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 […]
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 […]
A firm paid dividends of $10,000, paid interest of $20,000, reduced debt principal outstanding (paid off debt) in the amount of $100,000, and sold new stock for $150,000. What was the firm’s cash flow from financing activities? A) +$280,000 ($280,000 flowed into the firm) B) -$280,000 ($280,000 flowed out of the firm) C) -$20,000 ($20,000 […]
A deferred annuity will pay you $500 at the end of each year for 10 years, however the first payment will not be made until three years from today (payments will be made at the end of years 3 through 12). What amount will you have to deposit today to fund this deferred annuity? Use […]
