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 […]
This form of business ownership does NOT avoid double taxation. A) Limited partnership B) “S” corporation C) “C” corporation D) Limited liability company ANSWER C
As an initial assumption, it is reasonable to assume that firms are reluctant to do all of the following EXCEPT: A) purchase new fixed assets. B) issue new equity. C) change dividend policy. D) change debt policy. ANSWER A
The main function of a balance sheet is to show your net worth at a point in time. Indicate whether the statement is true or false ANSWER TRUE
Define Dual Class Shares of stock. Why would a firm consider issuing dual classes of stock? Are dual shares common in the United States? In what type of industry are they found? What will be an ideal response? ANSWER Dual class stock exists when a firm issues two types of equity shares, generally […]
Based on the information in Table 4-3, the debt ratio is A) 40.24%. B) 18.38%. C) 53.43%. D) 48.48%. ANSWER D
Which form of organization is free of initial legal requirements? A) general partnership B) sole proprietorship C) corporation D) both A and B ANSWER D
“Unfortunately, one thing we know for certain about financial forecasts is that they are almost always wrong.” If the preceeding statement is generally thought to be true, why do we spend so much time and money on financial forecasting?! What will be an ideal response? ANSWER Perhaps one way to address this statement […]
Based on the information in Table 4-3, the total asset turnover is A) 2.10 times. B) 2.42 times. C) 3.25 times. D) 2.87 times. ANSWER B
