When evaluating an investment project, which of the following best describes the financial information needed by the decision maker? A) pre-tax accounting profits adjusted for any accounting method changes B) incremental cash flows before taxes so the decision will not be biased by a tax code that may change in the future C) after-tax accounting […]
The accounting book value of an asset represents the historical cost of the asset rather than its current market value or replacement cost. Indicate whether the statement is true or false ANSWER TRUE
All of the following contributed to recent financial crises EXCEPT A) Relying on the efficiency of financial markets. B) Focusing on earnings instead of cash flow. C) Focusing on the short run. D) Excessive risk taking due to underestimation of risk. ANSWER A
Financial ratios are useful for measuring performance because maximizing the return on equity for common shareholders is the primary goal of financial managers. Indicate whether the statement is true or false ANSWER FALSE
Prepare an income statement using the information given below. Make sure to identify gross profit, operating income, and net income. Inventories $50,000 Cost of Goods Sold $250,000 Administrative Expenses $50,000 Accumulated Depreciation $150,000 Sales $600,000 Depreciation Expense $25,000 Selling Expenses $150,000 Common Stock Dividends $8,000 Interest Expense $8,000 Corporate Tax Rate 40% ANSWER […]
The telecommunications system that provides a national information linkup among brokers and dealers operating in the over-the-counter market is called A) NASQ. B) NCIS. C) NSQA. D) NASDAQ. ANSWER D
How do gross profits, operating income, and net income relate to the areas of business activity reported in the income statement? What will be an ideal response? ANSWER The income statement begins with sales or revenue, from which we subtract the cost of goods sold (the cost of producing or acquiring the product […]
At an annual interest rate of 9%, an initial sum of money will double approximately every 8 years. Indicate whether the statement is true or false ANSWER TRUE
An example of a primary market transaction involving a money-market security is A) a new issue of a security with a very long maturity. B) the transfer of a previously-issued security with a very long maturity. C) a new issue of a security with a very short maturity. D) the transfer of a previously-issued security […]
Intangible assets such as copyrights and goodwill are not included on the balance sheet because they are impossible to value objectively. Indicate whether the statement is true or false ANSWER FALSE
