Question
1
1 / 1 pts
Which of the following actions is consistent
with social responsibility but is necessarily inconsistent with stockholder
wealth maximization?
Voluntarily installing
expensive machinery to treat effluent discharge which currently is being dumped
into a river where it is ruining the drinking water of the community where the
plant is located.
Correct!
Each of these actions is consistent with social
responsibility and none are necessarily inconsistent with stockholder wealth
maximization.
Making a large
corporate donation to the local community in order to fund a recreation complex
that will be used by the community and the firm's employees.
Investing in a
smokestack "scrubber" to reduce the firm's air pollution as mandated
by law.
Investing in a smokestack filter to reduce
sulphur-dioxide emissions in order to reduce the current tax being levied on
the firm by the state for its pollution.
1 / 1 pts
Which of the following statements about the
corporate form of business organization is incorrect?
Correct!
The corporation is the easiest form of business
organization to establish.
Corporations generally
are larger than either partnerships or proprietorships.
None of these
statements are incorrect
In the United States,
corporations generate a significantly greater percentage of total annual sales
than either partnerships or proprietorships.
One of the most important features of the
corporate form of business organization is that stockholders have limited
liability.
1 / 1 pts
Which of the following statements concerning
"agency problems" is most correct?
None of these are
correct statements.
Regardless of economic
conditions, if a firm's stock price falls during the year, this indicates that
the firm's managers must not be acting in the best interests
of the shareholders.
One method of
controlling agency problems is to engage in the taking of "poison
pills."
Correct!
One of the best means to control agency problems is to
require the managers and other important decision makers of the firm to also be
owners of the firm.
Agency problems probably would not exist if
the important decisions of a firm were made by persons who have no
vested interests, such as ownership, in the firm.
0 / 1 pts
In the United States, the form of business
that generates most of the sales and profits is the ____, and
the most common form of business is the ____.
corporation;
corporation
proprietorship;
partnership
You Answered
proprietorship; corporation
Correct answer
corporation;
proprietorship
corporation;
partnership
1 / 1 pts
Compared to corporations, what is the primary
disadvantage of partnerships as forms of business organizations?
Correct!
The owners of a partnership, that is, the partners, have
unlimited liability when it comes to business obligations whereas the owners of
a corporation have limited liability.
Any dividends paid to
the owners of a partnership business are taxed twice, once at the partnership
level and once at the personal, or individual level.
Partnerships have
unlimited lives whereas corporations do not.
Partnerships generally
are much easier to form (start up) than corporations.
The tax rates applied
to partnership are higher than the tax rates applied to corporations.
0 / 1 pts
Everything else equal, including firm size,
dollar sales, type of product sold, and so forth, the primary difference
between the proprietorship and partnership business forms is that
You Answered
a partnership
generally is easier to form than a proprietorship.
there are many more
businesses that are formed as partnerships than proprietorships.
the combined personal
liability associated with a partnership is significantly less than the combined
personal liability associated with a proprietorship.
Correct answer
a partnership has more owners than a proprietorship.
the annual growth rate of a proprietorship is
limited by law, whereas the growth rate of a partnership is always potentially
unlimited.
1 / 1 pts
Which of the following statements is correct?
Although most
companies design a charter, only the bylaws are
legally required to be filed with the secretary of state in order for a
corporation to be in official existence.
Correct!
Procedures for electing corporate directors are contained
in bylaws while the declaration of the activities that the
firm will pursue and the number of directors are included in the corporate
charter.
Procedures which
govern changes in the bylaws of the corporation are contained
in the corporate charter.
The corporate bylaws are the
set of rules drawn up by the state to enable managers to run the firm in
accordance with state laws.
1 / 1 pts
Which of the following statements is correct?
Partnerships must be
formed according to specific rules which include the filing of a formal written
agreement with state authorities where the partnership does business.
A fast growth company
would be more likely to set up a partnership for its business organization than
would a slow-growth company.
A major disadvantage
of a partnership as a form of business organization is the high cost and
practical difficulty of its formation.
Correct!
Partnerships have difficulty attracting capital in part
because of the other disadvantages of the partnership form of business,
including impermanence of the organization.
In a partnership, liability for other
partners' misdeeds includes but is limited to the amount a particular partner
has invested in the business.
0 / 1 pts
Which of the following are reasons for a firm
to operate as a multinational corporation?
You Answered
To Seek New Markets
To Seek Raw Materials
To seek Production
Efficiency
To Avoid Political and
Regulatory Hurdles
Correct answer
These are all valid reasons
1 / 1 pts
Which of the following is a factor that a
multinational corporation must contend with?
Language Differences
Correct!
These are all accurate factors
Economic and Legal
Ramifications
Cultural Differences
Political Risk
Exchange Rates
1 / 1 pts
A firm has a profit margin of 10 percent on sales of $25,000,000.
If the firm has debt of $7,500,000, total assets of $22,500,000, and an
after-tax interest cost on total debt of 5 percent, what is the firm's ROA?
Correct!
