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Question;1. Which of the following statements;is CORRECT?;a. One of the;disadvantages of incorporating your business is that you could become subject;to the firm's liabilities in the event of bankruptcy.;b. Sole;proprietorships are subject to more regulations than corporations.;c. In any;partnership, every partner has the same rights, privileges, and liability exposure;as every other partner.;d. Corporations;of all types are subject to the corporate income tax.;e. Sole proprietorships and partnerships;generally have a tax advantage over corporations.;2.;What is the sequential;approach?;a.;Profit maximization;b. Agency conflict;c. Efficient management;d.;Satisfying stakeholders to maximize;shareholder wealth maximization e.;e. None;f the above;3. The primary operating goal of a;publicly-owned firm interested in serving its stockholders should be to;a. Maximize its;expected total corporate income.;b. Maximize its;expected EPS.;c. Minimize the;chances of losses.;d. Maximize the;stock price per share over the long run;e. Maximize the;stock price on a specific target date.;4. Which of the following actions;would be most likely to reduce potential conflicts of interest between;stockholders and managers?;a. Pay managers;large cash salaries and give them no stock options.;b. Change the;corporation's formal documents to make it easier for outside investors to;acquire a controlling interest in the firm through a hostile takeover.;c. Beef up the;restrictive covenants in the firm?s debt agreements.;d. Eliminate a;requirement that members of the board of directors must hold a high percentage;of their personal wealth in the firm?s stock.;e. For a firm;that compensates managers with stock options, reduce the time before options;are vested, i.e., the time before options can be exercised and the shares that;are received can be sold.;5. Which;of the following statements is CORRECT?;a. The four most important financial;statements provided in the annual report are the balance sheet, income;statement, cash budget, and the statement of stockholders' equity.;b. The balance sheet gives us a picture of the;firm?s financial position at a point in time.;c. The income statement gives us a picture of;the firm?s financial position at a point in time.;d. The statement of cash flows tells us how;much cash the firm must pay out in interest during the year.;e. The statement of cash needs tells us how;much cash the firm will require during some future period, generally a month or;a year.;6. Other;things held constant, which of the following actions would increase the;amount of cash on a company?s balance sheet?;a. The company repurchases common stock.;b. The company pays a dividend.;c. The company issues new common stock.;d. The company gives customers more time to;pay their bills.;e. The company purchases a new piece of;equipment.;7. While preparing a pro forma B/S, you have realized that A;L+E, you want to balance the B/S with increased short-term debt. What is;(are) the problem(s) you may run into?;a.;Increased debt;b.;Increased liquidity;c.;Decreased profit;d.;Liquidity problem;e.;Both increased debt and liquidity;problem;8. On;12/31/08, Hite Industries reported retained earnings of $525,000 on its balance;sheet, and it reported that it had $135,000 of net income during the year. On;its previous balance sheet, at 12/31/07, the company had reported $445,000 of;retained earnings. No shares were;repurchased during 2008. How much in;dividends did the firm pay during 2008?;a. $49,638;b. $52,250;c. $55,000;d. $57,750;e. $60,638;9. Shrives;Publishing recently reported $10,750 of sales, $5,500 of operating costs other;than depreciation, and $1,250 of depreciation.;The company had $3,500 of bonds that carry a 6.25% interest rate, and;its federal-plus-state income tax rate was 35%.;During the year, the firm had expenditures on capital;expenditure and net working capital that totaled $1,550. These expenditures were necessary for it to;sustain operations and generate future sales and cash flows. What was its free cash flow?;a. $1,873;b. $1,972;c. $2,076;d. $2,185;e. $2,300;10. Moose;Industries faces the following tax schedule;Tax;on Base Percentage;on;Taxable Income of Bracket Excess above Base;Up to $50,000 $0 15%;$50,000-$75,000 7,500 25;$75,000-$100,000 13,750 34;$100,000-$335,000 22,250 39;$335,000-$10,000,000 113,900 34;$10,000,000-$15,000,000 3,400,000 35;Last year the company realized;$10,000,000 in operating income (EBIT). Its annual interest expense is;$1,500,000. What was the company?s net;income for the year?;a. $4,809,874;b. $5,063,025;c. $5,329,500;d. $5,610,000;e. $5,890,500;11. The;term ?additional funds needed (AFN)? is generally defined as follows;a. Funds that are obtained automatically from;routine business transactions.;b. Funds that a firm must raise externally;from non-spontaneous sources, i.e., by borrowing or by selling new stock, to;support operations.;c. The amount of assets required per dollar of;sales.;d. The amount of internally generated cash in;a given year minus the amount of cash needed to acquire the new assets needed;to support growth.;e. A forecasting approach in which the;forecasted percentage of sales for each balance sheet account is held constant.;12. Spontaneously generated funds are;generally defined as follows;a. Assets required per dollar of sales.;b. A forecasting approach in which the;forecasted percentage of sales for each item is held constant.;c. Funds that a firm must raise externally;through borrowing or by selling new common or preferred stock.;d. Funds that arise out of normal business;operations from its suppliers, employees, and the government, and they include;spontaneous increases in accounts payable and accruals.;e. The amount of cash raised in a given year;minus the amount of cash needed to finance the additional capital expenditures;and working capital needed to support the firm?s growth.

 

Paper#44979 | Written in 18-Jul-2015

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