Question 40 1 pts Which of the following statement is correct? The end-users of financial ratio data would be anyone having a financial stake in the U.S. economy and international foreign exchange transactions. The return on equity (ROE) ratio is equal to Gross Income divided by Total Debt, and measures the average return on the firm's capital contributions from its owners. All the answers are incorrect. A complete financial ratio analysis of a company combines both marketing analysis and product price comparisons. Liquidity ratios measure the ability of a firm to meet its short?term obligations. Question 38 1 pts Which of the following statement is correct? Corporate bonds are issued by corporations and carry minimal risk of default. The over-the-counter market (OTC) has a fixed location where the dealers on the floor is ready to buy and sell the securities. Primary market transactions may occur on an exchange or on the over-the-counter market. All the answers are incorrect. Stock has an advantage over bonds that the money raised from the sale of stock does not ever have to be paid back, and the company does not have to make interest payments to the stockholders. Question 36 1 pts Which of the following statement is correct? Corporations cannot exist separately from their owners, and therefore they cannot live beyond the death of their original owners. The managing director is the principal and the common stockholder owners are the agents of the corporation. With financial monitoring costs such as audits, the firm resources are expended to increase agency conflicts. All the answers are incorrect. An agency problem occurs if the managing director buys the jet, even though he knows the benefits to the stockholders do not justify the cost. Question 27 1 pts Which of the following statement is correct? The debt to total assets ratio measures the percentage of the firm's current liabilities that is financed with equity. Total Asset Turnover Ratio measures whether the asset level is justified by the amount of sales generated by the assets, and it is a measure of asset efficiency and utilization. Current Ratio = (Total Assets Total Liabilities) / number of common shares outstanding. All the answers are incorrect. Debt ratios measure the market's perception about the future earning power of a business. Question 25 1 pts Which of the following statement is correct? The Financial Accounting Standards Board (FASB), a private, professional accounting body, publishes GAAP rules governing how public corporations must account for their business activities. A private corporation must report its activities to SEC at least quarterly but may report more frequently according to the laws. All the answers are incorrect. Dividends paid to common and preferred stockholders is tax deductible. On the income statement, the firm's assets are listed in order of their liquidity. Question 22 1 pts Which of the following statement is correct? All the answers are incorrect. The yield on short-term U.S. Treasury bills is often used as a proxy for the risk-free rate because the degree of uncertainty associated with these securities is very small. Large-denomination T-bills (of $100,000 to $1 million or more), with maturities of two weeks to a year, are negotiable because they can be traded in the primary market after they are initially issued by a corporation. The default risk premium is the extra compensation lenders demand for assuming the risk of liquidity. The extra interest that lenders demand to compensate for the default risk is called the illiquidity risk premium. Question 11 1 pts Which of the following statement is correct? In a corporation, a principal is a person who has the implied or actual authority to act on behalf of another. The agency problem increases if we tie the managers' compensation to the performance of the company and its stock price. Cash inflows expected later result in a higher stock price. Any event that increases and/or speeds up the receipt of expected cash flows increases stock price. All the answers are incorrect
