Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

FIN 534 Week 5 Midterm Examination Part 1

Review Test Submission: Week 5 Midterm Exam Part 1

Course Financial Management
Test Week 5 Midterm Exam Part 1
Instructions This exam consist of 25 multiple choice questions and covers the material in Chapters 1 through 3.
Results Displayed Submitted Answers, Correct Answers, Feedback
Question 1

2 out of 2 points

Cheers Inc. operates as a partnership. Now the partners have decided to convert the business into a regular corporation. Which of the following statements is CORRECT?

Question 2

2 out of 2 points

Which of the following statements is CORRECT?

Question 3

2 out of 2 points

Which of the following statements is CORRECT?

Question 4

2 out of 2 points

Which of the following statements is CORRECT?

Question 5

2 out of 2 points

Which of the following statements is CORRECT?

Question 6

2 out of 2 points

Money markets are markets for

Question 7

2 out of 2 points

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

Question 8

2 out of 2 points

Which of the following statements is CORRECT?

Question 9

2 out of 2 points

Which of the following statements is CORRECT?

Question 10

2 out of 2 points

Aubey Aircraft recently announced that its net income increased sharply from the previous year, yet its net cash flow from operations declined. Which of the following could explain this performance?

Question 11

2 out of 2 points

Which of the following statements is CORRECT?

Question 12

0 out of 2 points

DeYoung Devices Inc., a new high-tech instrumentation firm, is building and equipping a new manufacturing facility. Assume that currently its equipment must be depreciated on a straight-line basis over 10 years, but Congress is considering legislation that would require the firm to depreciate the equipment over 7 years. If the legislation becomes law, which of the following would occur in the year following the change?

Question 13

2 out of 2 points

Which of the following would be most likely to occur in the year after Congress, in an effort to increase tax revenue, passed legislation that forced companies to depreciate equipment over longer lives? Assume that sales, other operating costs, and tax rates are not affected, and assume that the same depreciation method is used for tax and stockholder reporting purposes.

Question 14

2 out of 2 points

Assume that Congress recently passed a provision that will enable Barton’s Rare Books (BRB) to double its depreciation expense for the upcoming year but will have no effect on its sales revenue or tax rate. Prior to the new provision, BRB’s net income after taxes was forecasted to be $4 million. Which of the following best describes the impact of the new provision on BRB’s financial statements versus the statements without the provision? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

Question 15

2 out of 2 points

Which of the following statements is CORRECT?

Question 16

2 out of 2 points

Analysts following Armstrong Products recently noted that the company’s operating net cash flow increased over the prior year, yet cash as reported on the balance sheet decreased. Which of the following factors could explain this situation?

Question 17

2 out of 2 points

Which of the following statements is CORRECT?

Question 18

2 out of 2 points

Considered alone, which of the following would increase a company’s current ratio?

Question 19

2 out of 2 points

A firm’s new president wants to strengthen the company’s financial position. Which of the following actions would make it financially stronger?

Question 20

The Cavendish Company recently issued new common stock and used the proceeds to pay off some of its short-term notes payable. This action had no effect on the company’s total assets or operating income. Which of the following effects would occur as a result of this action?

Question 21

2 out of 2 points

Which of the following statements is CORRECT?

Question 22

2 out of 2 points

Companies A and C each reported the same earnings per share (EPS), but Company A’s stock trades at a higher price. Which of the following statements is CORRECT?

Question 23

Which of the following statements is CORRECT?

Question 24

2 out of 2 points

A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio?

Question 25

2 out of 2 points

Cordelion Communications is considering issuing new common stock and using the proceeds to reduce its outstanding debt. The stock issue would have no effect on total assets, the interest rate Cordelion pays, EBIT, or the tax rate. Which of the following is likely to occur if the company goes ahead with the stock issue?

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