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WorksheetsIntroduction to Finance
Total questions: 25
Worksheet time: 12mins
From a financial point of view, a company that decides to develop new product is making
a financing decision
an investment decision
a capital structure decision
a cash flow decision
Working capital management refers to
long-term financing decisions
the management of cash flows
investing in product development
capital structure
The personal decision to take a year off from work to obtain a graduate degree in business is primarily a(n)_________ decision
social
financial
ethical
investment
Which one of the following is NOT an advantage of the sole proprietorship?
limited liability
no time limit imposed on its existence
no legal requirements for starting the business
none of the above
The true owners of the corporation are the
holders of debt issues of the firm
preferred stockholders
board of directors of the firms
common stockholders
Which of the following categories of owners enjoys limited liability?
General partners in a limited partnership or limited liability company
Shareholders (common stock) of a corporation
Sole proprietorship
None of the answers are correct
The major source of financing for corporations are
partners contributions
exchange between shareholders
interest and dividends
debt and equity
Which of the following best describe the goal of the firm
The maximization of the total market value of the firm's common stock
Cost minimization
Risk maximization
None of the above
What does the agency problem refer to?
The conflict that exists between the board of directors and the employees of the firm
The problem associated with financial managers and internal revenue agents
The conflict that exists between stockholders and investors
The problem that results from potential conflict of interest between the managers of a busines and the stockholders
Serious ethical violations by corporations such as Enron led to the passage of
The Dodd-Frank Act
The Insider Trading Act of 1988
The Sarbanes-Oxley Act
All of the above
Which of the following should be considered when assessing the financial impact of business decisions
The amount of projected earnings
The risk and return trade-off
The timing of projected earnings
All of the above
How could you compensate an investor for taking on a significant amount of risk?
Increase the expected return
Raise more debt capital
Offer stock at a higher price
Increase sales
If investor has a choice of receiving $1,000 today, or $1,000 in five years, which would the average investor prefer?
$1,000 in five years because they are not goof at saving money
$1,000 today because it will be worth more than $1,000 received in five years
$1,000 in five years because it will be worth more than $1,000 received today
Investors would be indifferent to when they would receive the $1,000
Forgoing the earning potential of a dollar today is referred to as the
time value of money
opportunity cost concept
risk-return tradeoff
creation of wealth
Which of the following factors is most important in investment decisions?
The change in earnings before taxes
The change in gross sales revenue
The change in net income
The change in after tax cash flow
The principal participants in the financial markets are
business, banks, government
borrowers, savers, financial institutions
mutual funds, hedge funds, investment bankers
dealers brokers, regulators
Secondary markets
function as a place for smaller, less well-known firms to issue securities
are an important vehicle for established firms to raise additional money for expansion
are a means by which funds are cycled from saver to borrowers
are concerned with the trading of previously issued securities between investors
All of the following operate as financial intermediaries EXCEPT
commercial banks
mutual funds
insurance companies
The U.S Treasury
The market for short-term debt is known as
the bond market
the notes market
the capital market
the money market
The basic format of an income statement is
Sales - Expenses = Profits.
Income - Expenses = EBIT.
Sales - Liabilities = Profits.
Assets - Liabilities = Profits.
Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000. Rogue's gross profit is equal to
$770,000.
$1,070,000.
$1,100,000.
$1,500,000.
Which of the following statements concerning net income is MOST correct?
Net income represents cash available to pay dividends.
Net income represents sales minus operating expenses at a specific point in time.
Negative net income reduces a company's cash balance.
Net income represents income that may be reinvested in the firm or distributed to its owners.
If two companies have the same revenues and operating expenses, their net incomes will still be different if one company finances its assets with more debt and the other company with more equity.
True
False
Changes in depreciation expense do not affect operating income because depreciation is a non-cash expense.
True
False
California Retailing Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. What is California Retailing's EBIT?
$850,000
$875,000
$900,000
$1,300,000
