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Fin/ 571 quiz 1

1- Which of the following business organizational forms subjects the owner(s) to unlimited liability?

a-      Sole proprietorship

b-      Partnership

c-       Corporation

d-      A and B

2-Which of the following business organizational forms is easiest to raise capital?

a-      Sole proprietorship

b-      Partnership

c-       Corporation

d-      A and B

3- Which organizational form best enables the owners of the firm to monitor the actions of other owners of the same firm?

a-      Partnership

b-      Public corporation

c-       Sole proprietorship

d-      Private corporation

4- Which of the following factors or activities can be controlled by the management of the firm?

a-      Capital budgeting

b-      The level of interest rates

c-       The level of economic activity

d-      Stock market conditions

5- The legal system and market forces impose substantial costs on individuals and institutions that engage in unethical behavior. Which of the following would not be an example of the above?

a-      Jail time

b-      Legal fines

c-       Agency conflicts

d-      Financial losses

6- The most common reason that corporation firms use the futures and options markets is

a-      None of these

b-      To hedge risk

c-       To take risk

d-      To make deposits

7- Galan Associates prepared its financial statement for 2008 based on the information given here. The company had cash worth $ 1,234, inventory worth $ 13,480, and accounts receivables of $7,789. The company’s next fixed assets are $42, 331, and other assets are $ 1,822. It had accounts payables of $9,558, notes payables of $2,756, common stock of $22,000, and retained earnings of $14,008. How much long-term debt does the firm have?

a-      $12,314

b-      $76,342

c-       $18,334

d-      $54,342

8- Tre-Bien Bakeries generated net income of $233, 412 this year. At year end, the company had accounts receivables of $47,199, inventory of $ 63,781, and cash of $21,461. It also had accounts payables of $51,369, short-term notes payables of $ 11,417, and accrued taxes of $6,145. The net working capital of the firm is

a-      $63,510

b-      None of these

c-       $68,931

d-      $69,655

9- Which of the following best represents cash flows to investors?

a-      Earnings before interest and taxes times 1 minus the firm’s tax rate.

b-      Cash flow from operating activity, plus cash flow generated from net working capital.

c-       Net income, minus dividends paid to preferred stockholders.

d-      Cash flow operating activity, minus cash flow invested in net working capital, minus cash flow invested in long-term assets.

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