Bill is a public accountant auditing Expo Corporation. Based on information in Expo’s confidential records, Bill recommends the purchase of Expo stock to his brother. A) If Bill told a non-relative who purchases Expo stock, no insider trading laws would be violated. B) Bill is not an insider because he is not an officer or […]
All of the following are income statement items EXCEPT A) accrued expenses. B) interest expense. C) depreciation expense. D) cost of goods sold. ANSWER A
Return on equity is driven by (1 ) the spread between the operating return on assets and the interest rate, and (2 ) changes in the debt ratio. Indicate whether the statement is true or false ANSWER TRUE
Borrowing money causes a corporation’s return on operating assets to decrease because of the interest that must be paid. Indicate whether the statement is true or false ANSWER FALSE
When solving time value of money problems on a financial calculator, you must select the “end mode” when you enter the final year’s cash flow. Indicate whether the statement is true or false ANSWER FALSE
Two companies have identical assets and operating activities. Which of the follow statements is true? A) The company with more debt will have lower operating income due to interest expense. B) Both companies have the same net income. C) The company with more debt will have higher operating income due to leverage. D) The company […]
Capital market instruments include A) negotiable certificates of deposit. B) Treasury bills. C) corporate equities. D) commercial paper. ANSWER C
Project A is expected to generate positive cash flow of $1 million in 10 years while Project B is expected to generate $500,000 in 5 years. Therefore A) Project B may be preferred to Project A if the opportunity cost of money is high enough. B) Both projects have equal value because they average $100,000 […]
All of the following statements about agency problems are true EXCEPT A) Agency problems result from the separation of management and the ownership of a firm. B) Agency problems interfere with the goal of maximizing shareholder value. C) Agency costs are paid by the managers who do not act in the shareholders’ best interest. D) […]
An income statement may be represented as follows: A) Revenues – Liabilities = Net Income. B) Sales – Expenses = Profits. C) Sales – Liabilities = Profits. D) Sales – Expenses = Retained Earnings. ANSWER B
