Stadford Inc. is financed with 40 percent debt and 60 percent equity. This mixture of debt and equity is referred to as the firm's
Capital Structure
Todd and Cathy created a firm that is separate legal entity and will share ownership of that firm on a 50/50 basis. Which type of entity did they create if they have no personal liability for the firm's debt
Corporation
Will and Bill decided to create a business together renting surfboards in California. Will and Bill will equally share in the decision making and in the profits or losses. Which type of business did they create if they both have full personal liability fo
General Partnership
If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which of the following financial ares
Investments
The daily financial operations of a firm are primarily controlled by managing the
working capital
which of the following forms of business organization offers liability protection to some of its owners but not to all of its owners
Limited Partnership
Which one of the following applies to a general partnership
Any one of the partners can be held solely liable for all of the parntership's debts
Which of the following statements correctly applies to a sole proprietorship
Obtaining additional equity is dependent on the owner's personal finances
In a general partnership, each partner is personally liable for
the total debts of the partnership, even if he or she was unaware of the debts
Which one of the following is an advantage of being a limited partner
Losses limited to capital invested
Which one of the following statements about a limited partnership is correct
There must be at least one general partner
Corporate shareholders
Have the ability to change the corporation's bylaws
A limited liability company
prefers its profits be taxed as personal income to its owners
Limited liability companies are primarily designed to
provide limited liability while avoiding double taxation
Which one of the following best matches the primary goal of financial management
Increasing the market value of the firm
The goal of financial management is to increase the
current market value per share
The Sarbanes-Oxley Act in 2002 was prompted by which one of the following from the 1990's
Corporate accounting and financial fraud
The Sarbanes-Oxley Act of 2002 has
made officers of publicly traded firms personally responsible for the firm's financial statements
Net working capital is defined as
Current assets minus current liabilities
The financial statement that summarized a firm's accounting value as of a particular date is called
balance sheet
Which one of the following terms is defined as the total tax paid dividend by the total taxable income
average tax rate
Which one of the following is the tax rate that applies to the next dollar of taxable income that a firm earns
marginal tax rate
Which one of the following is an intangible fixed asset
Copyright
Delivery trucks are classified as
tangible fixed assets
Which one of the following is included in net working capital
Accounts payable
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
Shareholders' equity is equal to
net fixed assets minus long-term debt plus net working capital
All else equal, an increase in which one of the following will decrease owners' equity
Increase in Accounts payable
Which one of the following will decrease the net working capital of a firm
Making a Payment on a long-term debt
Which one of the following will decrease the liquidity level of a firm
Cash purchase of inventory
Highly liquid assets
can be sold quickly at close to full value
Financial leverage
increases the potential return to the shareholders
Which one of the following statements concerning market and book values is correct
The market value tends to provide a better guide to the actual worth of an asset than does the book value
Which one of the following statements concerning the balance sheet is correct
Assets are listed in descending order of liquidity
Common-size financial statements present all balance sheet account values as a percentage of
Total Assets
The ratios that are based on financial statement values and used for comparison purposes are called
Financial ratios
The Du Pont identity can be totally defined by which one of the following
Equity multiplier and return on assets
Which one of the following transactions will increase the liquidity of a frim
Credit Sale of inventory at cost
A firm has a current ratio of 1.4 and a quick ratio of 0.9. Given this, you know for certain that the firm
has positive net working capital
Fred is the owner of a local feed store. Which one of the following ratios should he compute if he wants to know how long the store can pay its bills given the amount of cash the store currently has
Cash ratio
Which one of the following is a measure of long-term solvency
Equity Multiplier
The cash coverage ratio is used to evaluate the
ability of a firm to pay the interest on its debt
The equity multiplier is equal to
one plus the debt-equity ratio
Blooming Gardens has an inventory turnover of 16. The means the firm
sells its inventory an average of 16 times each year
Kelso's Pharmacy generates $2 in sales for every $1 the firm has invested in total assets. Which one of the following rations would reflect this relationship
Total asset turnover
Which one of the following will increase the profit margin of a firm, all else constant
Decrease in the tax rate
You would like to borrow money three years from now to build a new building. In preparation for applying for that loan, you are in the process of developing target rations for you firm. Which set of ratios represents the best target mix considering that y
Cash coverage ration = 2.6; debt-equity ratio = 0.3
All else constant, which one of the following will decrease if a firm increases its net income
Price-earnings ratio
Which one of the following statements is true concerning the price-earnings ratio
A high PE ratio may indicate that a firm is expected to grow significantly
The T-shirt Hut successfully managed to reduce its general and administrative costs this year. This cost improvement will increase which of the following rations
Profit Margin, Return on Assets, and Return on Equity
Sara is investing $1,000 today. Which one of the following will increase the future value of that amount
Increasing the interest rate
Same wants to invest $5,000 for 5 years. Which one of the following rates will provide him with the largest future value
7 percent interest, compounded annually
Which one of the following is the correct formula for the future value of $500 invested today at 7 percent interest for 8 years
FV = $500(1+0.07)^8
Terry invested $2,000 today in an investment that pays 6.5 percent annual interest. Which one of the following statements is correct, assuming all interest is reinvested
Terry could have the same future value and invest less than $2,000 initially if he could earn more than 6.5 percent interest
Which of the following will decrease the future value of a lump sum investment made today assuming that all interest is reinvested. Assume the interest rate is a positive value
Decrease in the lump sum amount and decrease in the investment time period
Lisa has $1,000 in cash today. Which one of the following investment options is most apt to double her money
8 percent interest for 9 years
Which one of the following is the correct formula for computing the present value of $600 to be received in 6 years. The discount rate is 7 percent
PV = $600/(1+0.07)^6
Centre Bank pays 2.5 percent interest, compounded annually, on its savings accounts. Country Bank pays 2.5 percent simple interest on its savings accounts. You want to deposit sufficient funds today so that you will have $1,500 in your account 2 years fro
will be greater if you invest with Country Bank
The relationship between the present value and the time period is best described as
inverse