WSU Accounting 230 FINAL EXAM WITH ERROR-FREE ANSWERS

common stock characteristics - Correct Answer - voting rights - limited liability - right to receive dividends - right to share distribution of assets - access to public markets - residual claim to corporate assets advantages of corporations - Correct Answer - limited liability - easy generation of capital - separation of owners - easy transfer of ownership disadvantages of corporation - Correct Answer - double taxation - gov regulations - more paperwork preferred stock characteristics - Correct Answer - no voting rights - first rights for dividends - attracts wider investment - preference in distribution of assets - flexibility with contracts bonds payable characteristics - Correct Answer - less risky investment - less costly - interest is deductible - interest is not diluted- people who hold bonds are not owners retained earnings - Correct Answer credit balance of all net income less dividends over life of company treasury stock - Correct Answer stock purchased by own company recorded as contra equity with a negative balance (gains and losses are not recorded) vertical analysis - Correct Answer relationship of each item to total figure % of base = amount of individual item/ amount of base horizontal analysis - Correct Answer measures trends in data for a single company over time % change= dollar change/ base year receivables turnover ratio - Correct Answer risk ratio net credit sales/ average accounts recievable inventory turnover ratio - Correct Answer risk ratio cost of goods sold/ average inventory current ratio - Correct Answer risk ratio short run liquidity current assets/ current liabilities debt to equity ratio - Correct Answer risk ratio solvency total liabilities/ total stock equity