11.1%
13.3%
12.2%
7.7%
10.1%
Rationale: Net income = 0.10($25,000,000) =
$2,500,000. ROA = $2,500,000/$22,500,000 =
1 / 1 pts
A firm has total interest charges of $13,500 per year, sales of $1
million, a tax rate of 40 percent, and an EBIT of $94,500 . What is the
firm's times-interest-earned ratio?
6 times
9 times
Correct!
7 times
5 times
8 times
TIE = EBIT/I = $94,500/$13,500 = 7 times.
1 / 1 pts
Assume Meyer corporation has Equity of $2,500.
What is their ROE based on the following information?
|
(1)
|
Earnings before taxes = $1,337;
|
|
(2)
|
Sales = $5,000;
|
|
(3)
|
Dividend payout ratio = 60%;
|
|
(4)
|
Total assets turnover = 2.0;
|
|
(5)
|
Applicable tax rate = 40%.
|
31.7%
27.6%
Correct!
32.1%
35.1%
33.7%
Rationale: NI = $1,337(1-0.4) = $802.2 ROE =
NI/Equity = $802.2/$2,500 = 32.1%.
0 / 1 pts
On its December 31st balance sheet, LCG Company reported gross
fixed assets of $6,500,000 and net fixed assets of $4,450,000. Depreciation for
the year was $550,000. Net fixed assets a year earlier on December 31st, had
been $4,300,000. What figure for "Cash Flows Associated with Long-Term
Investments (Fixed Assets)" should LCG report on its Statement of Cash
Flows for the current year?
$2,350,000
$100,000
You Answered
$550,000
Correct answer
$700,000
$450,000
=4,450,000+550,000-4,300,000
1 / 1 pts
Other things held
constant, which of the following will not affect the quick
ratio? (Assume that current assets equal current liabilities.)
Correct!
Accounts receivable are collected.
Long-term debt is
issued to payoff a short-term bank loan.
Fixed assets are sold
for cash.
Cash is used to
purchase inventories.
Cash is used to pay
off accounts payable.
1 / 1 pts
All of the following represent cash outflows to the firm except
Taxes.
Purchase of plant and
equipment.
Dividends.
Interest payments.
Correct!
Depreciation.
1 / 1 pts
The primary goal of a publicly-owned firm
interested in serving its stockholders should be to
Minimize the chances
of losses.
Maximize expected EPS.
Correct!
Maximize the stock price per share.
Maximize expected net
income.
Minimize the debt used
by a firm.
0 / 1 pts
Which of the following mechanisms is not used
by shareholders to get managers to act in shareholder's best interests?
Managerial
compensation.
You Answered
Threat of takeover.
Threat of firing
Correct answer
Golden parachute.
1 / 1 pts
"The Charleston Company is a relatively
small, privately owned firm. Last year the company had after-tax income of
$15,000, and 30,000 shares were outstanding. What is their Price/Earnings Ratio
if their stock price is $3
3.0
5.5
3.5
Correct!
6.0
=15,000/30,000 = .5 =$3/.5=6.0
=15,000/30,000 = .5 =$3/.5=6.0
1 / 1 pts
"If Boyd Corporation has sales of $3
million per year (all credit) and days sales outstanding of 27 days, what is
its average amount of accounts receivable outstanding (assume a 360 day
year)?"
$175,000
$155,000
$435,000
Correct!
$225,000
3,000,000/360*27 =
$225,000
Days Sales Outstanding = Average accounts
receivable / (Sales/360)
1 / 1 pts
Which of the following groups probably would
not be interested in the financial statementanalysis of a firm?
management of the firm
Correct!
Internal Revenue Service
creditors
stockholders
1 / 1 pts
Which of the following financial
statements includes information about a firm's assets, equity, and liabilities?
All of the above
Cash flow statement
Correct!
Balance sheet
Income statement
Statement of retained
earnings
1 / 1 pts
Which of the following financial statements shows a firm's
operating, financing, and investment activities plus changes in
cash over a particular period of time?
statement of retained
earnings
proxy statement
Correct!
statement of cash flows
income statement
balance sheet
1 / 1 pts
HighTech Wireless just published its 2015
income statement, which shows net income equal to $222,000. The statement also
shows that operating expenses were $500,000 before including depreciation,
depreciation was $100,000, and the tax rate was 40%. What were HighTech's sales
revenues in 2014?
$870,000
$1,020,000
$820,000
Correct!
$970,000
1 / 1 pts
Credit Card of America
(CCA) has a current ratio of 3.5 and a quick ratio of 3.0 If its total current
assets equal 59,500 what is CCA's current inventory?
Assume CCA's current assets only include the
following accounts: Cash, Accounts Receivable, and Inventory.
Correct!
$8,500
$51,000
$69,416
$9,917
First, figure out current liabilities:
$59,500/3.5 = 17,000 Then use the quick ratio to figure out the total of Cash
and Accounts Receivable: $17,000*3=51,000 Then Subtract that amount from
Current assets $59500-$51,000 = 8,500
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