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[Solved] Liberty University BUSI 530 Exam 1

[Solved] Liberty University BUSI 530 Exam 1 Financial managers should only accept investment projects that: Multiple Choice • increase the current profits of the firm. • can increase the firm's market share. • earn a higher rate of return than the firm currently earns on its existing projects. Item 2 Item 2 3 of 3 points awarded Item Scored Unlimited liability is faced by the owners of: Multiple Choice • corporations. • partnerships and corporations. • sole proprietorships and general partnerships. Correct • all forms of business organization. Item 3 3/3 points awarded ItemScored Item 3 Item 3 3 of 3 points awarded Item Scored The term "capital structure" refers to: Multiple Choice • the mix of long-term debt and equity financing. Correct • the length of time needed to repay debt. • whether or not the firm invests in capital budgeting projects. • the types of assets a firm acquires. Item 4 0/3 points awarded ItemScored Item 4 Item 4 0 of 3 points awarded Item Scored Which of the following appears to be the most appropriate goal for corporate management? • Maximizing market value of the company's shares Correct • Maximizing the company's market share • Maximizing the current profits of the company ---ANSWER INCORRECT Incorrect • Minimizing the company's liabilities Item 5 One continuing problem with managerial incentive compensation plans is that: • the plans increase agency problems. • managers prefer guaranteed salaries. • their effectiveness is difficult to evaluate. Correct • the plans do not reward shareholders. 3/3 points awarded ItemScored Item 6 Item 6 3 of 3 points awarded Item Scored In a partnership form of organization, income tax liability, if any, is incurred by: Multiple Choice • the partnership itself. • the partners individually. Correct • both the partnership and the partners. • neither the partnership nor the partners. Item 7 3/3 points awarded ItemScored Item 7 Item 7 3 of 3 points awarded Item Scored A board of directors is elected as a representative of the corporation's: Multiple Choice • top management. • stakeholders. • shareholders. Correct • customers. Item 8 3/3 points awarded ItemScored Item 8 Item 8 3 of 3 points awarded Item Scored Which one of the following statements is not characteristic of mutual funds? Multiple Choice • They are always considered to be financial institutions. Correct • They raise money by selling shares to investors. • They pool the savings of many investors. • They offer professional management and portfolio diversification. Item 9 Item 9 3 of 3 points awarded Item Scored A capital investment that generates a 10% rate of return is worthwhile if: Multiple Choice • corporate bonds of similar risk offer 8% rates of return. Correct • corporate bonds of similar risk offer 11% rates of return. • top-quality corporate bonds offer 10% rates of return. • the expected rate of return on the stock market is 12%. Item 10 3/3 points awarded ItemScored Item 10 Item 10 3 of 3 points awarded Item Scored Which one of the following is least liquid? Multiple Choice • Foreign currency • U.S. Treasury bonds • Real estate Correct • Bank deposit Item 11 3/3 points awarded ItemScored Item 11 Item 11 3 of 3 points awarded Item Scored Which one of these enterprises generally acts as an underwriter for an initial public offering? Multiple Choice • Commercial bank • Government • Investment bank Correct • Insurance company Item 12 Item 12 0 of 3 points awarded Item Scored Foreign currencies are traded: • only by banks in New York and London. • over the counter. Correct • on both the NYSE and NASDAQ. • on the Intercontinental Exchange. Item 13 Item 13 3 of 3 points awarded Item Scored If Apple Computer Inc. is used as the model, then new firms should expect to raise capital in which one of these orders? Start with the first money raised. Multiple Choice • Owners, venture capitalists, suppliers, public investors • Owners, suppliers, venture capitalists, public investors Correct • Venture capitalists, owners, public investors, suppliers • Owners, public investors, venture capitalists, suppliers Item 14 Item 14 3 of 3 points awarded Item Scored Which one of these parties cannot invest in a hedge fund? Multiple Choice • Small retail investors Correct • Pension funds • Insurance companies • Wealthy individuals Item 15 3/3 points awarded ItemScored Item 15 Item 15 3 of 3 points awarded Item