ERAU MBAA518 Module 1 Readings and Videos Quiz 1 - 96563

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Question Question 1 2 / 2 pts The corporate document that sets forth the business purpose of a firm is the: state tax agreement. corporate bylaws. articles of incorporation. indenture contract. debt charter. Question 2 2 / 2 pts Agency costs refer to: the total dividends paid to stockholders over the lifetime of a firm. the costs that result from default and bankruptcy of a firm. the costs of any conflicts of interest between stockholders and management. the total interest paid to creditors over the lifetime of the firm. corporate income subject to double taxation. Question 3 2 / 2 pts Which one of the following is a capital budgeting decision? Deciding when to repay a long-term debt Determining how much debt should be borrowed from a particular lender Determining how much money should be kept in the checking account Determining how much inventory to keep on hand Deciding whether or not to open a new store Question 4 2 / 2 pts Which one of the following statements is correct? Both partnerships and corporations incur double taxation. Both partnerships and corporations have limited liability for general partners and shareholders. Both sole proprietorships and partnerships are taxed in a similar fashion. All types of business formations have limited lives. Partnerships are the most complicated type of business to form. Question 5 2 / 2 pts The rules by which corporations govern themselves are called: bylaws. articles of incorporation. indenture provisions. indemnity provisions. charter agreements. Question 6 2 / 2 pts The decisions made by financial managers should all be ones which increase the: financial distress of the firm. marketability of the managers. size of the firm. market value of the existing owners' equity. growth rate of the firm. Question 7 2 / 2 pts The process of planning and managing a firm's long-term investments is called: working capital management. capital structure. capital budgeting. agency cost analysis. financial depreciation. Question 8 2 / 2 pts A conflict of interest between the stockholders and management of a firm is called: stockholders' liability. corporate breakdown. corporate activism. legal liability. the agency problem. Question 9 2 / 2 pts Which one of the following assets is generally the most liquid? patents equipment accounts receivable buildings inventory Question 10 2 / 2 pts Which equality is the basis for the balance sheet? Assets = Liabilities + Stockholder's Equity Assets = Current Long-Term Debt + Retained Earnings None of these Fixed Assets = Liabilities + Stockholder's Equity Fixed Assets = Stockholder's Equity + Current Assets Question 11 2 / 2 pts _____ refers to the firm's dividend payments less any net new equity raised. Capital spending Operating cash flow Cash flow from creditors Net working capital Cash flow to stockholders Question 12 2 / 2 pts An increase in total assets: must be offset by an equal increase in liabilities and shareholders' equity. can only occur when a firm has positive net income. means that shareholders' equity must also increase. means that net working capital is also increasing. requires an investment in fixed assets. Question 13 2 / 2 pts Depreciation: decreases net fixed assets, net income, and operating cash flows. is a non-cash expense which increases the net operating income. increases the net fixed assets as shown on the balance sheet. is a noncash expense that is recorded on the income statement. reduces both the net fixed assets and the costs of a firm. Question 14 2 / 2 pts _____ refers to the cash flow that results from the firm's ongoing, normal business activities. Cash flow from operating activities Capital spending Net working capital Cash flow from assets Cash flow to creditors Question 15 2 / 2 pts Liquidity is: equal to the market value of a firm's total assets minus its current liabilities. equal to current assets minus current liabilities. a measure of the use of debt in a firm's capital structure. valuable to a firm even though liquid assets tend to be less profitable to own. generally associated with intangible assets. Question 16 2 / 2 pts The financial statement summarizing a firm's accounting performance over a period of time is the: shareholders' equity sheet. balance sheet. income statement. statement of cash flows. tax reconciliation statement. Question 17 2 / 2 pts One of the reasons why cash flow analysis is popular is because: None of these. cash flows are more subjective than net income. it is easy to manipulate, or spin the cash flows. it is difficult to manipulate, or spin the cash flows. cash flows are hard to understand. Question 18 2 / 2 pts The higher the inventory turnover measure, the: greater the amount of inventory held by a firm. faster a firm sells its inventory. longer it takes a firm to sell its inventory. lesser the amount of inventory held by a firm. faster a firm collects payment on its sales. Question 19 2 / 2 pts One key reason a long-term financial plan is developed is because: None of these. the plan determines your financial policy. there are direct connections between achievable corporate growth and the financial policy. the plan determines your investment policy. there is unlimited growth possible in a well-developed financial plan. Question 20 2 / 2 pts If shareholders want to know how much profit a firm is making on their entire investment in the firm, the shareholders should look at the: equity multiplier. return on assets. earnings per share. profit margin. return on equity. Question 21 2 / 2 pts Financial ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as _____ ratios. market value short-term solvency long-term solvency profitability asset management Question 22 2 / 2 pts Which one of the following statements is correct concerning ratio analysis? Ratios do not address the problem of size differences among firms. A single ratio is often computed differently by different individuals. Only a very limited number of ratios can be used for analytical purposes. Ratios cannot be used for comparison purposes over periods of time. Each ratio has a specific formula that is used consistently by all analysts. Question 23 2 / 2 pts Which of the following are liquidity ratios? I. cash coverage ratio II. current ratio III. quick ratio IV. inventory turnover I and II only II, III, and IV only I, III, and IV only I, II, III, and IV II and III only Question 24 2 / 2 pts Which one of the following sets of ratios applies most directly to shareholders? Market-to-book ratio and price-earnings ratio Quick ratio and times interest earned Return on assets and profit margin Price-earnings ratio and debt-equity ratio Cash coverage ratio and times equity multiplier Question 25 2 / 2 pts Which two of the following represent the most effective methods of directly evaluating the financial performance of a firm? I. comparing the current financial ratios to those of the same firm from prior time periods II. comparing a firm's financial ratios to those of other firms in the firm's peer group who have similar operations III. comparing the financial statements of the firm to the financial statements of similar firms operating in other countries IV. comparing the financial ratios of the firm to the average ratios of all firms located in the same geographic area II and III only III and IV only I and II only I and III only I and IV only
Solution Description

Question

Question 1

2 / 2 pts

The corporate document that sets forth the business purpose of a firm is the:

state tax agreement.

corporate bylaws.

articles of incorporation.

indenture contract.

debt charter.

Question 2

2 / 2 pts

Agency costs refer to:

the total dividends paid to stockholders over the lifetime of a firm.

the costs that result from default and bankruptcy of a firm.

the costs of any conflicts of interest between stockholders and management.

the total interest paid to creditors over the lifetime of the firm.

corporate income subject to double taxation.

Question 3

2 / 2 pts

Which one of the following is a capital budgeting decision?

Deciding when to repay a long-term debt

Determining how much debt should be borrowed from a particular lender

Determining how much money should be kept in the checking account

Determining how much inventory to keep on hand

Deciding whether or not to open a new store

Question 4

2 / 2 pts

Which one of the following statements is correct?

Both partnerships and corporations incur double taxation.

Both partnerships and corporations have limited liability for general partners and shareholders.

Both sole proprietorships and partnerships are taxed in a similar fashion.

All types of business formations have limited lives.

Partnerships are the most complicated type of business to form.

Question 5

2 / 2 pts

The rules by which corporations govern themselves are called:

bylaws.

articles of incorporation.

indenture provisions.

indemnity provisions.

charter agreemen