Question 1

Mark this question

Consider the price to book ratios of the following companies:

• Company A: 5.45
• Company B: 14.30
• Company C: 10.08
• Company D: 19.62

Which company do investors believe will create the most value from its assets?

• Company A
• Company D
• Company B
• Company C

Question 2

Mark this question

Haley is expanding her tax preparation business and wants to reorganize it. She wants to better protect her personal assets from any liabilities associated with the business, and she wants to pay a lower tax rate on her business income. She also believes her business will benefit from oversight from a board of directors.

Which form of business structure would clearly meet Haley's needs?

• Partnership
• Sole proprietorship
• Corporation
• Limited liability partnership

Question 3

Mark this question

A potential investor in Cristian's company wants to know how much money was paid in dividends in the last reporting period.

What type of financial statement should he look at?

• Income statement
• Cash flow statement
• Balance sheet
• Statement of changes in equity

Question 4

Mark this question

Which of the following is true of ethics and its application to the business environment?

• Personal values have no place in business, where decisions should be made according to organizational values and norms.
• Employers prefer to hire individuals whose ethics conflict with that of the business organization.
• The ethical norms and values of a business can have a powerful influence on its employees.
• Conflicts rarely occur between an individual's ethics and a business organization's ethics.

Question 5

Mark this question

If net income is $90 million and total assets are $480 million, then the ROA is __________.

• 25.00%
• 18.75%
• incalculable without gross profit data
• incalculable without EBIT data

Question 6

Mark this question

Preparing a cash flow forecast helps a company to examine and manage its __________.

• accounting practices
• bottom line
• profitability
• float times

Question 7

Mark this question

The pro forma balance sheet reflects the impact of a company's strategic plan on its __________.

• revenue and expenses
• assets and liabilities
• revenue and expenses
• share price

Question 8

Mark this question

Ratios that measure a company's ability to manage its long-term debt are _________.

• liquidity ratios
• efficiency ratios
• leverage ratios
• profitability ratios

Question 9

Mark this question

Which organization most fully protects owners from personal liabilities and is taxed separately?

• S Corp
• C Corp
• LLC
• Partnership

Question 10

Mark this question

Capacity planning answers the question "__________"

• What will our revenue be?
• How will we finance it?
• How will we decide which direction to go?
• How can we be most efficient?

Question 11

Mark this question

If Company A has a TIE ratio of 3 and Company B has a TIE ratio of 1.2, then Company A is more likely to __________ than Company B.

• need to use cash on hand to meet its interest obligations
• be able to honor its debt payments
• default on its short-term debt
• be able to repay its long-term debt

Question 12

Mark this question

If a balance sheet shows owner's equity of $10 million, current liabilities of $6 million and long-term liabilities of $15 million, then what are the total assets of the company?

• $25 million
• $31 million
• $19 million
• $16 million

Question 13

Mark this question

In the United States, the role of corporate governance is to maximize __________.

• shareholder value and stakeholder value
• fundamental value and shareholder value
• market value and stakeholder value
• market value and shareholder value

Question 14

Mark this question

The primary factor behind all of finance is __________.

• money
• time
• debt
• equity

Question 15

Mark this question

Finn is interested in taking over a small business, but he wants to pay a fair price for it, so he consults their income statements.

How can he determine the company's overall profitability in each quarter of the previous year?

• Calculate total revenue minus taxes paid
• Calculate operating revenue minus operating expenses
• Calculate total revenue minus total expenses
• Calculate total revenue minus operating expenses