BFIN 300 Review Questions With Correct
Answers
1) The process of planning and managing a firm's long-term investments is called
| | | | | | | | | | | |
..
| |
A. Capital Budgeting - the investment opportunities that give more return than
| | | | | | | | | | | |
they cost. ROI.
| |
B. Working Capital - managing short term assets and short-term liabilities. Makes
| | | | | | | | | | | |
sure business has enough liquidity
| | | |
C. Profit Maximization
| |
D. Capital Structure - decisions, long term vs short term debt, debt vs equity, how
| | | | | | | | | | | | | |
much to borrow, cost of borrowing?, how and where to raise that money. How to
| | | | | | | | | | | | | | |
finance business. Making one decision over another is at the heart of capital
| | | | | | | | | | | | | |
structure. Give and take between risk and reward
| | | | | | |
Short term assets are cash, accounts receivable, and certain kinds of inventory.
| | | | | | | | | | | |
Short term liability is anything owed within a year. - CORRECT ANSWER✔✔-A.
| | | | | | | | | | | |
Capital Budgeting - the investment opportunities that give more return than they
| | | | | | | | | | | |
cost. ROI. |
2) Which of the following is an example of an indirect agency cost?
| | | | | | | | | | | |
A. Unnecessary corporate expenditure
| | |
B. Management auditing expense
| | |
C. A lost opportunity
| | |
D. All the above - CORRECT ANSWER✔✔-C. A lost opportunity
| | | | | | | | |
,3) Which of the following forms of business organization is subject to double
| | | | | | | | | | | | |
taxation?
A. Corporation - legal person, differentiates managers from shareholders,
| | | | | | | | |
shareholders select board of directors, and the board of directors hire
| | | | | | | | | | |
management. Ownership is Easily transferred, shareholder have limited liability,
| | | | | | | | |
company must pay taxes. Double taxation is when corporation pays taxes on its
| | | | | | | | | | | | |
earnings, distributes dividends, and the shareholders pay taxes on their
| | | | | | | | | |
dividends. Most important business in US.
| | | | |
B. Partnership - business formed by 2 or more people. General partner is where
| | | | | | | | | | | | | |
partners share gains and losses and have unlimited liability. Limited partner is
| | | | | | | | | | | |
where there is 1 or more partners and the limited partner does not actively act in
| | | | | | | | | | | | | | |
the business, if they did they would have unlimited liability
| | | | | | | | | |
C. Limited Partnership
| |
D. Sole Proprietorship - business owned by 1 person. Simplest form of business,
| | | | | | | | | | | | |
owner keeps a - CORRECT ANSWER✔✔-A. Corporation - legal person,
| | | | | | | | | |
differentiates managers from shareholders, shareholders select board of
| | | | | | | |
directors, and the board of directors hire management. Ownership is Easily
| | | | | | | | | | |
transferred, shareholder have limited liability, company must pay taxes. Double
| | | | | | | | | |
taxation is when corporation pays taxes on its earnings, distributes dividends, and
| | | | | | | | | | |
|the shareholders pay taxes on their dividends. Most important business in US.
| | | | | | | | | | |
4) Control of a firm ultimately rests with. . .
| | | | | | | | |
A. The CEO
| |
B. The SEC
| |
C. The Stockholders
| |
D. The Founder - CORRECT ANSWER✔✔-C. The Stockholders
| | | | | | |
, 5) Which of the following should a financial manager take into account when
| | | | | | | | | | | | |
considering an opportunity? | |
A. How much cash they expect to receive
| | | | | | |
B. When will they receive the funds
| | | | | |
C. How likely they are to receive the funds
| | | | | | | |
D. All of the Above - CORRECT ANSWER✔✔-D. All of the Above
| | | | | | | | | | |
1) ABC Corporation has current assets of $5,200, fixed assets of $26,000, current
| | | | | | | | | | | | |
liabilities of $4,900, and long-term debt of $15,000. What is the ABC
| | | | | | | | | | | |
Corporation's total equity? What is the NWC of ABC Corporation?
| | | | | | | | |
A. Total Equity $11,000, NWC $11, 300
| | | | | |
B. Total Equity $11,300, NWC $300
| | | | |
C. Total Equity $11,000, NWC $300
| | | | |
D. Total Equity 11,300, NWC $11,000 - CORRECT ANSWER✔✔-B. Total Equity
| | | | | | | | | | |
$11,300, NWC $300 | |
2) Company X has fixed assets of $6million on its balance sheet that were
| | | | | | | | | | | | | |
originally purchased for $10million; it can be sold for $7million today. The
| | | | | | | | | | | |
company's balance sheet also shows current liabilities of $2.6million and NWC of
| | | | | | | | | | | |
$900,000. In addition, if all the current assets were liquidated today, the company
| | | | | | | | | | | |
would receive $2.8million cash. What is the book value of Company X's total
| | | | | | | | | | | | | |
assets? What is the market value of Company X's total assets?
| | | | | | | | | |
A. BV $9.5million, MV $9.8million
| | | |
B. BV $9.5million, MV $12.8million
| | | |
C. BV $8.6million, MV $12.8million
| | | |
Answers
1) The process of planning and managing a firm's long-term investments is called
| | | | | | | | | | | |
..
