ACC MCQ QUESTIONS(1-100) - 26875

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1) Which of the following legal forms of organization is characterized by limited liability?

a. Professional partnership

b. Sole proprietorship

c. Corporation

d. Partnership

2) The financial manager may be responsible for any of the following EXCEPT

a. keeping track of quarterly tax payments.

b. analyzing quarterly budget and performance reports.

c. analyzing the effects of more debt on the firm’s capital structure.

d. determining whether to accept or reject a capital asset acquisition.

 3) The financial manager’s financing decisions determine

a. both the mix and the type of assets found on the firm’s balance sheet.

b. both the mix and the type of assets and liabilities found on the firm’s balance

sheet.

c. the most appropriate mix of short-term and long-term financing.

d. the proportion of the firm’s earnings to be paid as dividend.

 4) Wealth maximization as the goal of the firm implies enhancing the wealth of

a. the firm’s stockholders.

b. the Board of Directors.

c. the firm’s employees.

d. the federal government.

5) The amount earned during the accounting period on each outstanding share of common stock is called

a. common stock dividend.

b. net profits after taxes.

c. earnings per share.

d. net income.

6) Cash flow and risk are the key determinants in share price. Increased cash flow results in ________, other things remaining the same.

a. an unchanged share price

b. a lower share price

c. an undetermined share price

d. a higher share price

7) A more recent issue that is causing major problems in the business community is

a. short-term versus long-term financial goals of management.

b. the privatization of ownership.

c. ethical problems.

d. environmental concerns.

8) The implementation of a pro-active ethics program is expected to result in

a. a positive corporate image and increased respect, but is not expected to affect

cash flows.

b. a positive corporate image and increased respect, but is not expected to affect

share price.

c. an increased share price resulting from a decrease in risk, but is not expected to affect cash flows.

d. a positive corporate image and increased respect, a reduction in risk, and enhanced cash flow resulting in an increase in share price.

9) The Sarbanes-Oxley Act of 2002 was passed in response to

a. the decline in technology stocks.

b. insider trading activities.

c. false disclosures in financial reporting.

d. all of the above

10) The key participants in financial transactions are individuals, businesses, and governments. Individuals are net ________ of funds, and businesses are net ________ of funds.

a. demanders; suppliers

b. purchasers; sellers

c. suppliers; demanders

d. users; providers

11) The over-the-counter (OTC) market is

a. an intangible market for unlisted securities.

b. a place where securities are bought and sold.

c. the New York Stock Exchange.

d. an organized stock exchange.

 12) The two key financial markets are

 a. primary market and secondary market.

 

b. capital market and secondary market.

 

c. primary market and money market.

 

d. money market and capital market.

13) Securities exchanges create efficient markets that do all of the following EXCEPT

 a. ensure a market in which the price reflects the true value of the security.

b. control the supply and demand for securities through price.

c. allocate funds to the most productive uses.

d. allow the price to be determined by supply and demand of securities.

14) The tax deductibility of various expenses such as general and administrative expenses ________ their after-tax cost.

 a. reduces

b. has no effect on

c. has an undetermined effect on

d. increases

 15) The dividend exclusion for corporations receiving dividends from another corporation has resulted in

 a. stock investments being relatively less attractive, relative to bond investments made by one corporation in another corporation.

b. stock investments being relatively more attractive relative to bond investments made by one corporation in another corporation.

c. a lower cost of equity for the corporation paying the dividend.

d. a higher relative cost of bond-financing for the corporation paying the dividend.

 

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95) Breakeven cash inflow refers to

 

a. the minimum level of cash inflow necessary for a project to be acceptable, that is, IRR < cost of capital.

b. the minimum level of cash inflow necessary for a project to be acceptable, that is, NPV > $0.

c. the minimum level of cash inflow necessary for a project to be acceptable, that is, NPV < $0.

d. none of the above is correct

 96) A behavioral approach that evaluates the impact on the firm’s return of simultaneous

changes in a number of project variables is called

 

a. simulation analysis.

b. scenario analysis.

c. sensitivity analysis.

d. none of the above

97) The ________ reflects the return that must be earned on the given project to compensate the firm’s owners adequately according to the project’s variability of cash flows.

 a. internal rate of return

b. cost of capital

c. average rate of return

d. risk-adjusted discount rate

98) An approach to capital rationing that involves graphing project returns in descending order against the total dollar investment to determine the group of acceptable projects is called the

 a. net present value approach.

b. the internal rate of return approach.

c. the profitability index approach.

d. the payback approach.

 99) The cost to a corporation of each type of capital is dependent upon

a. the risk-free rate of each type of capital plus the business risk and the financial risk of the firm.

b. the risk-free rate of each type of capital plus the business risk of the firm.

c. the risk-free rate of each type of capital plus the financial risk of the firm.

d. the risk-free rate of bonds plus the business risk of the firm.

100) The before-tax cost of debt for a firm which has a 40 percent marginal tax rate is 12 percent. The after-tax cost of debt is

 a. 12 percent.

b. 7.2 percent.

c. 4.8 percent.

d. 6.0 percent.

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