Question

Question 1

Earnings per share

A. will increase if net income increases and number of shares remains constant.

B. will increase if net income decreases and number of shares remains constant.

C. is number of shares divided by net income.

D. is the amount of money that goes into retained earnings on a per share basis.

E. None of these.

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Question 2

Mart’s Boutique has sales of $670,000 and costs of $460,000. Interest expense is $50,000 and depreciation is $55,000. The tax rate is 34%. What is the net income?

A. $35,700

B. $69,300

C. $105,000

D. $138,600

E. $210,000

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Question 3

The financial statement summarizing a firm’s accounting performance over a period of time is the:

A. income statement.

B. balance sheet.

C. statement of cash flows.

D. tax reconciliation statement.

E. shareholders’ equity sheet.

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Question 4

The financial statement showing a firm’s accounting value on a particular date is the:

A. income statement.

B. balance sheet.

C. statement of cash flows.

D. tax reconciliation statement.

E. shareholders’ equity sheet.

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Question 5

Dividends per share is equal to dividends paid:

A. divided by the par value of common stock.

B. divided by the total number of shares outstanding.

C. divided by total shareholders’ equity.

D. multiplied by the par value of the common stock.

E. multiplied by the total number of shares outstanding.

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Question 6

The long-term debts of a firm are liabilities:

A. that come due within the next 12 months.

B. that do not come due for at least 12 months.

C. owed to the firm’s suppliers.

D. owed to the firm’s shareholders.

E. the firm expects to incur within the next 12 months.

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Question 7

When making financial decisions related to assets, you should:

A. always consider market values.

B. place more emphasis on book values than on market values.

C. rely primarily on the value of assets as shown on the balance sheet.

D. place primary emphasis on historical costs.

E. only consider market values if they are less than book values.

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Question 8

A partnership:

A. is taxed the same as a corporation.

B. agreement defines whether the business income will be taxed like a partnership or a corporation.

C. terminates at the death of any general partner.

D. has less of an ability to raise capital than a proprietorship.

E. allows for easy transfer of interest from one general partner to another.

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Question 9

Which one of the following parties is considered a stakeholder of a firm?

A. Employee

B. short-term creditor

C. long-term creditor

D. preferred stockholder

E. common stockholder

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Question 10

A business formed by two or more individuals who each have unlimited liability for business debts is called a:

A. corporation.

B. sole proprietorship.

C. general partnership.

D. limited partnership.

E. limited liability company.

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Question 11

The management of a firm’s short-term assets and liabilities is called:

A. working capital management.

B. debt management.

C. equity management.

D. capital budgeting.

E. capital structure.

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Question 12

Financial managers should strive to maximize the current value per share of the existing stock because:

A. doing so guarantees the company will grow in size at the maximum possible rate.

B. doing so increases the salaries of all the employees.

C. the current stockholders are the owners of the corporation.

D. doing so means the firm is growing in size faster than its competitors.

E. the managers often receive shares of stock as part of their compensation.

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Question 13

The treasurer and the controller of a corporation generally report to the:

A. board of directors.

B. chairman of the board.

C. chief executive officer.

D. president.

E. chief financial officer.

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Question 14

Which one of the following is a capital budgeting decision?

A. Determining how much debt should be borrowed from a particular lender

B. Deciding whether or not to open a new store

C. Deciding when to repay a long-term debt

D. Determining how much inventory to keep on hand

E. Determining how much money should be kept in the checking account

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Question 15

The person generally directly responsible for overseeing the cash and credit functions, financial planning, and capital expenditures is the:

A. treasurer.

B. director.

C. controller.

D. chairman of the board.

E. chief operations officer.