Question 1 Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers? ________

Question 1

Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers? ________

A.	articles of incorporation

B.	corporate breakdown

C.	agency problem

D.

bylaws

E.	legal liability

Question 2

Which one of the following is a capital budgeting decision?

A.	determining how many shares of stock to issue

B.	deciding whether or not to purchase a new machine for the production line

C.	deciding how to refinance a debt issue that is maturing

D.	determining how much inventory to keep on hand

E.	determining how much money should be kept in the checking account

Question 3

Decisions made by financial managers should primarily focus on increasing which one of the following?

A.	size of the firm

B.	growth rate of the firm

C.	gross profit per unit produced

D.	market value per share of outstanding stock

E.	total sales

Question 4

The book value of a firm is:

A.	equivalent to the firm’s market value provided that the firm has some fixed assets.

B.	based on historical cost.

C.	generally greater than the market value when fixed assets are included.

D.	more of a financial than an accounting valuation.

E.	adjusted to the market value whenever the market value exceeds the stated book value.

Question 5

A firm has $520 in inventory, $1,860 in fixed assets, $190 in accounts receivables, $210 in accounts payable, and $70 in cash. What is the amount of the current assets?

A.

$710

B.

$780

C.

$990

D.

$2,430

E.

$2,640

Question 6

List and briefly describe the three general areas of responsibility for a financial manager.

The three areas of responsibility for a financial manager are capital budgeting, capital structure and working capital.

Question 7

Crandall Oil has total sales of $1,349,800 and costs of $903,500. Depreciation is $42,700 and the tax rate is 34 percent. The firm does not have any interest expense. What is the operating cash flow?

A.	$129,152
B.	$171,852
C.	$179,924
D .	$281,417
E.	$309,076

Question 8

Relationships determined from a firm’s financial information and used for comparison purposes are known as:

A.	financial ratios.

B.	identities.

C.	dimensional analysis.

D.	scenario analysis. E. solvency analysis.

Question 9

According to the Statement of Cash Flows, a decrease in accounts receivable will _____ the cash flow from _____ activities.

A.	decrease; operating

B.	decrease; financing

E.	increase; investment

Question 10

The Corner Hardware has succeeded in increasing the amount of goods it sells while holding the amount of inventory on hand at a constant level. Assume that both the cost per unit and the selling price per unit also remained constant. This accomplishment will be reflected in the firm’s financial ratios in which one of the following ways?

A.	decrease in the inventory turnover rate

B.	decrease in the net working capital turnover rate

C.	no change in the fixed asset turnover rate

D.	decrease in the day’s sales in inventory

E.	no change in the total asset turnover rate