100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
IET 414 Exam 1 review || A+ Guaranteed. $10.69   Add to cart
Quickly navigate to
Preview
  2.  
  3. IET 414
  4.  
  5. IET 414

Exam (elaborations)

IET 414 Exam 1 review || A+ Guaranteed.
 10 views  0 purchase
  • Course
  • IET 414
  • Institution
  • IET 414

Primary goal of financial management correct answers The primary goal is to maximize profit or shareholder wealth maximization. Drawbacks: change in profit may also represent change in risk. Fails to consider timing benefits. Impossible task of accurately measuring key variable "Profit". Problem...

[Show more]

Preview 2 out of 5  pages

Document information

  • August 4, 2024
  • 5
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • primary goal of financial management

Written for

  • IET 414
  • IET 414

Seller

avatar-seller
FullyFocus

Reviews received

Content preview

IET 414 Exam 1 review || A+ Guaranteed.
Primary goal of financial management correct answers The primary goal is to maximize profit or
shareholder wealth maximization.

Drawbacks: change in profit may also represent change in risk. Fails to consider timing benefits.
Impossible task of accurately measuring key variable "Profit". Problems with inflation and
international currency transactions further complicate the issue.

Solo proprietorship correct answers ownership of a business by one person

Advantage: Simplicity in decision making, low organizational and operational costs.

Disadv: unlimited liability to owner

Partnership correct answers A business in which two or more persons combine their assets and
skills

Limited liability partnership correct answers One or more partners designated general partners
and have unlimited liability for debts of the firm. Only partners designated limited partners and
liable only for initial contribution.

Corporation correct answers Unique, legal entity unto itself. Owned by shareholders who enjoy
limited liability.
Adv: Continual Life. Easy divisibility of ownership interest by issuing shares of stock.
Disadv: Potential of double taxation of earnings.

S corporation correct answers Income taxed as direct income to stockholders, thus taxed only
once as normal income

Limited Liability Company (LLC) correct answers Provides limited liability for the owners. Can
be taxed as any business entity depending upon elections of owners.

What is corporate governance? correct answers Refers to the relationship among the board of
directors, top management, and shareholders in determining the direction and performance of the
corporation

What is agency Theory correct answers Examines relationship between owners and managers of
a firm. Identify and reduce potential conflicts of interest.

How do you get to operating income on an income statement? correct answers Sales - COGS -
Selling & Administration - Depreciation Expense = Operating income (EBIT)

What effect on EBITS will an increase or decrease in interest have? correct answers An increase
will result in a smaller EBT value while a decrease in interest will result in a larger EBT.

, How do you calculate earnings per share? correct answers Earnings After Taxes - Preferred
Stock Dividends = Earnings Available to Common Stockholders

Earnings Available to Common Stockholders / Common Shares Outstanding = Earnings Per
Share (EPS)

How do you calculate gross profit margin? Be able to do correct answers Gross Profit Margin =
((Net Sales - Cost of Goods Sold) / (Net Sales)) x100

How do you calculate taxes, rate? correct answers Operating income (EBIT) - Interest Expense =
Earnings Before Taxes (EBT)

Earnings Before Taxes - Taxes = Earnings After Taxes (EAT)

Operating Income (EBIT) correct answers Sales - COGS - Selling & Administration -
Depreciation Expense

Stockholders' Equity correct answers Represents total contribution and ownership interest of
preferred and common stockholders.

Dividends correct answers Maintains necessary payout on common stock and covers preferred
stock obligations.

common stockholders correct answers receive dividends after preferred stockholders.

P/E ratio correct answers a multiplier applied to EPS to determine current value of common
stock.

Gross Proceeds correct answers Net Proceeds + Costs

Issue Price correct answers Gross Proceeds/Number of Shares issued

What is ratio analysis useful for? correct answers Used to weigh and evaluate operating
performance of a firm. Measure in relation to other values. Compares performance record against
firms in industry


Drawbacks: ratios analysis for any one year does not reflect an accurate picture of the firm.

What kind of ratios would short term creditors be interested in? correct answers They would be
interested in current ratio and quick ratio also known as the liquidity Ratios.

Return on Equity correct answers is a profitability ratio.

Satisfactory ROE can be derived through correct answers - High return on total assets
- Generous utilization of debt

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller FullyFocus. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $10.69. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

73243 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$10.69
  • (0)
  Add to cart