Multiple Choice Finance


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Question 1
Which one of the following is a working capital management decision?
Should a new machine be purchased this year?
Should the inventory level be increased?
Should debt or equity financing be used to purchase a building?
Should 10 or 15-year bonds be issued?
Question 2
Which one of the following functions is generally under the control of the corporate treasurer?
data processing
tax management
credit management
financial accounting
Question 3
Which one of the following best describes the liability a limited partner has for the partnership debts?
liability limited to amount invested in the firm
liability limited based on percentage ownership
Question 4
Which one of the following provides you with the greatest control over a firm’s daily operations?
limited partner
employee-shareholder in a multi-national corporation
minor stockholder in a joint stock company
general partner
Question 5
A general partner:
has no personal responsibility for the debts incurred by the partnership.
is guaranteed a return of his or her entire investment in the partnership if the partnership
can manage the partnership’s operations on a daily basis.
has no control over the daily operations of the partnership.
Question 6
The primary goal of corporate financial management is to maximize the:
total revenue of the firm.
current earnings per share.
current value per share of the existing stock.
current net income of the firm.
Question 7
The Sarbanes-Oxley Act of 2002 is designed to protect the public against:
a. market declines in stock values.
b. declines in a firm’s net operating profit.
c. financial malpractice and accounting fraud.
d. share dilution.
Question 8
Who has the ultimate control over a corporation?
a. shareholders
b. chief executive officer
c. chairman of the board
d. board of directors
Question 9
Which one of the following is a primary market transaction?
a. Kate, the president of Logistics, Inc., sells some of her shares in the firm on the NYSE.
b. General Motors offers newly issued shares of stock to the general public.
c. Margie calls her broker and requests that all her shares of TLC be sold.
d. Al gifts shares of Logon stock to his wife.
Question Which one of the following is most apt to create an agency problem?
a. stock bonuses for key employees
b. separation of ownership and management
c. the threat of a company takeover
d. key management positions held by shareholders
Question 11
Operating cash flow is defined as:
A. a firm’s net profit over a specified period of time.
B. the cash that a firm generates from its normal business activities.
C. a firm’s operating margin.
D. the change in the net working capital over a stated period of time.
Question 12
Global Exporters has total assets of $84,300, net working capital of $22,900, owner’s equity of $38,600,
and long-term debt of $23,900. What is the value of the current assets?
A. $21,600
B. $24,300
C. $38,900
D. $44,700
Question 13.
Donut Delite has total assets of $31,300, long-term debt of $8,600, net fixed assets of $19,300, and
owners’ equity of $21,100. What is the value of the net working capital?
A. $9,800
B. $10,400
C. $18,900
D. $21,300
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Question 14
Donner United has total owner’s equity of $18,800. The firm has current assets of $23,100, current
liabilities of $12,200, and total assets of $36,400. What is the value of the long-term debt?
A. $5,400
B. $12,500
C. $13,700
D. $29,800
Question 15
Blasco Printing has net income of $26,310 for the year. At the beginning of the year, the firm had
common stock of $35,000, paid-in surplus of $11,200, and retained earnings of $48,420. At the end of
the year, the firm had total equity of $142,430. The firm does not pay dividends. What is the amount of
the net new equity raised during the year?
A. $18,000
B. $21,500
C. $32,700
D. $48,900
Question 16
Gallagher’s Supply has sales of $387,000 and costs of $294,500. The depreciation expense is $43,800.
Interest paid equals $18,200 and dividends paid equal $6,500. The tax rate is 35 percent. What is the
addition to retained earnings?
A. $10,775
B. $11,460
C. $13,120
D. $13,325
Question 17 5
Last year, The Pizza Joint added $4,100 to retained earnings from sales of $93,600. The company had
costs of $74,400, dividends of $2,500, and interest paid of $1,400. The tax rate was 34 percent. What
was the amount of the depreciation expense?
A. $7,300
B. $7,500
C. $7,800
D. $8,100
Question 18
Frank Town Farms has sales of $481,600, costs of $379,700, depreciation expense of $32,100, and
interest paid of $8,400. The tax rate is 32 percent. How much net income did the firm earn for the
A. $41,752
B. $43,090
C. $43,380
D. $45,671
Question 19
For the year, Movers United has net income of $31,800, net new equity of $7,500, and an addition to
retained earnings of $24,200. What is the amount of the dividends paid?
A. $100
B. $7,500
C. $7,600
D. $15,100
Question 20
Caldweiler & Co. owes a total of $21,684 in taxes for this year. The taxable income is $71,509. If the firm
earns $100 more in income, it will owe an additional $36 in taxes. What is the average tax rate on
income of $71,609?
A. 28.00 percent
B. 30.33 percent
C. 33.33 percent
D. 34.00 percent

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