MULTIPLE CHOICE. Choose the one alternative that BEST completes the statement or answers the question. Explain each choice.

8-When a corporation fails, the maximum that can be lost by an individual shareholder is:

The amount of their personal wealth

Their proportionate share required to pay the corporations debt

The amount of their share of the profits

The amount of their initial investment

Both A and B

9-Duster Company reported the following financial information at the end of 2021:

	$ in millions
Revenue	2,000
Unearned revenue	240
Account payable	1,150
Shareholders equity	30
Accrued liabilities	830
Long-term debt	1,570

9-Find Dusters liabilities as of December 31, 2021.

$3,550 million

$3,580 million

$3,790 million

$3,820 million

None of above

10-Apples common size income statement for the year ended Sep 26, 2020 and Sep. 25, 2021 included following information:

(In percentage)	2020	2021
Sales	100	100
Cost of Goods Sold	61.8	58.2
Gross Profit	38.2	41.8
SG&A	7.3	6.0
R&D	6.8	6.0
Operating Income	24.1	29.8
Interest Income, net	0.3	0.1
Income Before Taxes	24.4	29.9
Tax Expenses	3.5	4.0
Net Income	20.9	25.9

11-Analysis of this data indicates that from 2020 to 2021:

Cost of goods sold increased

EBIT margin increased

D&A decreased

Both A and B

All above

12-The wealth of the owners of a corporation is represented by:

Profits

Earnings per share (net income per share)

Share value

Cash flow

None of above

13-Firms can obtain external sources:

Through financial institutions

From central bank (or Fed) directly

By issuing treasury bonds

Both A and C

All above

14-Which of the following statement is correct?

Agency cost is the cost incurred for setting up an agency

One disadvantage of corporation is limited liabilities

Hurdle rate is the maximum acceptable return of a project

All above

None of above

15-Short-term financing transactions commonly occur in the:

NYSE

NASDAQ

Over-the-counter or OTC

Capital market

Money market

16-A firm with spare cash:

Should always reinvest in new equipment

Should always invest in US equities

Should pay it out to shareholders unless the firm can earn a higher rate of return on the cash than the shareholders can earn by investing in the capital market

Should invest in the safest projects available

Should always pay it out to shareholders

17-A manager whose compensation is tied to improving the firms inventory turnover most likely has an incentive to:

(Hint: how items of inventory turnover changed)

Overstate assets

Understate earnings

Overstate working capital

All above

Cant tell