1
Business Finance Final
Exam
1. Insider trading occurs when - -Correct Answer--
✔️someone has information not available to the public
which they use to profit from trading in stocks.
2. A corporation is - -Correct Answer--✔️A.owned by
stockholders who enjoy the privilege of limited
liability.B.easily divisible between owners.C.a separate
legal entity with perpetual life.Correct Answer is D.all of
these.
3. The major focus of the Sarbanes-Oxley Act is to - -Correct
Answer--✔️make sure that publicly traded corporations
accurately present their assets, liabilities and equity and
income on the financial statements.
4. An item which may be converted to cash within one year
or one operating cycle of the firm is classified as a - -
Correct Answer--✔️current asset.
5. Gross profit is equal to - -Correct Answer--✔️sales minus
cost of goods sold.
1
, 2
6. Net worth is equal to stockholders' equity - -Correct
Answer--✔️minus the preferred stock component.
7. The firm's price-earnings (P/E) ratio is influenced by its - -
Correct Answer--✔️debt-equity, structure, risk, and sales
growth.
8. _______________ represents an attempt to allocate the initial
cost of an asset over its useful life. - -Correct Answer--
✔️Depreciation
9. Asset utilization ratios - -Correct Answer--✔️measure the
speed at which the firm is turning over accounts
receivable, inventory, and long-term assets
10. Which of the following is not considered to be a
profitability ratio? - -Correct Answer--✔️times interest
earned
11. In developing the pro forma income statement, the first
step is to ______________ . - -Correct Answer--✔️establish a
sales projection.
12. The primary purpose of _____________ is to allow the firm to
anticipate the need for outside funding at the end of each
planning period. - -Correct Answer--✔️a cash budget
2
Business Finance Final
Exam
1. Insider trading occurs when - -Correct Answer--
✔️someone has information not available to the public
which they use to profit from trading in stocks.
2. A corporation is - -Correct Answer--✔️A.owned by
stockholders who enjoy the privilege of limited
liability.B.easily divisible between owners.C.a separate
legal entity with perpetual life.Correct Answer is D.all of
these.
3. The major focus of the Sarbanes-Oxley Act is to - -Correct
Answer--✔️make sure that publicly traded corporations
accurately present their assets, liabilities and equity and
income on the financial statements.
4. An item which may be converted to cash within one year
or one operating cycle of the firm is classified as a - -
Correct Answer--✔️current asset.
5. Gross profit is equal to - -Correct Answer--✔️sales minus
cost of goods sold.
1
, 2
6. Net worth is equal to stockholders' equity - -Correct
Answer--✔️minus the preferred stock component.
7. The firm's price-earnings (P/E) ratio is influenced by its - -
Correct Answer--✔️debt-equity, structure, risk, and sales
growth.
8. _______________ represents an attempt to allocate the initial
cost of an asset over its useful life. - -Correct Answer--
✔️Depreciation
9. Asset utilization ratios - -Correct Answer--✔️measure the
speed at which the firm is turning over accounts
receivable, inventory, and long-term assets
10. Which of the following is not considered to be a
profitability ratio? - -Correct Answer--✔️times interest
earned
11. In developing the pro forma income statement, the first
step is to ______________ . - -Correct Answer--✔️establish a
sales projection.
12. The primary purpose of _____________ is to allow the firm to
anticipate the need for outside funding at the end of each
planning period. - -Correct Answer--✔️a cash budget
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