Quiz 1 MBA PFEBL - MM5007 Intro to Finance & FSA

1. Which of the following is a strength of a corporation?

• low taxes

• limited liability

• low organization costs

• less government regulation

The primary goal of a financial manager is ________.

• minimizing risk

• maximizing profit

• maximizing wealth

• minimizing return

The wealth of the owners of a corporation is represented by ________.

• profits

• earnings per share

• share value

• cash flow

An ethics program is expected to have ________ impact on a firm's share price.

• a positive

• a negative

• no impact

• an unpredictable

Which of the following is considered as a violation of business ethics?

• earnings management

• repurchase of shares

• using the call option on a callable bond when the interest rate is low

• paying a high amount of dividends every year

Which of the following is true of accrual basis accounting?

• Expenses are recognized either when they are incurred or cash is paid.

• Revenue is recognized when a customer pays cash.

• Expenses are recognized when they are incurred.

• Revenue is recognized when a customer pays cash or shows interest to purchase the product or service.

Johnson, Inc. has just ended the calendar year making a sale in the amount of $10,000 of merchandise purchased during the year at a total cost of $7,000. Although the firm paid in full for the merchandise during the year, it is yet to collect at year end from the customer. The net profit and cash flow from this sale for the year are ________.

• $3,000 and $10,000, respectively

• $3,000 and -$7,000, respectively

• $7,000 and -$3,000, respectively

• $3,000 and $7,000, respectively

A firm has just ended its calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full for the merchandise during the year, it is yet to collect at year end from the customer. The possible problem this firm may face is ________.

• high taxes

• lack of cash flow

• inability to receive credit

• high leverage

Making financing decisions includes ________.

• determining the appropriate mix of short-term and long-term financing

• deciding on which individual securities to select for investment

• analyzing quarterly budget and performance reports

• improving the productivity of manufacturing products

Making investment decisions includes ________.

• inventory

• fixed assets

• accounts receivable

• notes payable