Scored In a statement of cash flows, which category includes depreciation expense as a line item? Multiple Choice • Cash provided by operations. Correct • Cash flows from investments. • Cash provided by (used for) financing activities. • Current liabilities. Item 16 3/3 points awarded ItemScored Item 16 Item 16 3 of 3 points awarded Item Scored Current period depreciation expense is listed: Multiple Choice • on the balance sheet. • in the investment section of the cash flow statement. • on the income statement. Correct • on neither the balance sheet nor the income statement; it is a noncash expense. Item 17 3/3 points awarded ItemScored Item 17 Item 17 3 of 3 points awarded Item Scored Interest expense appears in the operations section of the statement of cash flows because: Multiple Choice • firms cannot operate without incurring interest expense. • its payment is not within managerial discretion. Correct • it is paid to finance a firm's inventory. • none of the options; interest expense appears in the financing section of the statement of cash flows. Item 18 Item 18 3 of 3 points awarded Item Scored In general, what is changing as you read down the left-hand side of a balance sheet? Multiple Choice • The assets are becoming more fully depreciated. • The assets are increasing in value. • The assets are increasing in maturity. • The assets are becoming less liquid. Correct Item 19 What is the marginal corporate tax rate for large companies? Multiple Choice • 15% • 34% • 35% Correct • 39% Item 20 Item 20 3 of 3 points awarded Item Scored The income statement resembles a snapshot of the firm at a specific time. True or False True False Correct Item 21 Item 21 3 of 3 points awarded Item Scored The purchase of new equipment is a use of cash, and it reduces the firm's net cash balance. True or False True Correct False Item 22 Item 22 3 of 3 points awarded Item Scored There is generally a bigger difference between the book value and the market value of fixed assets as compared to cash. True or False True Correct False Item 23 Item 23 3 of 3 points awarded Item Scored A deficiency of the standard measures of liquidity is that the measures: Multiple Choice • ignore a firm's reserve borrowing capacity. Correct • fail to include accounts receivable as an asset. • give inventories equal weighting in the quick ratio. • do not include the current portions of long-term debt. Item 24 Item 24 3 of 3 points awarded Item Scored Efficiency ratios: Multiple Choice • include the quick ratio, asset turnover ratio, and return on equity. • are used to measure how well the company uses its assets. Correct • are used to measure how liquid the company is. • measure the profits generated by a firm's equity and assets. Item 25 Item 25 3 of 3 points awarded Item Scored An asset turnover ratio of 1.75 can be interpreted as: Multiple Choice • $1.75 in sales are generated by every $1 of assets. Correct • $1.75 in additional assets are generated by every $1 of sales. • $1.75 in assets are used to generate $1 of sales. • $1 in sales are used to generate $1.75 in assets. Item 26 Item 26 3 of 3 points awarded Item Scored High levels of liquidity may indicate: Multiple Choice • low levels of net working capital. • low profit margins. • high levels of economic value added. • inefficient use of assets. Correct Item 27 Item 27 3 of 3 points awarded Item Scored In the past year, TVG had revenues of $3 million, cost of goods sold of $2.5 million, and depreciation expense of $200,000. The firm has a single issue of debt outstanding with a face value of $1million, market value of $.92 million, and a coupon rate of 8%. What is the firm's times interest earned ratio? Multiple Choice • 3.75 Correct • 2.98 • 2.80 • 3.40 84out of/90 Total points awarded Help opens in a new windowExit Item 28 Item 28 3 of 3 points awarded Item Scored Return on assets is always a larger number than the return on equity. True or False True False Correct Item 29 3/3 points awarded ItemScored Item 29 Item 29 3 of 3 points awarded Item Scored Which of the following actions could improve a firm's current ratio if it is now less than 1.0? Multiple Choice • Converting marketable securities to cash • Paying accounts payable with cash • Buying inventory on credit Correct • Selling inventory at cost Item 30 Item 30 3 of 3 points awarded Item Scored The higher the times interest earned ratio, the higher the interest expense. False

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