Reference no: EM133117259
Section One: Multiple Choice.
Draw a circle around the letter that corresponds to your choice of right answer.
1) Which of the following could explain why a business might choose to organize as a corporation rather than as a sole proprietorship or a partnership?
a. Corporations generally face fewer regulations.
b. Corporations generally face lower taxes.
c. Corporations generally find it easier to raise capital.
d. Corporations enjoy unlimited liability.
e. Statements c and d are correct.
2) The primary goal of a publicly-owned firm interested in serving its stockholders should be to
a. Maximize expected total corporate profit.
b. Maximize expected EPS.
c. Minimize the chances of losses.
d. Maximize the stock price per share.
e. Maximize expected net income.
3)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 above are correct.
e. Statements b and c are correct.
4)Which of the following items I s included as part of a company's current assets?
a. Accounts payable.
b. Inventory.
c. Accounts receivable.
d. Statements b and c are correct.
e. All of the statements above are correct.
5)Which of the following items can be found on a firm's balance sheet listed as a current asset?
a. Accounts receivable.
b. Depreciation.
c. Accrued wages.
d. Statements a and b are correct.
e. Statements a and c are correct.
6) All else equal, which of the following actions will increase the amount of cash on a company's balance sheet?
a. The company issues new common stock.
b. The company repurchases common stock.
c. The company pays a dividend.
d. The company purchases a new piece of equipment.
e. All of the statements above are correct.
7)Which of the following are likely to occur if Congress passes legislation that forces Carter Manufacturing to depreciate their equipment over a longer time period?
a. The company's physical stock of assets would increase.
b. The company's reported net income would decline.
c. The company's cash position would decline.
d. All of the statements above are correct.
e. Statements b and c are correct.
8) Which of the statements below is TRUE?
a. Accounting Identity is: Assets ≡ Liabilities - Owners' Equity.
b. Accounting Identity is: Assets ≡ Liabilities + Owners' Equity.
c. Accounting Identity is: Assets ≡ Owners' Equity - Liabilities.
d. Accounting Identity is: Liabilities ≡ Assets + Owners' Equity.
e. None of the above.
9) The income statement begins with revenue and subtracts various operating expenses until arriving at ________.
a. Earnings after taxes.
b. Net income.
c. Taxable income.
d. EBIT.
e. None of the above.
10) Net income is ________.
a. Not cash flow.
b. The cash flow from the operations of the company during the period.
c. The increase or decrease in cash flow for the period.
d. Earnings before interest and taxes.
e. None of the above.
Section Two: Subjective Questions.
Answer these following questions
1- Explain briefly the difference between Money Market and Capital Market Instruments. Support your argument with examples.
2- What are the three fundamental decisions in financial management?
3- Explain the Agency problem and the means to overcome such conflicts.
4- What are the forms of business organization?
5- Discuss all the aspects and components of the fisher equation.
Problem 1:
Arco Steel, Inc. generated total sales of $45,565,200 during fiscal 2010. Depreciation and amortization for the year totaled $2,278,260, and cost of goods sold was $27,339,120. Interest expense for the year was $9,641,300 and selling, general, and administrative expenses totaled $4,556,520 for the year. What is Arco's EBIT for 2010?
Problem2:
Parrino Corporation has announced that its net income for the year ended June 30, 2008, is $1,824,214. The company had an EBITDA of $ 5,174,366, and its depreciation and amortization expense was equal to $1,241,790. The company's average tax rate is 34 percent. What is the amount of interest expense for the firm?
Problem 3:
In an effort to analyze Clockwork Company finances, Jim realized that he was missing the company's net profits after taxes for the current year. Find the company's net profits after taxes using the following information.
Return on total assets = 2% Total Asset Turnover = 0.5x Cost of Goods Sold = $105,000 Gross Profit Margin = 30%
Problem 4:
You are given the following information about Clarkesville Plumbing Company. Revenues last year totaled $896, depreciation expenses $75, costs of goods sold $365, and interest expenses $54. The company has an average tax rate of 34 percent.
Calculate its net income by setting up an income statement.
Solve them showing all your computations In details