| |
A. Capital Budgeting - the investment opportunities that give more return than
| | | | | | | | | | | |
they cost. ROI.
| |
B. Working Capital - managing short term assets and short-term liabilities. Makes
| | | | | | | | | | | |
sure business has enough liquidity
| | | |
C. Profit Maximization
| |
D. Capital Structure - decisions, long term vs short term debt, debt vs equity, how
| | | | | | | | | | | | | |
much to borrow, cost of borrowing?, how and where to raise that money. How to
| | | | | | | | | | | | | | |
finance business. Making one decision over another is at the heart of capital
| | | | | | | | | | | | | |
structure. Give and take between risk and reward
| | | | | | |
Short term assets are cash, accounts receivable, and certain kinds of inventory.
| | | | | | | | | | | |
Short term liability is anything owed within a year. - CORRECT ANSWER✔✔-A.
| | | | | | | | | | | |
Capital Budgeting - the investment opportunities that give more return than they
| | | | | | | | | | | |
cost. ROI. |
2) Which of the following is an example of an indirect agency cost?
| | | | | | | | | | | |
A. Unnecessary corporate expenditure
| | |
B. Management auditing expense
| | |
C. A lost opportunity
| | |
D. All the above - CORRECT ANSWER✔✔-C. A lost opportunity
| | | | | | | | |
,3) Which of the following forms of business organization is subject to double
| | | | | | | | | | | | |
taxation?
A. Corporation - legal person, differentiates managers from shareholders,
| | | | | | | | |
shareholders select board of directors, and the board of directors hire
| | | | | | | | | | |
management. Ownership is Easily transferred, shareholder have limited liability,
| | | | | | | | |
company must pay taxes. Double taxation is when corporation pays taxes on its
| | | | | | | | | | | | |
earnings, distributes dividends, and the shareholders pay taxes on their
| | | | | | | | | |
dividends. Most important business in US.
| | | | |
B. Partnership - business formed by 2 or more people. General partner is where
| | | | | | | | | | | | | |
partners share gains and losses and have unlimited liability. Limited partner is
| | | | | | | | | | | |
where there is 1 or more partners and the limited partner does not actively act in
| | | | | | | | | | | | | | |
the business, if they did they would have unlimited liability
| | | | | | | | | |
C. Limited Partnership
| |
D. Sole Proprietorship - business owned by 1 person. Simplest form of business,
| | | | | | | | | | | | |
owner keeps a - CORRECT ANSWER✔✔-A. Corporation - legal person,
| | | | | | | | | |
differentiates managers from shareholders, shareholders select board of
| | | | | | | |
directors, and the board of directors hire management. Ownership is Easily
| | | | | | | | | | |
transferred, shareholder have limited liability, company must pay taxes. Double
| | | | | | | | | |
taxation is when corporation pays taxes on its earnings, distributes dividends, and
| | | | | | | | | | |
|the shareholders pay taxes on their dividends. Most important business in US.
| | | | | | | | | | |
4) Control of a firm ultimately rests with. . .
| | | | | | | | |
A. The CEO
| |
B. The SEC
| |
C. The Stockholders
| |
D. The Founder - CORRECT ANSWER✔✔-C. The Stockholders
| | | | | | |
, 5) Which of the following should a financial manager take into account when
| | | | | | | | | | | | |
considering an opportunity? | |
A. How much cash they expect to receive
| | | | | | |
B. When will they receive the funds
| | | | | |
C. How likely they are to receive the funds
| | | | | | | |
D. All of the Above - CORRECT ANSWER✔✔-D. All of the Above
| | | | | | | | | | |
1) ABC Corporation has current assets of $5,200, fixed assets of $26,000, current
| | | | | | | | | | | | |
liabilities of $4,900, and long-term debt of $15,000. What is the ABC
| | | | | | | | | | | |
Corporation's total equity? What is the NWC of ABC Corporation?
| | | | | | | | |
A. Total Equity $11,000, NWC $11, 300
| | | | | |
B. Total Equity $11,300, NWC $300
| | | | |
C. Total Equity $11,000, NWC $300
| | | | |
D. Total Equity 11,300, NWC $11,000 - CORRECT ANSWER✔✔-B. Total Equity
| | | | | | | | | | |
$11,300, NWC $300 | |
2) Company X has fixed assets of $6million on its balance sheet that were
| | | | | | | | | | | | | |
originally purchased for $10million; it can be sold for $7million today. The
| | | | | | | | | | | |
company's balance sheet also shows current liabilities of $2.6million and NWC of
| | | | | | | | | | | |
$900,000. In addition, if all the current assets were liquidated today, the company
| | | | | | | | | | | |
would receive $2.8million cash. What is the book value of Company X's total
| | | | | | | | | | | | | |
assets? What is the market value of Company X's total assets?
| | | | | | | | | |
A. BV $9.5million, MV $9.8million
| | | |
B. BV $9.5million, MV $12.8million
| | | |
C. BV $8.6million, MV $12.8million
| | | |
