Investment and financing decisions, which may beshort-term or long-term decisions are best describedas:
financial decision making.
economic decision making.
accounting decision making.
Mutual funds, pension funds, investment dealers andinsurance companies are best described as examples of:
corporate finance.
market intermediaries.
financial intermediaries.
Farmers and Merchants Bank lends money to Ruth topurchase a car from Steven Toyota. Ruth is going to insure the carwith Allstate Insurance. Which party is best described as thecreditor?
Ruth
Steven Toyota
Allstate Insurance
Farmers and Merchants Bank
Which of the following would not be described as adebenture?
An unsecured loan
A loan secured by collateral
A loan secured by the “full faith and credit” of theissuer
Morgan Stanley was the investment banking firm that tookFacebook from being a closely held company to issuing stock to thepublic for the first time. Which of the following terms mostclosely describes this?
money market security.
issuing commercial paper.
initial public offering (IPO).
debt security backed by the general credit of theissuer.
Which of the following transactions does not take placein the primary market? An investor:
buying a newly issued municipal bond.
buying shares of an initial publicoffering.
selling one hundred shares of stock through a stockbroker.
buying a U.S. Treasury bill through the governmentauction.
The majority of home purchases in the U.S. are securedwith a mortgage. A mortgage is:
an unsecured loan.
an equity investment in the property.
a debt obligation secured by a specificproperty.
Which form of business would most likely describe thefollowing, a college student other students, a retired woman whobabysits children, a teenager who mows lawns, and a partyclown?
Partnership
Corporation
Sole proprietorship
Limited liability company
Flow-through taxation is a characteristic for all butthe following forms of business?
Partnership
Corporation
Sole proprietorship
Limited liability company
Your sister wants to start a tee shirt business on e-Baywith you to help pay for college tuition. All of the following areadvantages to partnerships that you should both consider, except____________?
Easy to form
Access to capital
Business income is taxed once, at the individualpartner’s level
Which of the following takes into account takes intoaccount the opportunity cost of funds?
Net profit
Economic profit
Accounting profit
When we talk about capital structure, this refersto:
the cash, inventory, and accountsreceivable.
mix of debt and equity to finance anenterprise.
the investment in plant, property andequipment.
The uncertainty associated with the use of debt tofinance a business enterprise is best described as:
financial risk.
business risk.
operating risk.
The mix of debt and equity that is used to finance abusiness enterprise is best described as theenterprise’s:
assets.
working capital.
capital structure.
capital expenditures
Generally accepted accounting principles (GAAP) are bestdescribed as a(n):
organization that establishes the accounting principlesfor U.S. financial reporting.
accounting standards promulgated by the InternationalAccounting Standards Board (IASB.)
set of basic principles and conventions that are appliedin the preparation of financial statements.
organization that establishes the accounting principlesfor business entities in the European EconomicCommunity.
Which reporting convention requires recording revenueand expenses when the transaction occurs, regardless of when cashchanges hands?
Cost basis
Cash basis
Accrual basis
The summary of the company’s performance over a periodof time, typically a fiscal quarter or fiscal year
Balance sheet
Statement of stockholder’s equity
Income statement
Statement of cash flows
_______ is the cash flow from the day-to-day operationsof the business; the result of subtracting the increase in newworking capital from traditional cash flow.
Cash flow from investing
Cash flow from financing
Simple cash flow
Cash flow from operations
The debt ratio is classified as which type ofratio?
Owner
Liquidity
Efficiency
Productivity
Financial Leverage
Inventory turnover, accountsreceivable turnover, fixed asset turnover, and total asset turnoverare all classified as which type of ratio?
Owner
Liquidity
Efficiency
Productivity
Financial Leverage
ABC Company attempts tomanage its earnings by extending the useful life of all of itsequipment. Which of the following will not be an outcome of thischoice by management?
Income will be higher than it would have been underprior accounting methods.
Equipment values will be higher than they would havebeen without the change.
Depreciation expense will be lower than it would havebeen under prior accounting methods.
Depreciation expense will be higher than it would havebeen under prior accounting methods.
It is important for a companyto know the level of sales at which it covers all its variable andfixed operating costs. This level of sales is best described asthe:
gross profit margin.
contribution margin.
operating break even.
operating profit margin.
The minimum return thatinvestors expect to earn on the investment in stock is bestdescribed as:
growth rate.
risk premium.
capital gains yield.
required rate of return
If a company returns more than the required rate ofreturn on a stock, what happens to the value of thatstock?
The stock price falls.
The stock price rises.
The stock price stays the same.
When market rates are greaterthan the dividend rate, preferred shares will tradeat:
par.
a discount.
a premium.
