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How are assets typically organized on a balance sheet? In order of...

How are assets typically organized on a balance sheet?

  • In order of value, with most valuable assets first.
  • In order of value, with least valuable assets first.
  • In order of liquidity, with least liquid assets first.
  • In order of liquidity, with more liquid assets first.

What must be forecasted first in order to prepare the pro forma income statement?

  • Cost of goods sold
  • Net income
  • Sales
  • Expenses

Over the last six years, prices and investing activity in the bond market rose for two years and then fell consistently for the next four years.

How is this market classified?

  • Secular bull market
  • Primary bear market
  • Secular bear market
  • Primary bull market

If a balance sheet shows owner's equity of $10 million, current liabilities of $6 million and long-term liabilities of $15 million, then what are the total assets of the company?

  • $16 million
  • $31 million
  • $19 million
  • $25 million

What is the recent trend of algorithmic trading criticized for?

  • Being too transparent
  • Over-extending credit
  • Improving market liquidity
  • Increasing market volatility

The process of predicting what the market would pay for a company's investments and bonds is __________.

  • financial management
  • valuation
  • appraisal
  • assessment

Which organization most fully protects owners from personal liabilities and is taxed separately?

  • S Corp
  • LLC
  • C Corp
  • Partnership

Preparing a cash flow forecast helps a company to avoid __________.

  • liquidity
  • higher financing costs
  • net losses
  • opportunity costs

Under GAAP, how would the sale of company-owned land be accounted for on the statement of cash flows?

  • As an increase in cash flow from investment
  • As an increase in cash flow from operations
  • As a decrease in cash flow from financing
  • As a decrease in cash flow from operations

If operating income is $155,000 and total revenue is $577,000, then the operating margin is __________.

  • incalculable without net income data
  • 72.20%
  • 26.80%
  • incalculable without equity data

Tom and Wendy are launching a life coaching business. They plan to have an equal say in any managerial business decisions and they plan to share any profits or losses. They are concerned about their exposure to liability, so they have purchased some professional insurance policies. However, they are pleased with how simple it has been to organize their business.

Which form of business structure have Tom and Wendy likely adopted?

  • Partnership
  • S corporation
  • Sole proprietorship
  • Corporation

Consider the price to book ratios of the following companies:

  • Company A: 5.45
  • Company B: 14.30
  • Company C: 10.08
  • Company D: 19.62

Which company do investors believe will create the most value from its assets?

  • Company B
  • Company C
  • Company D
  • Company A

In which scenario would benchmarking be least useful?

  • Comparing financial ratios of a company in an extractive industry and a tertiary industry
  • Comparing financial ratios of a company in a primary industry and an extractive industry
  • Comparing financial ratios of a company in a secondary industry and a manufacturing industry
  • Comparing financial ratios of a company in a tertiary industry and a service industry

Finn is interested in taking over a small business, but he wants to pay a fair price for it, so he consults their income statements.

How can he determine the company's overall profitability in each quarter of the previous year?

  • Calculate total revenue minus operating expenses
  • Calculate operating revenue minus operating expenses
  • Calculate total revenue minus taxes paid
  • Calculate total revenue minus total expenses

Which of the following is an example of an agency conflict?

  • Manager's salary
  • Managerial self-dealing
  • Board oversight
  • Shareholder voting rights

Consider the following information:

Total current assets$42,123Deferred income taxes$2,638Inventories$4,873Prepaid expenses$1,554Other assets$6,263Total current liabilities$38,902


What is the current ratio?

  • 1.15
  • 1.08
  • 0.97
  • 1.21

Question 18

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Why is it good for businesses when personal values and company values align?

  • Because employees are more likely to have moral sensitivity.
  • Because managers can avoid having to deal with ethical questions.
  • Because employees are more likely to uphold company values.
  • Because companies are more likely to follow the law.

Question 19

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Which statement best characterizes the impact of regulatory changes on corporate governance since the 1990s?

  • Corporate transparency and accountability have increased through revised reporting and oversight requirements and stiffer penalties for fraud.
  • Oversight by boards of directors and independent auditors has decreased, allowing for greater corporate flexibility.
  • Corporate governance has become untenable due to requirements that all conflicts of interest be catalogued.
  • New regulations require corporate managers to prioritize the interests of external stakeholders over those of shareholders.

The pro forma balance sheet reflects the impact of a company's strategic plan on its __________.

  • revenue and expenses
  • revenue and expenses
  • assets and liabilities
  • share price

One reason that ROE calculations are broken down into three components in the DuPont equation is that __________.

  • the numbers are more difficult to falsify
  • it hides problem areas from analysts
  • it shows management where ROE improvements can be made
  • it highlights exceptional financial planning

What is finance?

  • The study of a business's past financial decisions
  • The process of communicating financial information about a business
  • The study of how to allocate assets to maximize returns
  • The social science that analyzes the production, distribution and consumption of goods and services

Lucas is worried about his company's short-term viability.

What type of financial statement should he look at?

  • Cash flow statement
  • Balance sheet
  • Statement of changes in equity
  • Income statement

Capacity planning answers the question "__________"

  • How will we finance it?
  • What will our revenue be?
  • How will we decide which direction to go?
  • How can we be most efficient?

If Company A has a lower debt ratio than Company B, then Company A is likely to have __________ than Company B.

  • more total assets
  • a higher level of financial risk
  • a greater ability to borrow
  • less financial flexibility

Which of the following would explain a company's day sales outstanding ratio rising from 32 to 41.25?

  • The company's accounts receivable has decreased while total sales has increased.
  • The company's accounts receivable has decreased while the average inventory has increased.
  • The company's accounts receivable has remained constant while total sales has decreased.
  • The company's accounts receivable has decreased while the average inventory has remained constant.

What is a question that should be asked about inventory when forecasting?

  • What is the anticipated ratio of credit to cash sales?
  • How quickly can we collect cash receipts?
  • Is the company's liquidity sufficient?
  • What are the current storage costs?

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