Finance 300 Mizzzou

Tim Howald semester 1 8-9-26. study guide

Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's

capital structure

Nishaa has been promoted and is now in charge of planning and managing her firm’s long- term investments. In other words, she is in charge of:

capital budgeting.

Raleigh BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions

related to these accounts are referred to as:

working capital mangament

The potential conflict of interest between a firm's owners and its managers is referred to as

which type of conflict?

agency

The shareholders of Qiang’s Markets would benefit if the firm were to be acquired by Better

Foods. However, Weil’s board of directors rejects the acquisition offer. This is an example

of:

the agency conflict

When conducting a financial analysis of a firm, financial analysts:

frequently us accounting information

If you accept a job as a domestic security analyst for a brokerage firm, you are most likely

working in which one of the following financial areas?

investments

Which one of the following functions is generally a responsibility assigned to the corporate

treasurer?

Capital expenditure

Which one of the following functions should be assigned to the corporate treasurer rather

than to the controller?

cash management

Capital budgeting includes the evaluation of which of the following?

Size, timing, and risk of future cash flows

Which one of the following is a working capital decision?

how much cash a firm should keep and reserve

Which one of the following is a capital structure decision?

establishing a preferred debt to equity level

Working capital management includes which one of the following?

determining which customers will be granted credit

The daily financial operations of a firm are primarily controlled by managing the

working capital

Which one of the following forms of business organization offers liability protection to some

of its owners but not to all of its owners?

limited partnership

Which one of the following statements correctly applies to a sole proprietorship?

Obtaining additional equity is dependent on the owner's personal finances

In a general partnership, each partner is personally liable for:

the total debts of the partnership, even if he or she was unaware of those debts.

Which one of the following is an advantage of being a limited partner?

Losses limited to capital invested

What is true about a corporation?

it is a legal entity separate from its owners

Which one of the following is contained in the corporate bylaws?

Procedures for electing corporate directors

One advantage of the corporate form of organization is the:

ability to raise larger sums of equity capital than other organizational forms.

what do Corporate shareholders have the ability to do?

have the ability to change the corporation's bylaws.

what do LLC’s prefer?

prefers its profits be taxed as personal income to its owners.

Limited liability companies are primarily designed to:

provide limited liability while avoiding double taxation.

The primary goal of financial management is to maximize:

the market value of existing stock.

The primary goal of financial management is most associated with increasing the:

market value of the firm.

The goal of financial management is to increase the:

current market value per share.

What is the primary goal of financial management for a sole proprietorship?

Maximize the market value of the equity

The Sarbanes-Oxley Act in 2002 was primarily prompted by which one of the following

from the 1990s ?

Corporate accounting and financial fraud

The Sarbanes-Oxley Act of 2002 has mad WHO responsible for statements?

essentially made officers of publicly traded firms personally responsible for the firm's

financial statements.

Which one of the following situations is most apt to create an agency conflict?

Basing management bonuses on the length of employment

Which one of the following is most apt to align management's priorities with shareholders'

interests?

Compensating managers with shares of stock that must be held for a minimum of

three years

Probably the least effective means of aligning management goals with shareholder interests is

automatically increasing management salaries on an annual basis.

Levi had an unexpected surprise when he returned home this morning. He found that a

chemical spill from a local manufacturer had spilled over onto his property. The potential

claim that he has against this manufacturer is that of a

stakeholder

One example of a primary market transaction would be the:

sale of 1,000 shares of newly issued stock by Alt Company to Miquel.

You contacted your stock broker this morning and placed an order to sell 300 shares of a

stock that trades on the NYSE. This sale will occur in the

secondary market.

Which one of the following statements is correct?

A) All secondary markets are dealer markets.

B) All secondary markets are broker markets.

C) All stock trades between existing shareholders are primary market transactions.

D) All stock transactions are secondary market transactions.

E) All over-the-counter sales occur in dealer markets.

All over-the-counter sales occur in dealer markets.

The issuer of a security must be involved in all __________ transactions involving that

security.

primary market

what do security dealers do ?

buy and sell from their own inventory.

what makes an AUCTION MARKET special?

has a physical trading floor.

A private placement is most apt to involve:

a life-insurance company

Which one of the following statements is correct?

A) All of the major stock exchanges are U.S. based.

