200 in interest and$18,000 in dividends. It also increased retained earnings by $62,138 for the year. The depreciation was$76,400. What is the average tax rate?

32.83 percent 33.33 percent 38.17 percent 43.39 percent 48.87 percent

Which one of the following statements is correct?

A general partnership is a legal person. Taxable income earned by a partnership is treated as individual income. Partnerships are the most complicated type of business to form. All partnerships are required to have at least one limited partner. Only firms organized as partnerships have limited lives.

Noncash items refer to:

Accrued expenses. Inventory items purchased using credit. The ownership of intangible assets such as patents. Expenses which do not directly affect cash flows. Sales which are made using store credit.

Which one of the following business types is best suited to raising large amounts of capital?

Sole proprietorship. Limited liability company. Corporation. General partnership. Limited partnership.

Which one of the following will decrease the value of a firm's net working capital?

Using cash to pay a supplier. Depreciating an asset. Collecting an accounts receivable. Purchasing inventory on credit. Selling inventory at a loss.

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

corporation. sole proprietorship. general partnership. limited partnership. unlimited liability company.

A firm has net working capital of $560. Long-term debt is $3,970, total assets are $7,390, and fixed assets are $3,910. What is the amount of the total liabilities?

$2,050 $2,920 $4,130 $7,950 $6,890

Which one of the following is a current liability?

A loan payable to the bank in 4 years An invoice payable to a supplier in 45 days An amount due from a customer in 90 days A note payable to a lender in 18 months An amount due from a customer, which is already past due

Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?

Articles of incorporation. Corporate breakdown. Agency problem. Bylaws. Legal liability.

Which one of the following parties has ultimate control of a corporation?

Chairman of the board. Board of directors. Chief executive officer. Chief operating officer. Shareholders.

Given these financial statements, which one of the following is correct for 2015?

Current assets increased. The firm reduced its long term debt. The average tax rate is 34 percent. The firm paid more to its suppliers than it borrowed. The non-cash expenses totaled $2,893.

The higher the degree of financial leverage employed by a firm is, the:

Higher the probability that the firm will encounter financial distress. Lower is the amount of debt incurred. Less debt a firm has per dollar of total assets. Higher is the number of outstanding shares of stock. Lower is the balance in accounts payable.

Which of the following help convince managers to work in the best interest of the stockholders? Assume there are no golden parachutes. I. Compensation based on the value of the stock. II. Stock option plans. III. Threat of a company takeover. IV. Threat of a proxy fight.

I and II only. III and IV only. I, II, and III only. I, III, and IV only. I, II, III, and IV.

Which of the following are advantages of the corporate form of business ownership? I. Limited liability for firm debt. II. Double taxation. III. Ability to raise capital. IV. Unlimited firm life.

I and II only. III and IV only. I, III, and IV only. II, III, and IV only. I, II, III, and IV.

Which of the following questions are addressed by financial managers? I. How should a product be marketed? II. Should customers be given 30 or 45 days to pay for their credit purchases?III. Should the firm borrow more money? IV. Should the firm acquire new equipment?

I and IV only. II and III only. I, II, and III only. II, III, and IV only. I, II, III, and IV.

Which of the following are current assets? I. Cash II. Trademark III. Accounts receivable IV. Notes payable

II and III only. I and III only. I, II, and IV only. I, III, and IV only.

Which of the following individuals have unlimited liability based on their ownership interest? I. General partner II. Sole proprietor III. Stockholder IV. Limited partner

II only. I and II only. II and IV only. I, II, and III only. I, II, and IV only.

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date?

Income statement. Creditor's statement. Balance sheet. Statement of cash flows. Dividend statement.

Which one of the following statements related to an income statement is correct?

Interest expense increases the amount of tax due. Depreciation does not affect taxes since it is a non-cash expense. Net income is distributed to dividends and paid-in surplus. Taxes reduce both net income and operating cash flow. Interest expense is included in operating cash flow.

Which one of the following accounts is the most liquid?

Inventory Building Accounts Receivable Equipment Land

Which one of the following best states the primary goal of financial management?

Maximize current dividends per share. Maximize the current value per share. Increase cash flow and avoid financial distress. Minimize operational costs while maximizing firm efficiency. Maintain steady growth while increasing current profits.

Which one of the following statements concerning net working capital is correct?

Net working capital increases when inventory is purchased with cash. Net working capital may be a negative value. Total assets must increase if net working capital increases. Net working capital excludes inventory. Net working capital is the amount of cash a firm currently has available for spending.

Which one of the following actions by a financial manager is most apt to create an agency problem?

Refusing to borrow money when doing so will create losses for the firm Refusing to lower selling prices if doing so will reduce the net profits Refusing to expand the company if doing so will lower the value of the equity Agreeing to pay bonuses based on the market value of the company's stock rather than on its level of sales Increasing current profits when doing so lowers the value of the company's equity

Which one of the following is a primary market transaction?

Sale of currently outstanding stock by a dealer to an individual investor. Sale of a new share of stock to an individual investor. Stock ownership transfer from one shareholder to another shareholder. Gift of stock from one shareholder to another shareholder. Gift of stock by a shareholder to a family member.

Which one of the following statements regarding corporations is correct?

The majority of firms in the U.S. are structured as corporations. Undistributed corporate profits are taxable income to the shareholders. Corporations can have an unlimited life. Shareholders are protected from all potential losses. Shareholders directly elect the chief financial officer.