MULTIPLE CHOICE QUESTIONS-QUIZ 1-3

Question 1

The success of financial institutions depends on _______.

Answer 1

THE UNDERSTANDING OF THE FACTORS THAT CAUSE INTEREST RATES AND OTHER RETURNS IN THE FINANCIAL MARKETS TO RISE AND FALL

Question 2

Market value ratios indicate:

Answer 2

WHAT INVESTORS THINK OF THE COMPANY’S FUTURE PROSPECTS BASED ON ITS PAST PERFORMANCE.

Question 3

A firm’s current ratio has steadily increased over the past 5 years, from 1.9 to 3.8. What would a financial analyst probably conclude from this information?

Answer 3

THE FIRM’S LIQUIDITY POSITION HAS IMPROVED

Question 4

Which of the following is a feature of an S Corporation?

Answer 4

THE INCOME OF AN S CORPORATIO IS TAXED THE SAME AS INCOME EARNED BY PROPRIETORSHIPS AND PARTNERSHIPS

Question 5

Which of the following is true of corporations that operate in several different countries?

Answer 5

A NATION MAY EXPROPRIATE THE ASSETS OF MULTINATIONAL CORPORATIONS WITHOUT COMPENSATION

Question 6

Which of the following rations measures how effectively a firm is managing its assets?

Answer 6

INVENTORY TURNOVER RATIO

Question 7

Because financial institutions in other countries are generally less regulated than those in the United States, they generally.

Answer 7

CAN PROVIDE BUSINESSES A GREATER VARIETY OF SERVICES THAN U.S. BANKS CAN

Question 8

If a limited liability company (LLC) is taxed like a partnership

Answer 8

INCOME PASSES THROUGH TO THE OWNERS

Question 9

Which of the following statements concerning a firm’s quest to maximize wealth is correct?

Answer 9

IN EXTREMELY COMPETITIVE INDUSTRIES, WE WOULD EXPECT FIRMS TO VOLUNTARILY ENGAGE IN MANY SOCIALLY BENEFICIAL PRJECTS TO TRY TO MAXIMIZE THEIR STOCKS’ VALUES

Question 10

The days sales outstanding (DSO) ratio of a firm identifies:

Answer 10

THE AVERAGE LENGTH OF TIME A FIRM MUST WAIT AFTER MAKING A CREDIT SALE BEFORE RECEIVING CASH

Question 11

Which of the following mathematical expressions calculates the debt ratio?

Answer 11

DEBT RATIO = TOTAL LIABILITIES / TOTAL ASSETS

Question 12

Which of the following is an example of a current asset?

Answer 12

INVENTORY

Question 13

Identify a true statement about an S corporation.

Answer 13

THE INCOME OF AN S CORPORATION PASSES THROUGH THE COMPANY TO THE OWNERS

Question 14

Identify a true statement about a limited liability company (LLC).

Answer 14

A LIMITED LIABILITY COMPANY CAN HAVE MORE THAN ONE TYPE OF STOCK (OWNERSHIP INTEREST) OUTSTANDING

Question 15

The investment function of finance helps in _____.

Answer 15

DETERMINING THE VALUES, RISKS, AND RETURNS ASSOCIATED WITH SUCH FINANCIAL ASSETS AS STOCKS AND BONDS.

Question 16

Which of the following statements is true of corporate bylaws?

Answer 16

PROCEDURES FOR ELECTING CORPORATE DIRECTORS ARE CONTAINED IN CORPORATE BYLAWS

Question 17

Which of the following accounts contains the actual money that can be spent by a firm?

Answer 17

CASH AND EQUIVALENTS

Question 18

Techniques employed by firms to make their financial statements look better than they actually are, are called:

Answer 18

WINDOW-DRESSING TECHNIQUES

Question 19

Which of the following is true of a firm that tries to coordinate and control the worldwide operations of its subsidiaries?

Answer 19

CASH FLOWS IN DIFFERENT SUBSIDIARIES ARE DENOMINATED IN DIFFERENT CURRENCIES

Question 20

The success of financial institutions requires an understanding of:

Answer 20

REGULATIONS THAT AFFECT THESE FINANCIAL INSTITUTIONS

Question 21

Which of the following financial statements includes information about a firm’s assets, equity, and liabilities at a specific point in time?

Answer 21

BALANCE SHEET

Question 22

Which of the following is true of financial services provided by persons working in banks, insurance companies, and brokerage firms?

