You are considering investing in Ford Motor Company. Which of the following are examples of diversifiable risk? I. Risk resulting from possibility of a stock market crash. II. Risk resulting from uncertainty regarding a possible strike against Ford. III. Risk resulting from an expensive recall of a Ford product. IV. Risk resulting from interest rates […]
Which of the following is NOT a disadvantage of a sole proprietorship as a form of business organization compared to the corporate form of business organization? A) Access to the capital markets B) Unlimited liability of the owners C) Subject to the double taxation D) Limited liability of the shareholders ANSWER D
Why is the price/earnings ratio a common and popular technique for evaluating stocks? Why do fast growing firms have higher P/E ratios? What is a long-run average P/E ratio for larger publicly traded firms in the United States? What are some limitations to using this technique to evaluate stock prices? ANSWER P/E ratios […]
The real rate of return is the return earned above the A) variability of returns measured by standard deviation. B) inflation risk premium. C) risk-adjusted return. D) default risk premium. ANSWER B
David started a public accounting firm. David is concerned that accountants on his staff may give incorrect accounting advice, and the accounting firm may be sued. What type of liability insurance should David purchase to protect against such claims? A) errors and omissions insurance B) directors and officers liability insurance C) general liability insurance D) […]
Which of the following statements is (are) true with respect to the treatment of legal defense costs under the ISO Commercial General Liability policy? I. Legal defense costs usually are counted against the policy limit. II. Once the insurer has paid out the applicable limit of liability, the insurer’s duty to defend ends. A) I […]
Jennifer was just asked to serve on the Board of an insurance company. Jennifer is concerned that if the company is mismanaged, the policyowners, stockholders, and employees might sue the management team. What type of liability insurance will protect Jennifer from such claims if she accepts a position on the insurance company’s Board? A) commercial […]
Is it possible for a company that has negative net income and negative operating cash flow to end the year with an increase in cash and an increase in stock price? Explain your answer. What will be an ideal response? ANSWER Yes! Many start-up companies or research companies in high growth industries are […]
Which of the following statements is true concerning the ISO employment-related practices liability form? A) Coverage is provided without a co-payment provision. B) Legal defense costs are included as part of the policy limit. C) Wrongful termination is excluded from coverage. D) Liability to employees is excluded from coverage. ANSWER Answer: B
Table 3-3 Marlett Company Financial Information December 2009 December 2010 Net Income $2,000 $4,000 Accounts receivable 750 1,250 Accumulated depreciation 1,000 1,400 Common stock 4,500 5500 Paid-in capital 7,500 8500 Retained earnings 1,500 3,500 Accounts payable 750 950 Based on the information in Table 3-3, prepare a statement of cash flows for 2010. Assume that […]
