QUESTIONS AND ANSWERS 2020

Exam

Name___________________________________


MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) All of the following are measures that can be used as a guide for establishing a corporate ethics 1)
policy, EXCEPT
A) making sure violations are penalized, while at the same time not subjecting the employee to
publicity.
B) an effective internal audit system.
C) making reference checks before hiring new employees.
D) an effective internal control system.
Answer: A
Explanation: A)
B)
C)
D)

2) Managing the firm's liabilities includes all of the following EXCEPT 2)
A) notes payable. B) accounts payable.
C) accruals. D) cash.
Answer: D
Explanation: A)
B)
C)
D)

3) A more recent issue that is causing major problems in the business community is 3)
A) short-term versus long-term financial goals of management.
B) the privatization of ownership.
C) environmental concerns.
D) ethical problems.
Answer: D
Explanation: A)
B)
C)
D)

4) The conflict between the goals of a firm's owners and the goals of its nonowner managers is 4)
A) the agency problem.
B) of little importance in most large U.S. firms.
C) serious only when profits decline.
D) incompatibility.
Answer: A
Explanation: A)
B)
C)
D)




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,5) Return and risk 5)
A) have no effect on share price. B) adversely affect share price.
C) have the same effect on share price. D) have an inverse effect on share price.
Answer: D
Explanation: A)
B)
C)
D)

6) A recent ethics survey indicated the opinion that maintaining high ethical standards 6)
A) strengthened a firm's competitive position.
B) weakened a firm's competitive position, particularly in foreign markets.
C) was difficult to enforce.
D) had no effect on a firm's competitive position.
Answer: A
Explanation: A)
B)
C)
D)

7) The true owners of the corporation is/are the 7)
A) board of directors. B) creditors.
C) chief executive officer. D) stockholders.
Answer: D
Explanation: A)
B)
C)
D)

8) Profit maximization fails because it ignores all EXCEPT 8)
A) risk. B) cash flows available to stockholders.
C) earnings per share. D) the timing of returns.
Answer: C
Explanation: A)
B)
C)
D)

9) A firm has just ended its calendar year making a sale in the amount of $150,000 of merchandise 9)
purchased during the year at a total cost of $112,500. Although the firm paid in full for the
merchandise during the year, it has yet to collect at year end from the customer. The net profit and
cash flow from this sale for the year are
A) $37,500 and -$112,500 respectively. B) $150,000 and $112,500 respectively.
C) $0 and $150,000 respectively. D) $37,500 and -$150,000 respectively.
Answer: A
Explanation: A)
B)
C)
D)




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,10) The goal of profit maximization would result in priority for 10)
A) cash flows available to stockholders. B) earnings per share.
C) risk of the investment. D) timing of the returns.
Answer: B
Explanation: A)
B)
C)
D)

11) The key role of the financial manager is 11)
A) the presentation of financial statements.
B) the collection of financial data.
C) decision making.
D) the preparation of data for future evaluation.
Answer: C
Explanation: A)
B)
C)
D)

12) The financial manager may be responsible for any of the following EXCEPT 12)
A) determining whether to accept or reject a capital asset acquisition.
B) analyzing the effects of more debt on the firm's capital structure.
C) analyzing budget and performance reports.
D) monitoring of quarterly tax payments.
Answer: D
Explanation: A)
B)
C)
D)

13) The dominant form of organization with respect to revenues and net income is the 13)
A) sole proprietorship. B) corporation.
C) limited partnership. D) partnership.
Answer: B
Explanation: A)
B)
C)
D)

14) The wealth of the owners of a corporation is represented by 14)
A) earnings per share. B) cash flow.
C) share price. D) profits.
Answer: C
Explanation: A)
B)
C)
D)




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, 15) Bayside Equipment is considering buying new equipment. The existing machine produces 10 000 15)
units a day at a cost of $2 per unit. The new machine will produce 15 000 at a cost of $1.50 a unit.
BAyside sells each unit for $4. What is the marginal benefit of the new machine
A) $7 500 B) $20 000 C) $22 500 D) $38 500
Answer: D
Explanation: A)
B)
C)
D)

16) For $200,000 you can buy a business that has steady cash flows and low risk. Given these cash 16)
flows and level of risk, you estimate the business will earn a return in excess of its opportunity cost
of money. The business
A) appears economically profitable, and strong consideration should be given to buying it.
B) looks like a break-even opportunity and should be rejected.
C) appears to be a losing proposition but should be bought anyway.
D) appears to be a losing proposition and should not be bought.
Answer: A
Explanation: A)
B)
C)
D)

17) One key output of the financial forecasting process are: 17)
A) the forecasted financial statements
B) the amount of funds the company required to operate over the past fiscal period
C) the current financial statements
D) the past financial statements
Answer: A
Explanation: A)
B)
C)
D)

18) In planning and managing the requirements of the firm, the financial manager is concerned with 18)
A) the mix and type of assets, the type of financing utilized, and analysis in order to monitor the
financial condition.
B) the acquisition of fixed assets, allowing someone else to plan the level of current assets
required.
C) the type of financing utilized, but not the mix and type of assets.
D) the mix and type of assets, but not the type of financing utilized.
Answer: A
Explanation: A)
B)
C)
D)




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