FIN 320 Final Exam Review
Questions with Correct
Answers
Theo's BBQ has $48000 in current assets and $39000 in current liabilities. Decisions related to these
accounts are referred to as:
A. capital structure decisions
B. capital budgeting decisions
C. working capital management
D. operating management
E. fix account structure - Correct Answers: C. working capital managment
Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a
75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?
A. Limited Partnership
B. Corporation
C. Sole proprietorship
D. General partnership
E. Public company - Correct Answers: B. Corporation
The potential conflict of interest between a firm's owners and its managers is referred to as which type
of conflict?
A. Organizational
B. Structural
C. Formative
D. Agency
E. Territorial - Correct Answers: D. Agency
A sole proprietorship:
,A. provides limited financial liability for its owner
B. involves significant legal costs during the formation process
C. has an unlimited life
D. has its profits taxed as personal income
E. can generally raise significant capital from non-owner sources - Correct Answers: D. has its profits
taxed as personal income
A corporation:
A. is ultimately controlled by its board of directors
B. is a legal entity separate from its owners
C. is prohibited from entering into contractual agreements
D. has its identity defined by its bylaws
E. has its existence regulated by the rules set forth in its charter - Correct Answers: B. is a legal entity
separate from its owners
One advantage of the corporate form of organization is the:
A. taxation of the corporate profits
B. unlimited liability for its shareholders
C. double taxation on the profits
D. ability to raise larger sums of equity capital than other organizational forms
E. ease of formation compared to other organizational forms - Correct Answers: D. ability to raise larger
sums of equity capital than other organizational forms
The primary goal of financial management is to maximize:
A. current profits
B. market share
C. current dividends
D. the market value of existing stock
E. revenue growth - Correct Answers: D. the market value of existing stock
, Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?
A. Decrease the number of corporations that can be publicly traded
B. Increase the protections against corporate fraud
C. Limit secondary issues of corporate securities
D. Increase the dividends paid to shareholders
E. Increase the number of firms that "go dark" - Correct Answers: B. Increase the protections against
corporate fraud
Net working capital is defined as:
A. the depreciated book value of a firm's fixed assets
B. the value of a firm's current assets
C. available cash minus current liabilities
D. total assets minus total liabilities
E. current assets minus current liabilities - Correct Answers: E. current assets minus current liabilities
The financial statement that summarizes a firm's accounting value as of a particular date is called the:
A. income statement
B. cash flow statement
C. liquidity position
D. balance sheet
E. periodic operating statement - Correct Answers: D. balance sheet
The tax rate that determines the amount of tax that will be due on the next dollar of taxable income
earned is called the:
A. average tax rate
B. variable tax rate
C. marginal tax rate
D. fixed tax rate
E. ordinary tax rate - Correct Answers: C. marginal tax rate
Questions with Correct
Answers
Theo's BBQ has $48000 in current assets and $39000 in current liabilities. Decisions related to these
accounts are referred to as:
A. capital structure decisions
B. capital budgeting decisions
C. working capital management
D. operating management
E. fix account structure - Correct Answers: C. working capital managment
Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a
75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?
A. Limited Partnership
B. Corporation
C. Sole proprietorship
D. General partnership
E. Public company - Correct Answers: B. Corporation
The potential conflict of interest between a firm's owners and its managers is referred to as which type
of conflict?
A. Organizational
B. Structural
C. Formative
D. Agency
E. Territorial - Correct Answers: D. Agency
A sole proprietorship:
,A. provides limited financial liability for its owner
B. involves significant legal costs during the formation process
C. has an unlimited life
D. has its profits taxed as personal income
E. can generally raise significant capital from non-owner sources - Correct Answers: D. has its profits
taxed as personal income
A corporation:
A. is ultimately controlled by its board of directors
B. is a legal entity separate from its owners
C. is prohibited from entering into contractual agreements
D. has its identity defined by its bylaws
E. has its existence regulated by the rules set forth in its charter - Correct Answers: B. is a legal entity
separate from its owners
One advantage of the corporate form of organization is the:
A. taxation of the corporate profits
B. unlimited liability for its shareholders
C. double taxation on the profits
D. ability to raise larger sums of equity capital than other organizational forms
E. ease of formation compared to other organizational forms - Correct Answers: D. ability to raise larger
sums of equity capital than other organizational forms
The primary goal of financial management is to maximize:
A. current profits
B. market share
C. current dividends
D. the market value of existing stock
E. revenue growth - Correct Answers: D. the market value of existing stock
, Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?
A. Decrease the number of corporations that can be publicly traded
B. Increase the protections against corporate fraud
C. Limit secondary issues of corporate securities
D. Increase the dividends paid to shareholders
E. Increase the number of firms that "go dark" - Correct Answers: B. Increase the protections against
corporate fraud
Net working capital is defined as:
A. the depreciated book value of a firm's fixed assets
B. the value of a firm's current assets
C. available cash minus current liabilities
D. total assets minus total liabilities
E. current assets minus current liabilities - Correct Answers: E. current assets minus current liabilities
The financial statement that summarizes a firm's accounting value as of a particular date is called the:
A. income statement
B. cash flow statement
C. liquidity position
D. balance sheet
E. periodic operating statement - Correct Answers: D. balance sheet
The tax rate that determines the amount of tax that will be due on the next dollar of taxable income
earned is called the:
A. average tax rate
B. variable tax rate
C. marginal tax rate
D. fixed tax rate
E. ordinary tax rate - Correct Answers: C. marginal tax rate