B) The NYSE was created by the National Association of Securities Dealers in the early

1930s.

C) The Chicago Stock Exchange is a dealer market.

D) OTC markets have a physical trading floor generally located in either New York City

or Chicago.

E) The primary purpose of the NYSE is to match buyers with sellers.

E) The primary purpose of the NYSE is to match buyers with sellers.

Which of the following is not a basic area of finance as described by the text?

accounting

Which of the following statements regarding buy now, pay later (BNPL) is most accurate?

BNPL loans often carry a higher interest rate than a credit card.

Which of the following is a list of records that are used to record transactions and, by design, is resistant to alteration and thus provides an accurate record of transactions?

blockchain

What is the term for a new form of business organization that is for-profit, but has three

additional legal attributes: accountability, transparency, and purpose?

B corporation

What of the following is an intangible fixed asset?

copyright

What is production equipment classified as?

Tangible fixed asset

Over the past year, a firm decreased its current assets and increased its current liabilities. As

a result, the firm's net working capital:

had to decrease

Shareholders’ equity is best defined as

he residual value of a firm

When does networking capital decrease?

a dividend is paid to current shareholders.

A negative cash flow to stockholders indicates a firm

received more from selling stock than it paid out to shareholders.

An increase in which one of the following will increase operating cash flow for a profitable,

tax-paying firm?

depreciation

Tressler Industries opted to repurchase 5,000 shares of stock last year in lieu of paying a

dividend. The cash flow statement for last year must have which one of the following

assuming that no new shares were issued?

positive cash flow to shareholders

Cash flow to creditors increases when:

long term debt is repaid

Cash flow to creditors increases when:

long-term debt is repaid.

Builder's Outlet just hired a new chief financial officer. To get a feel for the company, she

wants to compare the firm's sales and costs over the past three years to determine if any

trends are present and also determine where the firm might need to make changes. Which one

of the following statements will best suit her purposes?

common size income statement

A common-size balance sheet helps financial managers determine

if changes are occurring in a firm's mix of assets.

Quincy Real Estate pays out a fixed percentage of its net income to its shareholders in the

form of annual dividends. Given this, the percentage shown on a common-size income

statement for the dividend account will:

vary in direct relation to the net profit percentage.

Which one of the following actions will increase the current ratio, all else constant?

Assume the current ratio is greater than 1.0

cash Payment of an account payable

The equity multiplier is equal to:

one plus the debt-equity ratio

Which one of the following best indicates a firm is utilizing its assets more efficiently

than it has in the past?

A decrease in the capital intensity ratio

Which one of these statements is true concerning the price-earnings (PE) ratio

A high PE ratio may indicate that a firm is expected to grow significantly

LaVerne’s Candies reduced its fixed assets this year without affecting the shop's

operations, sales, or equity. This reduction will increase which of the following ratios?

Capital intensity ratio

Return on assets

Return on equity

Total asset turnover

Return on assets Total asset turnover

which of the following is true? )

a) Peer group analysis is easier when a firm is a conglomerate versus when it has only a

single line of business.

B) Peer group analysis is easier when seasonal firms have different fiscal years.

C) Peer group analysis is simplified when firms use varying methods of depreciation.

D) Comparing results across geographic locations is easier since all countries now use a

common set of accounting standards.

E) Adjustments have to be made when comparing the income statements of firms that

use different methods of accounting for inventory.

Adjustments have to be made when comparing the income statements of firms that

use different methods of accounting for inventory.

Financial statement analysis should provide…

provides useful information that can serve as a basis for forecasting future

performance.

Kendall is investing $3,333 today at 3 percent annual interest for three years. Which one

of the following will increase the future value of that amount?

Increasing the interest rate

The future value of a lump-sum investment will increase if you:

increase the time period

Given an interest rate of zero percent, the future value of a lump sum invested today will

always:

remain constant, regardless of the investment time period

All else held constant, the future value of a lump-sum investment will decrease if the:

interest is changed to simple interest from compound interest.

the relationship between the present value and the investment time period is best

described a

inverse

Today, Charity wants to invest less than $3,000 with the goal of receiving $3,000 back

some time in the future. Which one of the following statements is correct?

The period of time she has to wait decreases as the amount she invests increases.