Fin515

Exam

Question 1. 1. (TCO A) Which of the following statements is CORRECT? (Points : 10) |

       One of the disadvantages of incorporating a business is that the owners then become subject to liabilities in the event the firm goes bankrupt.

       Sole proprietorships are subject to more regulations than corporations.

       In any type of partnership, every partner has the same rights, privileges, and liability exposure as every other partner.

       Sole proprietorships and partnerships generally have a tax advantage over many corporations, especially large ones.

       Corporations of all types are subject to the corporate income tax.

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Question 2. 2. (TCO G) Which of the following statements is CORRECT? (Points : 10) |

       The statement of cash flows reflects cash flows from operations, but it does not reflect the effects of buying or selling fixed assets.

       The statement of cash flows shows where the firm’s cash is located; indeed, it provides a listing of all banks and brokerage houses where cash is on deposit.

       The statement of cash flows reflects cash flows from continuing operations, but it does not reflect the effects of changes in working capital.

       The statement of cash flows reflects cash flows from operations and from borrowings, but it does not reflect cash obtained by selling new common stock.

       The statement of cash flows shows how much the firm’s cash—the total of currency, bank deposits, and short-term liquid securities (or cash equivalents)—increased or decreased during a given year.

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Question 3. 3. (TCO G) LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $620,000, and its net income after taxes was $24,655. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would LeCompte need in order to achieve the 15% ROE, holding...