Exam1SP09R

Exam1SP09R - Exam1SP09 Multiple Choice Identify the choice...

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Exam1SP09 Multiple Choice Identify the choice that best completes the statement or answers the question. Note that no question is identified as the bonus question. There are a couple of questions that will take a little longer than average, but no super-long questions. If you get stuck on any question, move on and come back to this question later. Chapter 1 ____ 1. Which of the following statements is most correct? a. One of the advantages of the corporate form of organization is that there is no double taxation. b. The partnership form of organization has easy transferability of ownership. c. One of the disadvantages of the sole proprietorship form of organization is that there is unlimited liability. d. All of these statements are correct. Chapter 1 ____ 2. Which of the following actions are likely to reduce agency conflicts between stockholders and managers? a. Paying managers a large fixed salary. b. Increasing the threat of corporate takeover. c. Placing restrictive covenants in debt agreements. d. All of the statements are correct. Chapter 1 ____ 3. Which of the following statements is most correct? a. Bond covenants are a good way to resolve agency conflicts between stockholders and managers. b. Hostile takeovers tend to reduce a company's stock price. c. Corporations have limited liability. d. All of these statements are correct. Chapter 2 ____ 4. A start-up firm is making an initial investment in new plant and equipment. Currently, equipment is depreciated on a straight-line basis over 10 years. Assume that Congress is considering legislation that will allow the corporation to depreciate the equipment over 7 years. If the legislation becomes law, and the firm implements the 7-year depreciation basis, which of the following will occur? a. The firm's tax payments will increase. b. The firm's net income will increase. c. The firm's taxable income will increase. d. The firm's net cash flow will increase. e. The firm's operating income (EBIT) will increase. Chapter 3 ____ 5. Company X has a higher ROE than Company Y, but Company Y has a higher ROA than Company X. Company X also has a higher total assets turnover ratio than Company Y; however, the two companies have the same total assets. Which of the following statements is most correct? a. Company X has a lower debt ratio than Company Y. b. Company X has a higher profit margin than Company Y. c. Company X has a lower net income than Company Y. d. All of the statements are correct. Chapter 3
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____ 6. Cannon Company has enjoyed a rapid increase in sales in recent years, following a decision to sell on credit. However, the firm has noticed a recent increase in its collection period. Last year, total sales were $1 million, and $250,000 of these sales were on credit. During the year, the accounts receivable account averaged $41,096. It is expected that sales will increase in the forthcoming year by 50 percent, and, while credit sales should continue to be the same proportion of total sales, it is expected that the days sales outstanding will also
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This note was uploaded on 11/21/2011 for the course BMGT 340 taught by Professor White during the Fall '08 term at Maryland.

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Exam1SP09R - Exam1SP09 Multiple Choice Identify the choice...

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