1. A conflict of interest between the stockholders and management of a firm is called: (a) stockholders liability. (b) corporate breakdown. (c) the agency problem. (d) corporate activism. (e) legal liability.

2. Which of the following statements about EPS is/are true (a) EPS represents the amount earned during a specific period on behalf of each outstanding share of common stock. (b) EPS can be calculated by dividing the periods total earnings available for the firms common stockholders by the number of shares of common stock outstanding (c) Higher EPS does NOT indicate higher share price (d) Higher EPS indicates higher share price. (e) All of the above (f) None of the above (g) a, b, d (h) a,b,c (i) a,b (j) b,d

3. Other things held constant, which of the following will not affect the quick ratio? (Assume that inventory has a positive balance.) (a) fixed assets are sold for cash

(b) cash is used to purchase inventories (c) accounts receivables are collected

(d) long-term debt is issued to pay off short-term loan

4. Which of the following statements is true about present value (a) The longer the period of time the lower the present value (b) The longer the period of time the higher the present value (c) The higher the discount rate, the higher the present value (d) For any discount rate greater than 0, the present value is less than the future value of $1.00 (e) All of the above (f) a, b (g) a, c (h) b, c (i) a, d

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