Answer 22

PERSONS WORKING IN BANKS, INSURANCE COMPANIES, & BROKERAGE FIRMS HELP INDIVIDUALS AND COMPANIES DETERMINE HOW TO INVEST MONEY TO ACHIEVE THEIR FINANCIAL GOALS

Question 23

Which of the following mathematical expressions is used to compute the book value per share?

Answer 23

BOOK VALUE PER SHARE= COMMON EQUITY / TOTAL NUMBER OF SHARES OUTSTANDING

Question 24

Financial services refer to functions provided by organizations that:

Answer 24

DEAL WITH THE MANAGEMENT OF MONEY

Question 25

Which of the following statements is correct? Assume everything else equal.

Answer 25

INVESTORS GENERALLY RECEIVE HIGHER RETURNS ON INVESTMENTS WITH LOW RISK THAN INVESTMENTS WITH HIGH RISK

Question 26

Which of the following is the formula to calculate a firm's inventory turnover ratio?

Answer 26

INVENTORY TURNOVER = COST OF GOODS SOLD / INVENTORY

Question 27

The Sarbanes-Oxley Act of 2002 requires the chief executive officer of a publicly-traded corporation to:

Answer 27

CERTIFY FINANCIAL REPORTS THAT ARE SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION

Question 28

It is possible to limit the liability faced by some of the partners in a partnership form of business by establishing a:

Answer 28

LIMITED LIABILITY PARTNERSHIP (LLP)

Question 29

The credit manager is supervised by the

Answer 29

TREASURER

Question 30

Stock price maximization requires

Answer 30

EFFICIENT, LOW-COST PLANTS THAT PRODUCE HIGH-QUALITY GOODS AND SERVICES

Question 31

Which of the following is the most appropriate measure to examine whether management of a firm is pursuing the goal of maximizing the firm's stock price?

Answer 31

CASH FLOWS

Question 32

Institutional investors can ensure that a corporation pursues goals that are in their best interest by:

Answer 32

MONITORING ITS FINANCIAL PERFORMANCE TO ENSURE THAT MANAGERS PURSUE THE GOAL OF WEALTH MAXIMIZATION

Question 33

Paying Payroll Service (PPS) recently declared bankruptcy. The price of PPS's stock has dropped from approximately $10 per share one year ago to $1 today. You can imagine that stockholders are not happy that the value of their stock has dropped so significantly. At the same time the financial position of the firm was deteriorating, PPS executives increased their salaries and perquisites substantially. Nothing they did violated any laws or was considered an unethical act. We would most likely describe this situation as

Answer 33

AN AGENCY PROBLEM

Question 34

Which of the following mathematical expressions calculates a firm's retained earnings at the end of a year?

Answer 34

RETAINED EARNINGS= BEGINNING BALANCE OF RETAINED EARNINGS + NET INCOME CURRENT IN THE YEAR – DIVIDENDS PAID IN THE CURRENT YEAR

Question 35

Which of the following statements is true about net worth?

Answer 35

A FIRM’S NET WORTH IS = TOTAL ASSETS – TOTAL LIABILITIES

Question 37

Which of the following is true about a common size balance sheet?

Answer 37

a. THE ASSETS, LIABILITIES, AND EQUITIES ARE REPORTED AS % OF TOTAL ASSETS

Question 37

A limitation of ratio analysis is that:

Answer 37

FIRMS CAN EMPLOY WINDOW-DRESSING TECHNIQUES TO MAKE THEIR FINANCIAL STATEMENTS LOOK BETTER.

Question 38

A low inventory turnover ratio might indicate that:

Answer 38

THE FIRM IS HOLDING EXCESS STOCKS OF INVENTORY

Question 39

If an analyst's goal is to determine how effectively a firm is managing its assets, which of the following sets of ratios would he or she examine?

Answer 39

INVENTORY TURNOVER RATIO, DAYS SALES OUTSTANDING, & FIXED ASSET TURNOVER RATIO

Question 40

The firm's statement of retained earnings reports changes in:

Answer 40

THE COMMON EQUITY ACCOUNTS BETWEEN BALANCE SHEET DATES

Question 43

Identify the correct statement about business ethics:

Answer 43

GOOD BUSINESS ETHICS ATTRACT AND KEEP EMPLOYEES OF THE HIGHEST CALIBER

Question 43

Which of the following changes is considered a source of cash when preparing a statement of cash flow?

Answer 43

A DECREASE IN INVENTORIES

Question 44

In which order will assets be listed in a balance sheet?

Answer 44

IN ORDER OF LQUIDITY

Question 45

The funds provided by common stockholders that consist of common stock, paid-in capital, and retained earnings are referred to as the firm's:

Answer 45

MARKET VALUE