MULTIPLE CHOICE QUESTIONS-QUIZ 1-3 Flashcards
The success of financial institutions depends on _______.
THE UNDERSTANDING OF THE FACTORS THAT CAUSE INTEREST RATES AND OTHER RETURNS IN THE FINANCIAL MARKETS TO RISE AND FALL
Market value ratios indicate:
WHAT INVESTORS THINK OF THE COMPANY’S FUTURE PROSPECTS BASED ON ITS PAST PERFORMANCE.
A firm’s current ratio has steadily increased over the past 5 years, from 1.9 to 3.8. What would a financial analyst probably conclude from this information?
THE FIRM’S LIQUIDITY POSITION HAS IMPROVED
Which of the following is a feature of an S Corporation?
THE INCOME OF AN S CORPORATIO IS TAXED THE SAME AS INCOME EARNED BY PROPRIETORSHIPS AND PARTNERSHIPS
Which of the following is true of corporations that operate in several different countries?
A NATION MAY EXPROPRIATE THE ASSETS OF MULTINATIONAL CORPORATIONS WITHOUT COMPENSATION
Which of the following rations measures how effectively a firm is managing its assets?
INVENTORY TURNOVER RATIO
Because financial institutions in other countries are generally less regulated than those in the United States, they generally.
CAN PROVIDE BUSINESSES A GREATER VARIETY OF SERVICES THAN U.S. BANKS CAN
If a limited liability company (LLC) is taxed like a partnership
INCOME PASSES THROUGH TO THE OWNERS
Which of the following statements concerning a firm’s quest to maximize wealth is correct?
IN EXTREMELY COMPETITIVE INDUSTRIES, WE WOULD EXPECT FIRMS TO VOLUNTARILY ENGAGE IN MANY SOCIALLY BENEFICIAL PRJECTS TO TRY TO MAXIMIZE THEIR STOCKS’ VALUES
The days sales outstanding (DSO) ratio of a firm identifies:
THE AVERAGE LENGTH OF TIME A FIRM MUST WAIT AFTER MAKING A CREDIT SALE BEFORE RECEIVING CASH
Which of the following mathematical expressions calculates the debt ratio?
DEBT RATIO = TOTAL LIABILITIES / TOTAL ASSETS
Which of the following is an example of a current asset?
INVENTORY
Identify a true statement about an S corporation.
THE INCOME OF AN S CORPORATION PASSES THROUGH THE COMPANY TO THE OWNERS
Identify a true statement about a limited liability company (LLC).
A LIMITED LIABILITY COMPANY CAN HAVE MORE THAN ONE TYPE OF STOCK (OWNERSHIP INTEREST) OUTSTANDING
The investment function of finance helps in _____.
DETERMINING THE VALUES, RISKS, AND RETURNS ASSOCIATED WITH SUCH FINANCIAL ASSETS AS STOCKS AND BONDS.
Which of the following statements is true of corporate bylaws?
PROCEDURES FOR ELECTING CORPORATE DIRECTORS ARE CONTAINED IN CORPORATE BYLAWS
Which of the following accounts contains the actual money that can be spent by a firm?
CASH AND EQUIVALENTS
Techniques employed by firms to make their financial statements look better than they actually are, are called:
WINDOW-DRESSING TECHNIQUES
Which of the following is true of a firm that tries to coordinate and control the worldwide operations of its subsidiaries?
CASH FLOWS IN DIFFERENT SUBSIDIARIES ARE DENOMINATED IN DIFFERENT CURRENCIES
The success of financial institutions requires an understanding of:
REGULATIONS THAT AFFECT THESE FINANCIAL INSTITUTIONS
Which of the following financial statements includes information about a firm’s assets, equity, and liabilities at a specific point in time?
BALANCE SHEET
Which of the following is true of financial services provided by persons working in banks, insurance companies, and brokerage firms?
PERSONS WORKING IN BANKS, INSURANCE COMPANIES, & BROKERAGE FIRMS HELP INDIVIDUALS AND COMPANIES DETERMINE HOW TO INVEST MONEY TO ACHIEVE THEIR FINANCIAL GOALS
Which of the following mathematical expressions is used to compute the book value per share?
BOOK VALUE PER SHARE= COMMON EQUITY / TOTAL NUMBER OF SHARES OUTSTANDING
Financial services refer to functions provided by organizations that:
DEAL WITH THE MANAGEMENT OF MONEY
Which of the following statements is correct? Assume everything else equal.
INVESTORS GENERALLY RECEIVE HIGHER RETURNS ON INVESTMENTS WITH LOW RISK THAN INVESTMENTS WITH HIGH RISK
Which of the following is the formula to calculate a firm’s inventory turnover ratio?
INVENTORY TURNOVER = COST OF GOODS SOLD / INVENTORY
The Sarbanes-Oxley Act of 2002 requires the chief executive officer of a publicly-traded corporation to:
CERTIFY FINANCIAL REPORTS THAT ARE SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION
It is possible to limit the liability faced by some of the partners in a partnership form of business by establishing a:
LIMITED LIABILITY PARTNERSHIP (LLP)
The credit manager is supervised by the
TREASURER
Stock price maximization requires
EFFICIENT, LOW-COST PLANTS THAT PRODUCE HIGH-QUALITY GOODS AND SERVICES
Which of the following is the most appropriate measure to examine whether management of a firm is pursuing the goal of maximizing the firm’s stock price?
CASH FLOWS
Institutional investors can ensure that a corporation pursues goals that are in their best interest by:
MONITORING ITS FINANCIAL PERFORMANCE TO ENSURE THAT MANAGERS PURSUE THE GOAL OF WEALTH MAXIMIZATION
Paying Payroll Service (PPS) recently declared bankruptcy. The price of PPS’s stock has dropped from approximately $10 per share one year ago to $1 today. You can imagine that stockholders are not happy that the value of their stock has dropped so significantly. At the same time the financial position of the firm was deteriorating, PPS executives increased their salaries and perquisites substantially. Nothing they did violated any laws or was considered an unethical act. We would most likely describe this situation as
AN AGENCY PROBLEM
Which of the following mathematical expressions calculates a firm’s retained earnings at the end of a year?
RETAINED EARNINGS= BEGINNING BALANCE OF RETAINED EARNINGS + NET INCOME CURRENT IN THE YEAR – DIVIDENDS PAID IN THE CURRENT YEAR
Which of the following statements is true about net worth?
A FIRM’S NET WORTH IS = TOTAL ASSETS – TOTAL LIABILITIES
Which of the following is true about a common size balance sheet?
a. THE ASSETS, LIABILITIES, AND EQUITIES ARE REPORTED AS % OF TOTAL ASSETS
A limitation of ratio analysis is that:
FIRMS CAN EMPLOY WINDOW-DRESSING TECHNIQUES TO MAKE THEIR FINANCIAL STATEMENTS LOOK BETTER.
A low inventory turnover ratio might indicate that:
THE FIRM IS HOLDING EXCESS STOCKS OF INVENTORY
If an analyst’s goal is to determine how effectively a firm is managing its assets, which of the following sets of ratios would he or she examine?
INVENTORY TURNOVER RATIO, DAYS SALES OUTSTANDING, & FIXED ASSET TURNOVER RATIO
