Which of the following can use financial concepts to improve their decisions? - ANS financial
and nonfinancial professionals
The most commonly accepted groups of asset classes include all of the following except - ANS
Machinery and equipment
This is a term to describe non-physical assets like stocks and bonds that get their value from
future cash flows - ANS Financial asset
Which of the following personal decisions is impacted by finance? - ANS all of these choices are
correct.
An angel investor differs from a venture capitalist because of the - ANS size of investment
This type of business organization is entirely legally independent from its owners. - ANS Public
corporations
When determining a form of business organization, all of the following are considered EXCEPT
- ANS the physical location of the business.
These individuals examine the firm's accounting systems and comment on whether financial
statements fairly represent the firm's financial position. - ANS Auditors
The board of directors - ANS are elected by shareholders.
Which of these does NOT act as a monitor of how the firm is being run outside the firm? - ANS
Members of the board of directors
Individuals who provide small amounts of capital and expert business advice to small firms in
exchange for an ownership stake in the firm are referred to as - ANS angel investors
Which statements(s) is/are true for successful application of financial theories? - ANS A and B
are true.
You are considering a stock investment in one of two firms (Lots of Debt, Inc. and Lots of Equity,
Inc.), both of which operate in the same industry. Lots of Debt, Inc. finances its $100 million in
assets with $90 million in debt and $10 million in equity. Lots of Equity, Inc. finances its $100
million in assets with $10 million in debt and $90 million in equity.
, What are the debt ratio, equity multiplier, and debt-to-equity ratio for the two firms? - ANS
LotsofDebt: 90 percent, 10 times, 9 times, respectively; and LotsofEquity: 10 percent, 1.11
times, 0.1111 times, respectively
A firm has EBIT of $300,000 and depreciation expense of $12,000. Fixed charges total $44,000.
Interest expense totals $7,000. What is the firm's cash coverage ratio? - ANS 7.09 times
Which of the following measures the number of dollars of sales produced per dollar of fixed
assets? - ANS fixed asset turnover ratio
An investor wanting large returns will be interested in companies that have - ANS high ROES
For publicly traded firms, which of these ratios measure what investors think of the company's
future performance and risk? - ANS market value ratios
Which statement is true of ratio analysis - ANS can provide useful information on a firm's current
position and hint at future performance.
Which of the following is the maximum growth rate that can be achieved by financing asset
growth with new debt and retained earnings? - ANS sustainable growth rate
If Apex, Inc. has an ROE = 10 percent, equity multiplier = 3, and profit margin of 5 percent, what
is the total asset turnover ratio? - ANS 0.6667
Which of the following managers would NOT use finance? - ANS All of these would use finance.
A potential future negative impact to value and/or cash flows is often discussed in terms of
probability of loss and the expected magnitude of the loss. - ANS risk
This is a term to describe non-physical assets like stocks and bonds that get their value from
future cash flows. - ANS financial asset
When determining a form of business organization, all of the following are considered EXCEPT
- ANS The physical location of the business
From a taxation perspective, the form of business organization with the highest business level
taxes is the - ANS corporation
An employee stock option plan is - ANS a way to align the interests of employees with those of
the owners.
Which statement is incorrect regarding hybrid organizations? - ANS they offer the same type of
control as a sole proprietorship
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