FINANCE 325 FINAL EXAM
QUESTIONS & ACCURATE CORRECT
ANSWERS RATED 100% COMPLETE
LATEST VERSION
Which one of the following terms is defined as the management of a firm's long-term
investments? - CORRECT ANSWER capital budgeting
A business partner whose potential financial loss in the partnership will not exceed his
or her investment in that partnership is called a: - CORRECT ANSWER limited partner
A business created as a distinct legal entity and treated as a legal "person" is called a: -
CORRECT ANSWER corporation
Which of the following questions are addressed by financial managers?
I. How should a product be marketed?
II. Should customers be given 30 or 45 days to pay for their credit purchases?
III. Should the firm borrow more money?
IV. Should the firm acquire new equipment? - CORRECT ANSWER I, III, and IV only
Which one of the following functions should be the responsibility of the controller rather
than the treasurer? - CORRECT ANSWER income tax returns
Which one of the following correctly defines the upward chain of command in a typical
corporate organizational structure? - CORRECT ANSWER The treasurer reports to the
vice president of finance.
Which of the following should a financial manager consider when analyzing a capital
budgeting project?
I. Project start-up costs.
II. Timing of all projected cash flows.
III. Dependability of future cash flows.
IV. Dollar amount of each projected cash flow. - CORRECT ANSWER I, II, III, and IV.
Which of the following accounts are included in working capital management?
I. Accounts Payable
II. Accounts Receivable
III. Fixed Assets
IV. Inventory - CORRECT ANSWER I, II, and IV only.
,Which one of the following is a working capital management decision? - CORRECT
ANSWER Determining whether to pay cash for a purchase or use the credit offered by
the supplier.
Which of the following individuals have unlimited liability based on their ownership
interest?
I. General partner
II. Sole proprietor
III. Stockholder
IV. Limited partner - CORRECT ANSWER I and II only.
Which one of the following statements is correct? - CORRECT ANSWER Corporations
can raise large amounts of capital generally easier than partnerships can.
Which one of the following statements is correct? - CORRECT ANSWER Income from
both sole proprietorships and partnerships is taxed as individual income.
The articles of incorporation:
I. Describe the purpose of the firm.
II. Are amended periodically.
III. Set forth the number of shares of stock that can be issued.
IV. Detail the method that will be used to elect corporate directors. - CORRECT
ANSWER I and III only
Corporate bylaws: - CORRECT ANSWER determine how a corporation regulates itself
Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture
but wants to limit his liability to his initial investment and has no interest in the daily
operations. Sam will contribute his full efforts on a daily basis but has limited funds to
invest in the business. Alfredo will be involved as an active consultant and manager and
will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's
debts as they feel they have nothing to lose by doing so. All three individuals will share
in the firm's profits and wish to keep the initial organizational costs of the business to a
minimum. Which form of business entity should these individuals adopt? - CORRECT
ANSWER limited partnership
Which one of the following best states the primary goal of financial management? -
CORRECT ANSWER maximize the current value per share
Decisions made by financial managers should primarily focus on increasing which one
of the following? - CORRECT ANSWER Market value per share of outstanding stock.
The Sarbanes-Oxley Act of 2002 is a governmental response to: - CORRECT
ANSWER management greed and abuses
,Which one of the following is an unintended result of the Sarbanes-Oxley Act? -
CORRECT ANSWER corporations delisting from major exchanges
Which one of the following actions by a financial manager is most apt to create an
agency problem? - CORRECT ANSWER Increasing current profits when doing so
lowers the value of the firm's equity.
Which form of business structure is most associated with agency problems? -
CORRECT ANSWER corporation
Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This
transaction: - CORRECT ANSWER was facilitated in the secondary market
Which one of the following statements concerning stock exchanges is correct? -
CORRECT ANSWER Some large companies are listed on NASDAQ.
Corporate dividends are: - CORRECT ANSWER Taxable as personal income when
received by shareholders even though that income was taxed at the corporate level.
Financial managers should primarily focus on the interests of: - CORRECT ANSWER
shareholders
The cash flow of a firm that is available for distribution to the firm's creditors and
stockholders is called the: - CORRECT ANSWER cash flow from assets
Which term relates to the cash flow that results from a firm's ongoing, normal business
activities? - CORRECT ANSWER operating cash flow
Cash flow to stockholders is defined as: - CORRECT ANSWER dividend payments
less net new equity raised.
Which of the following are current assets?
