MB 310 FINAL QUESTIONS WITH VERIFIED
ACCURATE SOLUTION 2026
There is unlimited liability in a general partnership. - Answers -True
Dividends paid to corporate stockholders have already been taxed once as corporate
income. - Answers -True
Profits of a Subchapter S corporate are taxed at corporate tax rates. - Answers -False
Social responsibility and profit maximization are synonymous. - Answers -False
Existing securities are traded in the secondary market. - Answers -True
Proper risk-return management means that - Answers -the firm must determine an
appropriate trade-off between risk and return
A Subchapter S corporation - Answers -has all the organizational benefits of a
corporation and its income is only taxed once.
Agency theory examines the relationship between the - Answers -owners of the firm
and the managers of the firm.
Companies that have higher risk than a competitor in the same industry will generally
have - Answers -To pay a higher interest rate than its competitors, a lower relative
stock price than its competitors, a higher cost of funds than its competitors.
Restructuring - Answers -Redeploying the asset and liability structure of the firm.
Capital Market - Answers -Market composed of common stock, preferred stock,
commercial and government bonds and other long-term securities.
Money market - Answers -Securities with a maturity of less than 1 year.
Real capital - Answers -The high inflation rates of the 1980s caused this form of capital
to hold its value better than other forms of capital during this time period.
Inflation - Answers -The purchasing power of the dollar shrinks over time.
Primary market - Answers -A market where the securities being traded are new public
offerings.
Secondary Market - Answers -this market trades previously issued securities.
, Disinflation - Answers -A leveling off or slowing down of price increases.
Financial capital - Answers -This form of capital is found on the balance sheet under
long-term liabilities and equity.
(11) Operating profit is essentially a measure of how efficient management is in
generating revenues and controlling expenses. - Answers -False.
(12) Asset accounts are listed in order of their liquidity. - Answers -True.
(13) Accumulated depreciation shows up in the income statement. - Answers -False
(14) Retained earnings represent the firm's cumulative earnings since inception, minus
dividends and other adjustments. - Answers -True.
(15) An increase in a liability account represents a source of funds on the cash flow
statement. - Answers -True.
(16) A decrease in bonds payable results in a cash outflow on the statement of cash
flows. - Answers -True.
(17) Which of the following is not subtracted out in arriving at operating income? -
Answers -Interest expense.
(18) The residual income of the firm belongs to: - Answers -Common stockholders.
(20) A firm has $1,000,000 in its common stock account and $2,500,000 in its paid-in
capital account. The firm issued 100,000 shares of common stock. What was the
original issue price if only one stock issue has ever been sold? - Answers -$35 per
share.
(22) Assuming a tax rate of 30%, the after-tax cost of interest expense of $200,000 is: -
Answers -$140,000
Definition: Balance sheet - Answers -A financial statement that indicates what the firm
owns, and how these assets are financed in the form of liabilities or ownership interest.
Definition: Notes payable - Answers -Short-term signed obligations to banks or other
creditors.
Definition: Marketable securities - Answers -Temporary investments of excess cash.
Definition: Earnings per share - Answers -The income available to common
stockholders divided by the number of common shares outstanding.
ACCURATE SOLUTION 2026
There is unlimited liability in a general partnership. - Answers -True
Dividends paid to corporate stockholders have already been taxed once as corporate
income. - Answers -True
Profits of a Subchapter S corporate are taxed at corporate tax rates. - Answers -False
Social responsibility and profit maximization are synonymous. - Answers -False
Existing securities are traded in the secondary market. - Answers -True
Proper risk-return management means that - Answers -the firm must determine an
appropriate trade-off between risk and return
A Subchapter S corporation - Answers -has all the organizational benefits of a
corporation and its income is only taxed once.
Agency theory examines the relationship between the - Answers -owners of the firm
and the managers of the firm.
Companies that have higher risk than a competitor in the same industry will generally
have - Answers -To pay a higher interest rate than its competitors, a lower relative
stock price than its competitors, a higher cost of funds than its competitors.
Restructuring - Answers -Redeploying the asset and liability structure of the firm.
Capital Market - Answers -Market composed of common stock, preferred stock,
commercial and government bonds and other long-term securities.
Money market - Answers -Securities with a maturity of less than 1 year.
Real capital - Answers -The high inflation rates of the 1980s caused this form of capital
to hold its value better than other forms of capital during this time period.
Inflation - Answers -The purchasing power of the dollar shrinks over time.
Primary market - Answers -A market where the securities being traded are new public
offerings.
Secondary Market - Answers -this market trades previously issued securities.
, Disinflation - Answers -A leveling off or slowing down of price increases.
Financial capital - Answers -This form of capital is found on the balance sheet under
long-term liabilities and equity.
(11) Operating profit is essentially a measure of how efficient management is in
generating revenues and controlling expenses. - Answers -False.
(12) Asset accounts are listed in order of their liquidity. - Answers -True.
(13) Accumulated depreciation shows up in the income statement. - Answers -False
(14) Retained earnings represent the firm's cumulative earnings since inception, minus
dividends and other adjustments. - Answers -True.
(15) An increase in a liability account represents a source of funds on the cash flow
statement. - Answers -True.
(16) A decrease in bonds payable results in a cash outflow on the statement of cash
flows. - Answers -True.
(17) Which of the following is not subtracted out in arriving at operating income? -
Answers -Interest expense.
(18) The residual income of the firm belongs to: - Answers -Common stockholders.
(20) A firm has $1,000,000 in its common stock account and $2,500,000 in its paid-in
capital account. The firm issued 100,000 shares of common stock. What was the
original issue price if only one stock issue has ever been sold? - Answers -$35 per
share.
(22) Assuming a tax rate of 30%, the after-tax cost of interest expense of $200,000 is: -
Answers -$140,000
Definition: Balance sheet - Answers -A financial statement that indicates what the firm
owns, and how these assets are financed in the form of liabilities or ownership interest.
Definition: Notes payable - Answers -Short-term signed obligations to banks or other
creditors.
Definition: Marketable securities - Answers -Temporary investments of excess cash.
Definition: Earnings per share - Answers -The income available to common
stockholders divided by the number of common shares outstanding.
