1) The true owners of the corporation are the:
A. holders of debt issues of the firm.
B. preferred stockholders.
C. common stockholders.
D. board of directors of the firm.
2) In terms of organizational costs, which of the followingsequences is correct, moving from lowest to highest cost?
A. Corporation, limited partnership, general partnership, soleproprietorship
B. General partnership, sole proprietorship, limited partnership,corporation
C. Sole proprietorship, general partnership, limited partnership,corporation
D. Sole proprietorship, general partnership, corporation, limitedpartnership
3) Which of the following best describes the goal of the firm?
A. The maximization of the total market value of the firm’s commonstock]
B. Profit maximization
C. Risk minimization
D. None of the above
4) __________ is a method of offering securities to a limitednumber of investors.
A. Public offering
B. Initial public offering
C. Private placement
D. Syndicated underwriting
5) Money market instruments include:
A. corporate bonds.
B. bankers’ acceptances.
C. preferred stock.
D. common stock.
6) When public corporations decide to raise cash in the capitalmarkets, what type of financing vehicle is most favored?
A. Common stock
B. Retained earnings
C. Preferred stock
D. Corporate bonds
7) According to the agency problem, _________ represent theprincipals of a corporation. A. employees
B. shareholders
C. managers
D. suppliers
8) Difficulty in finding profitable projects is due to:
A. ethical dilemmas.
B. social responsibility.
C. competitive markets.
D. opportunity costs.
9) Which of the following is NOT a principle of basic financialmanagement?
A. Efficient capital markets
B. Risk/return tradeoff
C. Incremental cash flow counts
D. Profit is king
10) Marshall Networks, Inc. has a total asset turnover of 2.5% anda net profit margin of 3.5%. The firm has a return on equity of17.5%. Calculate Marshall’s debt ratio.
A. 30%
B. 40%
C. 60%
D. 50%
11) The accounting rate of return on stockholders’ investments ismeasured by:
A. return on assets.
B. return on equity.
C. realized rate of inflation.
D. operating income return on investment.
12) Which of the following financial ratios is the best measure ofthe operating effectiveness of a firm’s management?
A. Current ratio
B. Gross profit margin
C. Return on investment
D. Quick ratio
13) Northwest Bank pays a quoted annual (nominal) interest rate of4.75%. However, it pays interest (compouned) daily using a 365-dayyear. What is the effective annual rate of return (APY)?
A. 4.75%
B. 5.02%
C. 4.86%
D. 3.61%
14) Suppose that you wish to save for your child’s collegeeducation by opening up an educational IRA. You plan to deposit$100 per month into the IRA for the next 18 years. Assume that youwill be able to earn 10%, compounded monthly, on your investment.How much will you have accumulated at the end of 18 years?
A. $21,600
B. $54,719
C. $60,056
D. $85,920
E. $33,548
15) You have $10,000 to invest. You do not want to take any risk,so you will put the funds in a savings account at the local bank.Of the following choices, which one will produce the largest sum atthe end of 22 years?
A. An account that compounds interest annually
B. An account that compounds interest daily
C. An account that compounds interest monthly
D. An account that compounds interest quarterly
16) The primary purpose of a cash budget is to:
A. provide a detailed plan of future cash flows.
B. determine the level of investment in current and fixedassets.
C. determine accounts payable.
D. determine the estimated income tax for the year.
17) Which of the following is NOT a basic function of a budget?
A. Budgets compare historical costs of the firm with its currentcost performance.
B. Budgets indicate the need for future financing.
C. Budgets provide the basis for corrective action when actualfigures differ from the budgeted figures.
D. Budgets allow for performance evaluation.
18) Which of the following statements about the percent-of-salesmethod of financial forecasting is true?
A. It involves estimating the level of an expense, asset, orliability for a future period as a percent of the forecast forsales revenues.
B. It is the least commonly used method of financialforecasting.
C. It is a much more precise method of financial forecasting than acash budget would be. D. It projects all liabilities as a fixedpercentage of sales.
19) Which of the following is a non-cash expense?
A. Packaging costs
B. Depreciation expenses
C. Interest expense
D. Administrative salaries
20) A plant can remain operating when sales are depressed:
A. in an effort to cover at least some of the variable cost.
B. if the selling price per unit exceeds the variable cost perunit.
C. to help the local economy.
D. unless variable costs are zero when production is zero.
21) The break-even model enables the manager of a firm to:
A. determine the quantity of output that must be sold to cover alloperating costs.
B. calculate the minimum price of common stock for certainsituations.
C. set appropriate equilibrium thresholds.
D. determine the optimal amount of debt financing to use.
22) How long will it take $750 to double at 8% compoundedannually?
A. 9 years
B. 6.5 years
C. 48 months
D. 12 years
23) Which of the following is the formula for compound value?
A.
FVn = P(1+i)n
B.
FVn = (1+i)/P
C.
FVn = P(1+i)-n
D.
FVn = P/(1+i)n
24) The present value of a single future sum:
A.
increases as the number of discount periods increas.
B.
is generally larger than the future sum.
C.
increases as the discount rate increases.
D.
depends upon the number of discount periods.
25) Which of the following is NOT considered a permanent source offinancing?
A.
Corporate bonds
B.
Common stock
C.
Commercial paper
D.
Preferred stock
26) A toy manufacturer following the hedging principle willgenerally finance seasonal inventory build-up prior to theChristmas season with:
A.
common stock.
B.
selling equipment.
C.
preferred stock.
D.
trade credit.
27) Which of the following is considered to be a spontaneous sourceof financing?
A.
Operating leases
B.
Accounts receivable
C.
Accounts payable
D.
Inventory
ScholarMatic: Explanation & Answer
Your ready answer from a verified tutor is just a click away for as little as $14.99
Click Order Now to get 100% Original Answer Customized to your instructions!
