FIN 300 Final Exam
One of the most important disadvantages of the corporate form of business is:
a. limited owner liability
b. ease of transferring ownership
c. double taxation
d. unlimited owner liability - Answers-c. double taxation
Profit maximization:
a. is the ultimate goal of a firm
b. is a long-run concept
c. always maximizes the wealth of the owners
d. does not consider future cash flows or risk - Answers-d. does not consider future cash flows or risk
Hillary Rotteneggs wishes to form a company that will specialize in toxic waste removal and storage.
Which type of business form would be most advantageous?
a. a sole proprietorship due to its low cost and ease of formation
b. a partnership due to its low cost and diversitifcation of ownership
c. a corporation due to its limited liability
d. any of the above would be equally acceptable - Answers-c. a corporation due to its limited liability
,Which of the following is true?
a. as the length of time until an exepcted cash flow increases, the stock price decreases
b. as the riskiness of the cash flow increases, the stock price decreases
c. as the size of the expected cash inflow decreases, the stock price increases
d. all of the above statements are true - Answers-a. as the length of time until an exepcted cash flow
increases, the stock price decreases
The income statement:
a. is a financial statement that shows the firm's financial position at a particular point in time
b. is a financial statement that summarizes a firm's revenues and expenses over a period of time
c. is a financial statement that summarizes a firm's revenues and expenses at a patricular point in time
d. details the firm's assets and liabilities over a period of time - Answers-b. is a financial statement that
summarizes a firm's revenues and expenses over a period of time
Each of the following items is a liability with the exception of:
a. long-term debt
b. notes payable
c. prepaid expenses
d. accrued expenses - Answers-c. prepaid expenses
Given the following information, calculate earnings per share:
Interest Expense - 40,000
Net Income - 400,000
, Preferred dividends paid - 65,000
Common dividends paid - 100,000
Common Stock Oustanding - 100,000
a. 1.95
b. 3.35
c. 2.35
d. 3.60 - Answers-b. 3.35
Depreciation:
a. is not a true expense
b. represents a cash outflow on the cash flow statement
c. is deducted from net income
d. is a tax deductible non-cash expense - Answers-d. is a tax deductible non-cash expense
As the discount rate decreases, the present value of a positive cash flow to be received at a particular
time in the future:
a. gets closer to zero
b. gets larger
c. stays unchanged
d. gets smaller without limit - Answers-b. gets larger
You get a twenty-year amortized loan of $100,000 with a 5% annual interest rate. What are annual
payments?
One of the most important disadvantages of the corporate form of business is:
a. limited owner liability
b. ease of transferring ownership
c. double taxation
d. unlimited owner liability - Answers-c. double taxation
Profit maximization:
a. is the ultimate goal of a firm
b. is a long-run concept
c. always maximizes the wealth of the owners
d. does not consider future cash flows or risk - Answers-d. does not consider future cash flows or risk
Hillary Rotteneggs wishes to form a company that will specialize in toxic waste removal and storage.
Which type of business form would be most advantageous?
a. a sole proprietorship due to its low cost and ease of formation
b. a partnership due to its low cost and diversitifcation of ownership
c. a corporation due to its limited liability
d. any of the above would be equally acceptable - Answers-c. a corporation due to its limited liability
,Which of the following is true?
a. as the length of time until an exepcted cash flow increases, the stock price decreases
b. as the riskiness of the cash flow increases, the stock price decreases
c. as the size of the expected cash inflow decreases, the stock price increases
d. all of the above statements are true - Answers-a. as the length of time until an exepcted cash flow
increases, the stock price decreases
The income statement:
a. is a financial statement that shows the firm's financial position at a particular point in time
b. is a financial statement that summarizes a firm's revenues and expenses over a period of time
c. is a financial statement that summarizes a firm's revenues and expenses at a patricular point in time
d. details the firm's assets and liabilities over a period of time - Answers-b. is a financial statement that
summarizes a firm's revenues and expenses over a period of time
Each of the following items is a liability with the exception of:
a. long-term debt
b. notes payable
c. prepaid expenses
d. accrued expenses - Answers-c. prepaid expenses
Given the following information, calculate earnings per share:
Interest Expense - 40,000
Net Income - 400,000
, Preferred dividends paid - 65,000
Common dividends paid - 100,000
Common Stock Oustanding - 100,000
a. 1.95
b. 3.35
c. 2.35
d. 3.60 - Answers-b. 3.35
Depreciation:
a. is not a true expense
b. represents a cash outflow on the cash flow statement
c. is deducted from net income
d. is a tax deductible non-cash expense - Answers-d. is a tax deductible non-cash expense
As the discount rate decreases, the present value of a positive cash flow to be received at a particular
time in the future:
a. gets closer to zero
b. gets larger
c. stays unchanged
d. gets smaller without limit - Answers-b. gets larger
You get a twenty-year amortized loan of $100,000 with a 5% annual interest rate. What are annual
payments?
