Which organization creates GAAP?

1. FASB

2. DOE

3. GASB

4. SEC

For creditors, (i.e. those that lend corporations money) are interested in the following. Pick all that apply.

Creditors are concerned in general with a company's cash flow

Short-term Creditors are concerned with liquidity

Long-term creditors are concerned with solvency

Short-term creditors are concerned with solvency

Answers 1,2, and 3

A company that has a high business risk (i.e. high earnings and cash flow volatility) should also have high financial risk. True or False

True

False

QUESTION 5

Equity in general (Equity analysts and shareholders of a corporation) are primarily concerned with a company's future earnings

True

False

QUESTION 7

In Chapter 1, which company & its auditors in Chapter 1 initially suggested that the company had been obliged to restate its financial results in response to a SEC advisory on rules for booking revenues. After the SEC objected to that explanation, the company conceded that its original accounting was simply not in accordance with GAAP for many years (i.e. they fudged their numbers).

1. Interpublic Group of Companies

2. None of the above

3. Lernout & Hauspie

4. REC

5. Microstratgey

QUESTION 8

If a company has:

Sales of $1 million,

Expenses of $300,000,

and pays dividends of $250,000

Should see an increase in Retained Earnings of?

300,000

None of the choices are valid

450,000

950,000

1,300,000

$1,000,000

700,000

QUESTION 6

CEOs of corporations prefer and like to issue stock to raise funds to finance a corporation.

True

False

QUESTION 10

A corporation exists for: Select all that apply (Book pages 3-5)

I. The benefit of its shareholders

II. All of the above

III. To educate the public about its financial condition

IV. Maximize its shareholders wealth

V. None of the above

QUESTION 11

In Chapter 1, Richard Zeckhauser and his associates corroborate the big bath hypothesis by showing:

that small earnings declines are more common than small increases.

that large earnings declines are as equally common as large increases.

All of the above

that large earnings declines are less common than large increases.

that large earnings declines are more common than large increases.

None of the above