What are the primary differences among a sole proprietorship, a partnership, and a corporation? What will be an ideal response? ANSWER The sole proprietorship is a business operation owned and managed by an individual. Initiating this form of business is simple and generally does not involve any substantial organizational costs. The proprietor has […]
Smith is Manager of ABC Department Store. Jones, ABC’s Security Director, visited Smith to ask some questions. During questioning, Smith admitted that he stole $10,000 in merchandise. He was disciplined, but not fired. The loss was not reported to the insurer that wrote ABC’s crime insurance. Six weeks later, Smith was observed on a surveillance […]
Fifth National Bank decided to loan $200,000 to Fred Franklin. As collateral for the loan, Fred posted stock certificates. When Fred defaulted on the loan, Fifth National tried to sell the stock. They discovered the stock certificates were stolen from someone else. Which insuring agreement in a financial institution bond is designed to cover such […]
Optimal capital structure “first” criteria suggests that THE IMPACT ON EPS should be ________ and that the best way to obtain that is with ________ levels of debt and ________ levels of equity. A) high; low; high B) low; high; low C) high; high; low D) low; low; high ANSWER D
Gaston Grooming Inc., has a sustainable growth rate of 17.28%. If the retention ratio is .60, the leverage ratio is 1.2 and the asset turnover ratio is 1.6, what was the firm’s profit margin? A) 15.0% B) 13.6% C) 12.1% D) 11.4% ANSWER A Explanation: A) PM = SGG/(ATO * LR * b) […]
A stock’s beta is a measure of its A) diversifiable risk. B) systematic risk. C) unsystematic risk. D) company-unique risk. ANSWER B
You are going to pay $800 into an account at the beginning of each of 20 years. The account will then be left to compound for an additional 20 years until the end of year 40, when it will turn into a perpetuity. You will receive the first payment from the perpetuity at the end […]
Which of the following statements about International Financial Reporting Standards (IFRS) is NOT true? A) IFRS offers simplicity but also possibly more leeway for accounting malpractice than does GAAP. B) In 2008, the Securities and Exchange Commission (SEC) announced its plan to convert U.S. companies from GAAP to IFRS. C) IFRS sets out broad and […]
Gremlin Media Inc. has realized tremendous growth in recent years. Last year the firm realized an ROE of 41.16%. If the firm was in a 40% marginal tax bracket, had an asset turnover ratio of 2.1, a profit margin of 14%, and a leverage ratio of 2, what was the firm’s retention ratio? A) 0.70 […]
Jack, owner of Jack’s Bar and Grill, was robbed while attempting to deposit receipts at his bank’s night depository. Jack had purchased an ISO commercial crime coverage form. This loss would be covered under which insuring agreement? A) Inside the Premises—Theft of Money and Securities B) Outside the Premises C) Money Orders and Counterfeit Currency […]
