In relation to the balance sheet, an income statement shows A) net worth, not the period’s savings or dissavings. B) the period’s savings or dissavings, not net worth. C) activities at a point in time, not over a period of time. D) financial position, not financial performance. ANSWER B
A corporation has annual sales of $18 million, total assets of $4 million, a debt ratio of 40%, depreciation expense of $200,000, and a tax rate of 40%. The corporation’s total stockholders’ equity is equal to A) $2,800,000. B) $2,400,000. C) $1,800,000. D) $5,600,000. ANSWER B
If managers are making decisions to maximize shareholder wealth, they are primarily making decisions that: A) maximize sales revenue. B) minimize risk. C) maximization of the market value of shareholders’ common stock. D) reduce the costs of borrowing. ANSWER C
Which of the following coverages are provided by an unendorsed ISO Dwelling Program form? I. Theft of personal property II. Named-perils coverage for personal property A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: B
Which of the following statements about the Personal Articles Floater is (are) true? I. It is designed to cover several classes of personal property. II. Coverage is written on an “open perils” (all-risks) basis. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
Which of the following is a characteristic of most inland marine floater policies? A) The insurance can be tailored to the specific type of personal property insured. B) Coverage amounts are pre-specified by the insurer and cannot be changed. C) Coverage is normally written on a named-perils basis. D) Covered property is insured only when […]
Given an accounts receivable turnover of 10 and annual credit sales of $900,000, the average collection period is A) 90 days. B) 40.56 days. C) 36.50 days. D) 18.25 days. ANSWER C
The benefits of diversification occur as long as the investments in a portfolio are not perfectly positively correlated. Indicate whether the statement is true or false ANSWER TRUE
A pro forma balance sheet typically begins with the assets and then we estimate the liabilites and equity. Indicate whether the statement is true or false ANSWER TRUE
If the interest rate is positive, a six-year ordinary annuity of $500 per year must have a present value over $3,000. Indicate whether the statement is true or false ANSWER FALSE