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quiz.acctg - Rev Revenues Exp Less Operating Expenses EBIT...

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University of Houston C. T. Bauer College of Business Finance 3332 Principles of Financial Management Accounting Quiz 1. Construct a simplified Income Statement beginning with Revenues and ending with Earnings per Share. 2. Construct a simplified Balance Sheet. 3. List the types of financial statements commonly found in annual reports. 1. 2. 3. 4. Characterize each statement by circling T for True or F for False. T F 1. The appropriate goal of the financial manager is to maximize the firm’s earnings per share. T F 2. Finance consists of three primary areas: Corporate Finance, Investments, and Financial Markets and Institutions T F 3. For investment purposes, real estate is an example of a financial asset. T F 4. Financial assets can be characterized as fixed income, equity, or real. T F 5. Agency problems arise from the potential conflict of interest due to the separation of ownership and control.
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Quiz Solutions 1. Simplified Income Statement:
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Unformatted text preview: Rev Revenues- Exp Less Operating Expenses EBIT Earnings before Interest and Taxes or Operating Income- Int Less Interest Paid EBT Earnings before taxes- taxes Less Income Taxes EAT Earnings after Taxes or Net Income EAT / Number of shares of Common Stock Outstanding = EPS In algebraic form: EPS = [(Rev – Exp – Int)(1-t)] / (number of shares of common stock outstanding) where t is the marginal tax rate 2. Simplified Balance Sheet: Assets Liabilities Short-term assets Short-term liabilities Long-term assets Long-term liabilities Stockholders Equity: Common stock at par Additional paid in capital Retained earnings . Total Assets Total liabilities and stockholders’ equity 3. Types of financial statements commonly found in annual reports: 1. Income statement 2. Balance sheet 3. Statement of cash flows 4. Statement of retained earnings Statements 2 and 5 are True...
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