Reference no: EM132289264
1. One of the disadvantages of forming a proprietorship is that it is subject to many government regulations.
True
False
2. Sarbanes-Oxley Act was passed by Congress in the wake of a series of accounting scandals in the early 2000s.
True
False
3. A major disadvantage of operating as a proprietorship is that it creates unlimited liability for the business's debt.
True
False
4. Double taxation can be avoided by forming a "S Corporation".
True
False
5. An estimate of a stock's "true" value based on accurate risk and return is known as the company's market price.
True
False
6. The verbal section of a company's annual report discusses the company's past year's performance and future prospects.
True
False
7. Income Statement gives a "snapshot" of a company's assets and who has claims on them on a given date.
True
False
8. Stockholders' Equity can be calculated by subtracting total liabilities from total assets.
True
False
9. Cost of assets depleted in the production process such as machinery, equipment, vehicle, etc. is known as amortization.
True
False
10. The amount of cash that could be withdrawn without harming a firm's ability to operate and produce future cash flow is known as free cash flow.
True
False
11. The tax rate applicable to the last unit of a person's income is known as the marginal tax rate.
True
False
12. Liquidity ratios measure a firm's ability to pay off debts that are maturing within one year.
True
False
13. The DuPont Equation shows the relationships among asset management, debt management, and profitability ratios.
True
False
14. Benchmarking refers to an analysis of a firm's financial ratios over time.
True
False
15. Ratio Analysis is used by three main groups: managers, credit analysts, and stock analysts.
True
False
16. A series of equal payments at fixed intervals for a specified number of periods is known as annuity.
True
False
17. Market Value ratios give an idea of what investors think about the firm and its future prospects.
True
False
18. Inventory Turnover Ratio is calculated by deducting inventories from current assets and then dividing by current liabilities.
True
False
19. Times-Interest-Earned Ratio measures the firm's ability to honor its debt payments.
True
False
20. The group of ratios that show the combined effects of liquidity, asset management, and debt management on operating results are known as profitability ratios.
True
False
21. Ease of forming, being subject to few government regulations, and being subject to lower income taxes are advantages of:
A. corporation
B. publicly traded company
C. proprietorship
D. initial public offering
22. The financial statement that shows how much cash the company began the year with and how much cash it ended up with is known as:
A. balance sheet
B. statement of cash flows
C. income statement
D. statement of stockholders' equity
23. If paid in capital for Firm A is $7 million, retained earnings are $2 million, and net income is $1 million, what is Firm A's stockholder's Equity?
A. $3 million
B. $5 million
C. $8 million
D. $9 million
24. If total assets are $1 million, current assets are $500,000, and current liabilities are $400,000, what is the net working capital?
A. $100,000
B. $300,000
C. $600,000
D. $900,000
25. A decline in the value of intangible assets during the production process is known as:
A. depreciation
B. annulment
C. amortization
D. retained earnings
26. Financial statements can be used to determine important questions such as:
A. How large is the company?
B. Is the company growing?
C. Is the company making or losing money?
D. All of the above.
27. A tax system in which the tax rate is higher on higher incomes is known as __________________ system.
progressive tax
regressive tax
flat tax
inverse tax
28. _______________ was created by Congress to make it more difficult for wealth individuals to avoid paying taxes through the use of various deductions.
Progressive tax
Alternative Minimum Tax
Regressive Tax
Flat Tax
29. If Current Assets equal $500,000, Current liabilities equal $400,000, and inventories equal $100,000, what is the current ratio?
A. 1.25
B. 1.50
C. 1.75
D. 2.00
30. If Current Assets equal $500,000, Current liabilities equal $400,000, and inventories equal $100,000, what is the quick ratio?
A. 1.00
B. 1.25
C. 1.50
D. 1.75