Which of the following financial ratios is the best measure of the operating effectiveness of a firm’s management?
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net profit margin
Question 2 text Question 2 2 points Save
The corporation is a legal entity separate from it owners; thus it is possible for the corporation to continue even upon the death of one or more shareholders.
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In making financial decisions, the relevant tax rate is the:
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marginal tax rate.
average (effective) tax rate.
previous year’s tax rate.
maximum allowable tax rate.
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Based on the information in the table, calculate the after tax cash flow from operations for 2002 (no assets were disposed of during the year, and there was no change in interest payable or taxes payable):
December 2001 December 2002
Net income $1,500 $3,000
Accounts receivable 750 750
Accumulated depreciation 1,125 1,500
Common stock 4,500 5,250
Paid-in capital 7,500 8,250
Retained earnings 1,500 2,250
Accounts payable 750 750
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Question 5 text Question 5 2 points Save
Which of the following are tax deductible items to a corporation:
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dividends to common stockholders
dividends to preferred stockholders
None of the above are tax deductible.
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The market price of the firm’s stock reflects the value of the firm as seen by its owners.
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Corporate debt markets clearly dominate the corporate equity markets when new funds are being raised.
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You are considering an investment in a U.S. Treasury bond but you are not sure what rate of interest it should pay. Assume that the real risk-free rate of interest is 1.0%; inflation is expected to be 2.0%; the maturity risk premium is 1.5%; and, the default risk premium for AAA rated corporate bonds is 3%. What rate of interest should the U.S. Treasury bond pay?
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Question 9 text Question 9 2 points Save
The telecommunications system that provides a national information linkup among brokers and dealers operating in the over-the-counter market is called:
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Which of the following represents an attempt to measure the net results of the firm’s operations (revenues versus expenses) over a given time period?
Question 10 answers
Statement of Cash Flows
Sources and Uses of Funds Statement
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The goal of the firm should be:
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maximization of profits (net income per share)
maximization of shareholder wealth
maximization of market share
maximization of sales
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The term structure of interest rates usually indicates that longer terms to maturity have higher expected returns.
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If a firm has unused debt capacity and the general level of equity prices is depressed, financial executives will favor the issuance of debt securities over the issuance of new common stock.
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Capital market instruments include:
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negotiable certificates of deposit
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“The markets are quick and the prices are right” describes a market that is:
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PDQ Corp. has sales of $3,000,000; the firm’s cost of goods sold is $1,425,000; and its total operating expenses are $700,000. The firm’s interest expense is $230,000, and the corporate tax rate is 40%. The firm paid dividends to preferred stockholders of $30,000, and the firm distributed $60,000 in dividend payments to common stockholders. What is PDQ’s “Addition to Retained Earnings?”
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Question 17 text Question 17 2 points Save
PDQ Corp. has sales of $3,000,000; the firm’s cost of goods sold is $1,425,000; and its total operating expenses are $700,000. What is PDQ’s EBIT?
Question 17 answers