Mid Term Reference Set One

Mid Term Reference Set One

Multiple Choice Questions (35*2.8)

1. Insider trading is:

A. legal.

B. illegal.

C. impossible to have in our efficient market.

D. discouraged, but legal.

2. The primary goal of financial management is to:

A. maximize current dividends per share of the existing stock.

B. maximize the current value per share of the existing stock.

C. avoid financial distress.

D. minimize operational costs and maximize firm efficiency.

3. Agency costs refer to:

A. the total dividends paid to stockholders over the lifetime of a firm.

B. the costs that result from default and bankruptcy of a firm.

C. corporate income subject to double taxation.

D. the costs of any conflicts of interest between stockholders and management.

4. Which form of business structure faces the greatest agency problems?

A. sole proprietorship

B. general partnership

C. limited partnership

D. corporation

5. The financial statement showing a firm's accounting value on a particular date is the:

A. income statement.

B. balance sheet.

C. statement of cash flows.

D. tax reconciliation statement.

6. A current asset is:

A. an item currently owned by the firm.

B. an item that the firm expects to own within the next year.

C. an item currently owned by the firm that will convert to cash within the next 12 months.

D. the amount of cash on hand the firm currently shows on its balance sheet.

7. The financial statement summarizing a firm's accounting performance over a period of time is the:

A. income statement.

B. balance sheet.

C. statement of cash flows.

D. tax reconciliation statement.

8. Your _____ tax rate is the amount of tax payable on the next taxable dollar you earn.

A. deductible

B. marginal

C. total

D. average

9. Which one of the following assets is generally the most liquid?

A. inventory

B. buildings

C. accounts receivable

D. equipment

E. patents

10. Depreciation:

A. is a...