finance test 1 content

There is unlimited liability in a general partnership true
Dividends paid to corporate stockholders have already been taxed once as __ ___. corporate income
Corporate governance issues have become less important to the financial community during the first decade of the new millennium. false
A major focus of the __ is to make sure that publicly traded companies accurately present their assets, liabilities, and income in their financial statements. Sarbanes-Oxley Act
___ is a particularly important consideration in financial decisions. timing
___ markets refer to those markets dealing with short-term securities having a life of one year or less money
t/f Higher returns always induce that stockholders should invest in a company. false
What should be the primary goal of financial management? maximizing shareholder wealth
One of the major disadvantages of a sole proprietorship is there is unlimited liability to owner
avoids the double taxation of earnings and dividends found in the corporate form of organization. partnership
relationship and exercise of oversight by the board of directors of the company. corporate governance
The increasing percentage ownership of public corporations by institutional investors has created more pressure on public companies to manage their firms more efficiently.
The major difficulty in most insider-trading cases has been that inside trades have not been legally well-defined.
When a corporation uses the financial markets to raise new funds, the sale of securities is made in the primary market
Companies that have higher risk than a competitor in the same industry will generally have to pay higher interest rate, lower relative stock price, a higher cost of funds
The _ __ is the major device for measuring the profitability of a firm over a period of time. income statement
t/f The income statement shows the amount of profits earned based on any one given day. over time, false
Asset accounts are listed in order of their liquidity.
____ securities are short term investments and are valued on the balance sheet at their original purchase price marketable
——shown on the balance sheet represents profits generated from prior year’s earnings less any prior dividends. retained earnings
Interest expense is deductible before taxes and therefore has an after-tax cost equal to the interest paid times (1 – tax rate). write down
t/f A cash flow statement is considered correct if the change in cash flow plus the beginning balance ties to the ending cash balance. true
__ ratios indicate how fast a firm can generate cash to pay bills liquidity
The __ __analysis emphasizes that profit generated by assets can be derived by a combination of profit levels and how fast an asset can turnover. dupont system
___ ___ ratios can be used to measure the effectiveness of a firm’s managers. asset utilization
Profitability ratios are distorted by inflation because profits are stated in current dollars
while assets and equity are stated in historical dollars.
the stock market tends to move up when inflation goes down
During disinflation, stock prices tend to go up because the investor’s required rate of return goes ___ down
A company can improve its return on equity (ROE) by changing its capital structure.
____ refers to the growth process that turns $1 today into a greater value several periods in the future. compounding
t/f The time value of money is a useful concept in determining the value of a bond or in capital investment decisions true
___ interest rates reduce the present value amount. higher
Time amplifies the growth of money. Consequently, to achieve a certain future value, more time means that you can start with less. So you can start with a small ____ ___ present value

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