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Finance Flashcards

Finance 355 Study Guide

Which one of the following actions by a financial manager creates an agency problem? agreeing to expand the company at the expense of stockholders’ value
For a firm to create value it must: create more cash flow than it uses.
Which one of the following statements concerning a sole proprietorship is correct? The owner may be forced to sell his/her personal assets to pay company debts.
The articles of incorporation: set forth the number of shares of stock that can be issued.
Which one of these statements is correct?A.When selecting one of two projects, managers should only consider the total cash flow from each.B. Accountants record sales and expenses after the related cash flows occur.C .All overseas operations present the same amount of risk.D. The value of an investment by a firm depends on the size, the timing, and the risk of the investment’s cash flows.E. Most investors prefer greater risk over less risk. D. The value of an investment by a firm depends on the size, the timing, and the risk of the investment’s cash flows.
Which account is least apt to vary directly with sales? notes payable
Which one of the following statements is correct concerning ratio analysis?A. A single ratio is often computed differently by different individuals.B. Each ratio has a specific formula that is used consistently by all analysts.C. Ratios do not address the problem of size differences among firms.D. Ratios cannot be used for comparison purposes over periods of time.E. Only a very limited number of ratios can be used for analytical purposes. A. A single ratio is often computed differently by different individuals.
It is easier to evaluate a firm using its financial statements when the firm: uses the same accounting procedures as other firms in its industry.
One intent of the Sarbanes Oxley Act of 2002 is to: protect investors from corporate abuses.
In a limited partnership each limited partner’s: liability is limited to the amount he or she invested into the partnership.
Corporate bylaws: establish the rules by which the firm regulates its existence.
The most effective method of directly evaluating the financial performance of a firm is to compare the financial ratios of the firm to: the firm’s ratios from prior time periods and to the ratios of firms with similar operations.
Which one of the following depicts a correct relationship?A. Equity multiplier = 1 – Debt-equity ratioB. Total asset turnover = 1 + Capital intensity ratioC. ROA = ROE × (1 + Debt-equity ratio)D. Dividend payout ratio = 1 – Retention ratioE. ROE = 1 – ROA D. Dividend payout ratio = 1 – Retention ratio
One advantage of a partnership is the relatively low formation cost.
Which one of the following is a capital budgeting decision? deciding whether or not a new production facility should be built
Financial managers primarily create firm value by: investing in assets that generate cash in excess of their cost.
Which one of these is a cash outflow from a corporation? Which one of these is a cash outflow from a corporation?
The treasurer and the controller of a corporation generally report to the: CFO
Which one of the following best describes the primary advantage of being a limited partner rather than a general partner? liability for firm debts is limited to the capital invested
A general partner can end the partnership by withdrawing.
One disadvantage of the corporate form of business ownership is the double taxation of profits.
The owners of a limited liability company generally prefer: being taxed personally on all business income.
Which type of business organization has the respective rights and privileges of a legal person? Corporation
Financial managers should primarily strive to: maximize the current value per share of existing stock.
Which one of the following is least apt to help convince managers to work in the best interest of the stockholders? pay raises based on length of service
A proxy fight occurs when: a group solicits voting rights to replace the board of directors
Accounting profits and cash flows are generally: different because of GAAP rules regarding the recognition of income.

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