I. Cash
II. Trademark
III. Accounts receivable
IV. Notes payable - CORRECT ANSWER I and III only
Which one of the following is included in a firm's market value but yet is excluded from
the firm's accounting value? - CORRECT ANSWER good reputation of the company
Which one of the following statements related to liquidity is correct? - CORRECT
ANSWER liquid assets are valuable to a firm
Which of the following is (are) included in the market value of a firm but is (are)
excluded from the firm's book value?
I. Value of management skills.
, II. Value of a copyright.
III. Value of the firm's reputation.
IV. Value of employee's experience. - CORRECT ANSWER I, III, and IV only
Which one of the following is true according to generally accepted accounting
principles? - CORRECT ANSWER income is recorded based on the realization
principle
Which of the following are expenses for accounting purposes but are not operating cash
flows for financial purposes?
I. Interest expense.
II. Taxes.
III. Cost of goods sold.
IV. Depreciation. - CORRECT ANSWER I and IV only
Which one of the following statements related to an income statement is correct?
Assume accrual accounting is used. - CORRECT ANSWER The labor costs for
producing a product are expensed when the product is sold.
As of 2015, which one of the following statements concerning corporate income taxes is
correct? - CORRECT ANSWER A firm's tax is computed on an incremental basis.
Which one of the following statements related to an income statement is correct? -
CORRECT ANSWER Taxes reduce both net income and operating cash flow.
Which one of the following will increase the cash flow from assets, all else equal? -
CORRECT ANSWER Decrease in the change in net working capital.
Net capital spending: - CORRECT ANSWER Is equal to zero if the decrease in the net
fixed assets is equal to the depreciation expense.
Which one of the following statements related to the cash flow to creditors is correct? -
CORRECT ANSWER A positive cash flow to creditors represents a net cash outflow
from the firm.
Four years ago, Ship Express purchased a mailing machine at a cost of $218,000. This
equipment is currently valued at $97,400 on today's balance sheet but could actually be
sold for $92,900. This is the only fixed asset the firm owns. Net working capital is
$41,300 and long-term debt is $102,800. What is the book value of shareholders'
equity? - CORRECT ANSWER $35,900
(Book value of shareholders' equity = $97,400 + 41,300 - 102,800 = $35,900)
Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year.
Common stock increased by $1,200 and retained earnings decreased by $310. What is
the net income for the year? - CORRECT ANSWER $990
(Net income = $1,300 + (-$310) = $990)
QUESTIONS & ACCURATE CORRECT
ANSWERS RATED 100% COMPLETE
LATEST VERSION
Which one of the following terms is defined as the management of a firm's long-term
investments? - CORRECT ANSWER capital budgeting
A business partner whose potential financial loss in the partnership will not exceed his
or her investment in that partnership is called a: - CORRECT ANSWER limited partner
A business created as a distinct legal entity and treated as a legal "person" is called a: -
CORRECT ANSWER corporation
Which of the following questions are addressed by financial managers?
I. How should a product be marketed?
II. Should customers be given 30 or 45 days to pay for their credit purchases?
III. Should the firm borrow more money?
IV. Should the firm acquire new equipment? - CORRECT ANSWER I, III, and IV only
Which one of the following functions should be the responsibility of the controller rather
than the treasurer? - CORRECT ANSWER income tax returns
Which one of the following correctly defines the upward chain of command in a typical
corporate organizational structure? - CORRECT ANSWER The treasurer reports to the
vice president of finance.
Which of the following should a financial manager consider when analyzing a capital
budgeting project?
I. Project start-up costs.
II. Timing of all projected cash flows.
III. Dependability of future cash flows.
IV. Dollar amount of each projected cash flow. - CORRECT ANSWER I, II, III, and IV.
Which of the following accounts are included in working capital management?
I. Accounts Payable
II. Accounts Receivable
III. Fixed Assets
IV. Inventory - CORRECT ANSWER I, II, and IV only.
,Which one of the following is a working capital management decision? - CORRECT
ANSWER Determining whether to pay cash for a purchase or use the credit offered by
the supplier.
Which of the following individuals have unlimited liability based on their ownership
interest?
I. General partner
II. Sole proprietor
III. Stockholder
IV. Limited partner - CORRECT ANSWER I and II only.
Which one of the following statements is correct? - CORRECT ANSWER Corporations
can raise large amounts of capital generally easier than partnerships can.
Which one of the following statements is correct? - CORRECT ANSWER Income from
both sole proprietorships and partnerships is taxed as individual income.
