FINANCE
1.) Which of the following is an area of career opportunities in managerial finance?
capital expenditures management
2.) In a limited partnership, all partners’ liabilities are limited to their investment in the partnership.
True
3.) A major weakness of a partnership is
the difficulty in liquidating or transferring ownership
4.) Economic theories that a financial manager must ensure for efficient business operations, include
supply-and-demand analysis
5.) A ________ is responsible for the firm’s accounting activities, such as corporate accounting, tax management,
financial accounting, and cost accounting.
Controller
6.) The primary activity of a financial manager is
making an investment decision
7.) Which of the following is the best measure to ensure that management decisions are in the best interest of the
stockholders?
Tie management compensation to the performance of the company’s common stock price
8.) The true owner(s) of the corporation is (are) the
Stockholders
9.) The primary goal of a financial manager is
maximizing wealth
10.) Profit maximization as the goal of the firm is not ideal because
profit maximization does not consider risk
11.) Managerial finance
involves tasks such as budgeting, financial forecasting, cash management, and funds procurement
12.) Which of the following is the purest and most basic form of corporate ownership?
Common Stock
13.) In a limited partnership, all partners’ liabilities are limited to their investment in the partnership.
True
14.) The primary economic principle used in managerial finance is
marginal cost-benefit analysis
15.) A financial manager’s financing decisions determine
the most appropriate mix of short-term and long-term financing
16.) The Sarbanes-Oxley Act of 2002 resulted in
tightened audit regulations and controls
17.) The Sarbanes-Oxley Act of 2002 was passed in response to
false disclosures in financial reporting
18.) A public offering is the sale of a new security issuetypically debt or preferred stockdirectly to an investor or group of
investors.
False
19.) The marginal tax rate paid on a firm’s ordinary income can be calculated by dividing its taxes by its net income.
False
20.) Which of the following serves as an intermediary channeling the savings of individuals, businesses, and
governments into loans and investments?
Financial institutions
21.) Which of the following is a means of selling bonds or stocks to the public?
Public Offering
22.) The ________ is created by a number of institutions and arrangements that allow the suppliers and demanders of
long-term funds to make transactions.
Capital Market
23.) The primary risk of mortgage-backed securities is
that homeowners may not be able to, or choose not to, repay their loans
24.) Which of the following acts regulates the secondary market?
The Securities Exchange Act of 1934
25.) Which of the following is true?
Corporations may pay taxes on only 30 percent of the dividends received from other corporations, depending on their
percentage of ownership.
26.) The tax liability of a corporation with ordinary income of $105,000 is ________.
Range of taxable income Marginal rate
$0 to $50,000 15%
50,000 to 75,000 25
75,000 to 100,000 34
100,000 to 335,000 39
335,000 to 10,000,000 34
10,000,000 to 15,000,000 35
15,000,000 to 18,333,333 38
Over 18,333,333 35
24,200
27.) Apex Inc. issues a bond of $1,000 which pays interest semiannually at a coupon interest rate of 8%. The maturity of
the bond is 15 years. Where should this bond be traded?
Capital Market
28.) The liquidity of a business firm is measured by its ability to satisfy its long-term obligations as they come due.
False
29.) Higher the debt ratio, more the financial leverage a firm has and thus, the greater will be its risk and return.
True
30.) Gross profit is _
sales revenue minus cost of goods sold
31.) The ________ ratios are primarily used as measures of return
profitability
32.) ________ ratio indicates that a firm will be able to meet interest obligations due on outstanding debt.
Times interest earned
33.) P/E ratio measures the
market value of the stock to earnings per share
34.) The financial leverage multiplier is an indicator of how much ________ a corporation is utilizing.
Total debt
35.) A firm’s year-end retained earnings balances are $670,000 and $560,000, for 2014 and 2015 respectively. The firm
paid $10,000 in dividends in 2015. The firm’s net profit after taxes in 2015 was
-$100,000
36.) Given a financial manager’s preference for faster receipt of cash flows, a longer depreciable life is preferred to a
shorter one.
False
37.) The excess cash balance is the amount available for investment by a firm if the desired minimum cash balance is less
than the period’s ending cash.
True
38.) A corporation ________.
Can use different depreciation methods for tax and financial reporting purposes
39.) Which of the following is a cash outflow?
An increase in accounts receivable
40.) The key aspects of a financial planning process are
Cash and Profit planning
41.) Cash disbursements include
Rent payments
42.) The ________ method of developing a pro forma balance sheet estimates values of certain balance sheet accounts
while external financing is used as a balancing, or plug, figure.
Judgemental
43.) NICO Corporation had net fixed assets of $2,000,000 at the end of 2015 and $1,800,000 at the end of 2014. In
addition, the firm had a depreciation expense of $200,000 during 2015 and $180,000 during 2014. Using this
information, NICO’s net fixed asset investment for 2015 was ________.
$400,000
44.) In the month of August, a firm had total cash receipts of $10,000, total cash disbursements of $8,000, depreciation
expense of $1,000, a minimum cash balance of $3,000, and a beginning cash balance of $500. The ending cash balance
for August totals ________.
$2,500
45.) Net operating profit after taxes (NOPAT) represents a firm’s earnings after deducting both interest and taxes.
False
46.) The cash flows from operating activities section of the statement of cash flows includes ________.
Cost of raw materials
47.) Which of the following would be the least likely to utilize a cash budget?
Public investors
48.) The primary purpose in preparing a cash budget is ________.
To estimate a firm’s short-term cash requirements
49.) ________ are projected financial statements.
Pro forma statements
50.) NICO Corporation had net current assets of $2,000,000 at the end of 2015 and $1,800,000 at the end of 2014. In
addition, NICO had net spontaneous current liabilities of $1,000,000 in 2015 and $1,500,000 in 2014. Using this
information, NICO’s net current asset investment for 2014 was ________.
-$300,000
51.) In the month of August, a firm had total cash receipts of $10,000, total cash disbursements of $8,000, depreciation
expense of $1,000, a minimum cash balance of $3,000, and a beginning cash balance of $500. The ending cash balance
for August totals ________.
$2,500
52.) Cash Budget
Total Cash Receipts
Less: Total Cash Disbursments
= Net Cash Flow
Add: Beginning Cash
=Ending Cash
Less: Minimum cash Balance