Test1 Fall 2002

Test1 Fall 2002 - BUS 320 Exam #1 Fall, 2002 (Answers are...

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BUS 320 Name: ______________________ Exam #1 Fall, 2002 SS#:   ______________________ (Answers are provided at the end of the test). 1. Which of the following statements is false ? a. Common stock is an example of a capital market security. b. Commercial paper is a money market security and represents an unsecured loan with  a maturity of less than one year. c. Treasury bills are money market securities. d. Secondary market transactions provide new capital to the corporation whose  securities are traded. 2. Which of the following is not  an example of an “organized” exchange? a. American Stock Exchange b. New York Stock Exchange c. Over-the-counter market  d. Regional exchange 3. Which of the following statements is false ? a. Higher levels of debt tend to magnify gains and  losses for a firm. b. When individual investors pay tax on dividends received, they are being subjected to  double taxation. c. Interest paid by a corporation to its bondholders is not a tax deductible expense for  the corporation. d. The Retained Earnings on the Balance Sheet represents all of the Net Income from  previous years that was not paid out as dividends. 4. Which of the following statements is false  regarding depreciation? a. It is a pre-tax expense (deduction) on the firm’s Income Statement. b. It is a non-cash expense, and therefore does not affect a firm’s cash flows.  c. It allows an asset’s cost to be expensed over its useful life. d. Its value to a firm is that it reduces taxable income and therefore reduces the firm’s  tax liability.
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5. Which of the following statements is true ? a. One of the advantages of a partnership is the ease of transferring ownership  compared to a corporation. b. “Agency” refers to the relationship that exists between the firm’s top management and  middle management. c.
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Test1 Fall 2002 - BUS 320 Exam #1 Fall, 2002 (Answers are...

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