1. Marcias pizza shop has sales of $129,600. The cost of goods sold is $68,200 and the other costs are $8,700. Depreciation is $4,300 and the tax rate is 31 percent. What is the net income (after tax)?

A) $2,860

B) $8,382

c) $33,396

D) $14,660

2. LLC stands for

A) Low Leverage Company

B) Limited Liability Company

C) Limited Liability Corporation

D) Least Likely Compensated

3.LLCs

A) Involve flow-through income taxes similar to partnerships and sole-proprietorships

B) Are taxed like C Corporations

C) Are only tax-exempt organizations and are not for-profit

D) Are exempt from real estate taxes

4. A business type you might consider using for your business to lessen your individual exposure to risk

A) Sole Proprietorship

B) A Partnership with at least 3 partners.

C) An S Corporation, or a C Corporation or an LLC

D) A Company with a fictitious name

5. The business form with an unlimited life, separation of ownership and management, easy transfer of ownership, and limited liability is:

A) Corporation

B) Limited Partnership

C) Sole proprietorship

D) General Partnership

6. A law passed in 2002 intended to limit and outlaw corporate scandals and fraudulent management acts is called:

A) The Scandal Ending Management Control Act

B) The Corporate Ethics Act of 2002

C) The Biden-Obama Compliance Act of 2002

D) The Sarbanes-Oxley Act

7. The left hand and right hand of the Balance Sheet respectively show

A) The cash generated by the company for a given year

B) Cost of goods sold as a percentage of sales.

C) The uses that cash was put to, and the sources of cash.

D) The sources of cash, and where cash was used

8. A Chief Financial Officer would typically

Supervise both the treasurer and controller

Report to the treasurer, but supervise the controller

Report to the controller, but supervise the treasurer

Report to both the treasurer and controller

9. Net Income after tax on the Income Statement for a Corporation:

Can be measured on a market value basis

Is either distributed to owners as dividends, or added to Paid In Capital

Is either distributed to owners as dividends, or added to Retained Earnings

Is calculated by adding back depreciation because it is a non-cash expense.

10. EBITDA, which is often used by buyers to value a companys worth is

Net Income from the Balance Sheet plus depreciation

Net Income after tax, plus the after-tax cost of interest

Net Income after tax plus Interest Expense, Income Taxes, Depreciation and Amortization

The product of the price of a companys stock by the number of shares outstanding

11. If the tax rates are 10% on the first $50,000 of taxable income, and 20% on the next $50,000, and 30% on the next $70,000, what is the tax liability for an individual with $130,000 of taxable income, what is the marginal tax rate, and what is the average tax rate ?

$10,250, 15%, and 20%

$19,000, 25%, and 17.27%

$11,345, 15%, and 34%

$24,000, 30%, and 18.46%

12. The Financial Crisis of 2007-08

Was largely caused by easy-money policies and the collapse of the market for collateralized subprime home mortgage loans

Had only minor effects on the U.S. economy

Only involved a couple of small investment banks

Has had no lasting effect on the home mortgage lending market

13. Bobs Pretty Good Hamburger Shop has a marginal tax rate of 32 percent and an average tax rate of 22.9 percent. If the firm owes $49,765 in taxes, how much taxable income did it earn?

$127,584

$217,314

$164,258

$157,500

14. A popular form of ownership, created in the 1970s, that the IRS does not recognize, but taxable income from which is reported similarly to a sole proprietorship on a tax return is:

Limited Partnership

Money Market Mutual Fund

Finance Company

LLC

15. The Times Interest Earned ratio

Is a key measure of a companys return on assets

Is used by a lender or analyst to calculate the ability of a company to pay interest expense out of its net income.

Is a key measure of a companys return on equity

Is the ratio of Cost of Goods Sold divided by Inventory

16. After tax cost of interest deals with the fact that interest is deductible for tax purposes. Therefore, the after-tax cost of interest is calculated by

Calculating the income tax of a corporation before depreciation

Comparing interest to net income

Interest expense times (1- tax rate)

Interest expense times the tax rate

17. Ratio analysis and comparing a companys performance against industry averages are important but

Doing so for a conglomerate that owns companies in different industries can be problematic

Global competitor financial statement comparisons can be problematic

Different accounting procedures and different fiscal year ends can be problematic

a, b, and c are true

18. The combination of Merrill Lynch and Bank of America was a normal, everyday, negotiated merger that had nothing to do with the overall economic situation during 2007-09.

True

False

19. An LLC

Has shareholders that are called members

Often passes along unlimited liability to owners

Cannot be used by smaller companies

Are taxed the same as C-Corporations

20. Agency problems arise when

Managers and shareholders have different objectives

Never when a good Board of Directors is in place

Profits are high and business is good

A corporation has more debt than equity

21. Extra Credit (1 Pt.) - The Glass-Steagall Act from the 1930s was:

Passed in 1933

Created to eliminate commercial banks from acting both as 1. A taker of deposits and maker of loans, and 2. An underwriter and seller of securities.

Passed after the 1929 Stock Market Crash and the discovery of fraudulent practices and abusive policies of a number of major banks.

All of the above