This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Answers are in blue Chapter1. An Overview of Financial Management 1. What is the sequential approach? A) Profit maximization B) Agency conflict C) Efficient management D) Satisfying stakeholders to maximize shareholder wealth maximization E) None f the above D) (Spring 2009 1) 2. Which of the following is NOT to address the agency conflict between shareholders and managers? A) maximize sales B) monitor managers activities C) give incentives based on performance D) offer stock shares E) offer stock options A) (Spring 2009 1) 3. What is the main advantage of S-corp relative to C-corp? A) Profit margin B) Single taxation C) limited liability D) Dividend policy E) None B) S-corp Distribution is taxed only once at personal income tax rate. In other words, a single taxation (Spring 2009 1) 4. What is the main advantage of sole proprietorship relative to S-corporation? A) Profit margin B) Single taxation C) limited liability D) Dividend policy E) None E) (Fall 2008 1) 5. Which of the following is the reason that the management may fail to try to achieve the objective of the firm? A) Maximize sales B) Maximize profits C) Avoid financial distress D) Agency conflict E) Maximize the current stock price D) (Fall 2008 1) Chapter3. Financial Statements, Cash Flow, and Taxes 1. Which one is an intangible real asset? A) building B) stocks and bonds C) patent D) equipment E) currency C) (Spring 2009 1) 2. While preparing a pro forma B/S, you have realized that A > L+E, you want to balance the B/S with increased long- term debt. What is (are) the problem(s) you may run into? A) increased debt B) increased liquidity C) decreased profit D) liquidity problem E) both increased debt and liquidity problem A) Obviously, you have increased debt. Since it is long-term debt, you do not have a liquidity problem you may experience with short-term debt (=> you need to have enough cash or cashable assets to cover any bills to pay). (Spring 2009 3) 3. ABC company is increasing its equity by selling additional shares to the public and also by converting its retained earnings. The total amount to be raised is $1,000. Given that the size of retained earnings is $300, how much should be raised externally by issuing new shares if $400 is raised externally by issuing new debt securities? A) $700 B) $705 C) $1,000 D) $1,005 E) $300 E) Total funding (=financing) needed = 1,000, Internal funding from using retained earnings = 300, external funding by issuing new common stock shares = 400 => 1000-300-400=300 = amount to be raised by issuing new debt securities like CP, Bonds, etc. (Spring 2009 3) 4. In order to force your pro forma B/S to balance, what do you need to do when estimated assets exceed the sum of liabilities and equity?...
View Full Document
This note was uploaded on 02/09/2011 for the course FIN 2030 taught by Professor Baker during the Spring '11 term at Southeaster Oklahoma State University.
- Spring '11