The articles of incorporation:
I. Describe the purpose of the firm.
II. Are amended periodically.
III. Set forth the number of shares of stock that can be issued.
IV. Detail the method that will be used to elect corporate directors. - CORRECT
ANSWER I and III only
Corporate bylaws: - CORRECT ANSWER determine how a corporation regulates itself
Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture
but wants to limit his liability to his initial investment and has no interest in the daily
operations. Sam will contribute his full efforts on a daily basis but has limited funds to
invest in the business. Alfredo will be involved as an active consultant and manager and
will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's
debts as they feel they have nothing to lose by doing so. All three individuals will share
in the firm's profits and wish to keep the initial organizational costs of the business to a
minimum. Which form of business entity should these individuals adopt? - CORRECT
ANSWER limited partnership
Which one of the following best states the primary goal of financial management? -
CORRECT ANSWER maximize the current value per share
Decisions made by financial managers should primarily focus on increasing which one
of the following? - CORRECT ANSWER Market value per share of outstanding stock.
The Sarbanes-Oxley Act of 2002 is a governmental response to: - CORRECT
ANSWER management greed and abuses
,Which one of the following is an unintended result of the Sarbanes-Oxley Act? -
CORRECT ANSWER corporations delisting from major exchanges
Which one of the following actions by a financial manager is most apt to create an
agency problem? - CORRECT ANSWER Increasing current profits when doing so
lowers the value of the firm's equity.
Which form of business structure is most associated with agency problems? -
CORRECT ANSWER corporation
Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This
transaction: - CORRECT ANSWER was facilitated in the secondary market
Which one of the following statements concerning stock exchanges is correct? -
CORRECT ANSWER Some large companies are listed on NASDAQ.
Corporate dividends are: - CORRECT ANSWER Taxable as personal income when
received by shareholders even though that income was taxed at the corporate level.
Financial managers should primarily focus on the interests of: - CORRECT ANSWER
shareholders
The cash flow of a firm that is available for distribution to the firm's creditors and
stockholders is called the: - CORRECT ANSWER cash flow from assets
Which term relates to the cash flow that results from a firm's ongoing, normal business
activities? - CORRECT ANSWER operating cash flow
Cash flow to stockholders is defined as: - CORRECT ANSWER dividend payments
less net new equity raised.
Which of the following are current assets?
I. Cash
II. Trademark
III. Accounts receivable
IV. Notes payable - CORRECT ANSWER I and III only
Which one of the following is included in a firm's market value but yet is excluded from
the firm's accounting value? - CORRECT ANSWER good reputation of the company
Which one of the following statements related to liquidity is correct? - CORRECT
ANSWER liquid assets are valuable to a firm
Which of the following is (are) included in the market value of a firm but is (are)
excluded from the firm's book value?
I. Value of management skills.
, II. Value of a copyright.
III. Value of the firm's reputation.
IV. Value of employee's experience. - CORRECT ANSWER I, III, and IV only
Which one of the following is true according to generally accepted accounting
principles? - CORRECT ANSWER income is recorded based on the realization
principle
Which of the following are expenses for accounting purposes but are not operating cash
flows for financial purposes?
I. Interest expense.
II. Taxes.
III. Cost of goods sold.
IV. Depreciation. - CORRECT ANSWER I and IV only
Which one of the following statements related to an income statement is correct?
Assume accrual accounting is used. - CORRECT ANSWER The labor costs for
producing a product are expensed when the product is sold.
As of 2015, which one of the following statements concerning corporate income taxes is
correct? - CORRECT ANSWER A firm's tax is computed on an incremental basis.
Which one of the following statements related to an income statement is correct? -
CORRECT ANSWER Taxes reduce both net income and operating cash flow.
Which one of the following will increase the cash flow from assets, all else equal? -
CORRECT ANSWER Decrease in the change in net working capital.
Net capital spending: - CORRECT ANSWER Is equal to zero if the decrease in the net
fixed assets is equal to the depreciation expense.
Which one of the following statements related to the cash flow to creditors is correct? -
CORRECT ANSWER A positive cash flow to creditors represents a net cash outflow
from the firm.
Four years ago, Ship Express purchased a mailing machine at a cost of $218,000. This
equipment is currently valued at $97,400 on today's balance sheet but could actually be
sold for $92,900. This is the only fixed asset the firm owns. Net working capital is
$41,300 and long-term debt is $102,800. What is the book value of shareholders'
equity? - CORRECT ANSWER $35,900
(Book value of shareholders' equity = $97,400 + 41,300 - 102,800 = $35,900)
Jensen Enterprises paid $1,300 in dividends and $920 in interest this past year.
Common stock increased by $1,200 and retained earnings decreased by $310. What is
the net income for the year? - CORRECT ANSWER $990
(Net income = $1,300 + (-$310) = $990)
