Deck 13: Business Organization and Financial Data

Question 1

4A 16.Limited partners must take an active role in the operations of the firm.

Answer 1

False

Question 2

A limited liability company can have an unlimited number of shareholders, including other corporations.

Answer 2

True

Question 3

Limited partners must take an active role in the operations of the firm.

Answer 3

False

Question 4

Under partnership law, each partner has unlimited liability for all the debts of the firm.

Question 5

Most of theAll limited liability company shareholders must take active roles in managing the company.

Question 6

Partnership income is taxed at the partnership income tax rate.

Question 7

The market value added measures the value created by the firm's managers.

Question 8

The goal of any firm should be the maximization of sales.

Question 9

Shareholder wealth is the market value of a firm's common stock.

Question 10

Managerial lines of authority, legal responsibility and the allocation of income and risk are directly related to the form the organization takes.

Question 11

Typically, aA close estimate of market value added (MVA) is the market value of equity less the book value of equity.

Question 12

Poison pills are provisions in a corporate charter that make a corporate take-over more unattractive.

Question 13

The success of a business in raising funds for operations depends upon the extent that profits can be produced from operations.

Question 14

A partnership is a form of business organization when two or more people own a business operated for profit.

Question 15

Profits from a proprietorship are taxed at the corporate income tax rates.

Question 16

proprietorships are the most widely used form although they are generally the smallest organizations in terms of assets.

Question 17

Limited partners face liability limited to their investment in the firm, but they can participate in the operations of the firm.

Question 18

The bylaws are the rules established to govern the corporation and include how the firm will be managed.

Question 19

A weakness for a proprietorship is that owner's liability for debts of the firm is unlimited.

Question 20

A business should begin with a vision or mission statement that is consistent with the planned overall strategy.

Question 21

The most desirable form of business organization in terms of ease of start-up is a proprietorship.

Question 22

An annual report contains descriptive information on operating and financial performance during the past year, a discussion of current and future business opportunities, and five year projected stock prices and shareholder returns.

Question 23

The marginal tax rate is the rate paid on the last dollar of income.

Question 24

Accounting is primarily concerned with matching revenues and expenses while finance focuses on identifying cash inflows and outflows.

Question 25

Most of accounting practice is based upon the cash concept.

Question 26

The most desirable form of business organization from a liquidity standpoint is a corporation.

Question 27

Privately held corporations register shares with the Securities and Exchange Commission before selling them to shareholders.

Question 28

If a corporation liquidates infiles for bankruptcy, creditors may attach try to get control of the personal assets of the owners of the company to collect on their debts.

Question 29

Common-size financial statements express balance sheet and income statement numbers as a percent of sales.

Question 30

Implicit agency costs do not have a direct expense associated with them, but they harm shareholders anyway.

Question 31

The most desirable form of business organization from a liquidity standpoint is a limited liability company.

Question 32

A firm's net income over some period is the same as its cash flow.

Question 33

With generally accepted accounting practices, there is one "right way" of accounting for business transactions.

Question 34

One advantage of the corporate form of organization is the ease with which ownership may be transferred.

Question 35

One of the important reasons corporations can accumulate large sums of capital is that they are allowed to sell capital stock.

Question 36

Shareholder wealth may be defined as the price of a company's stock times the number of shares outstanding.

Question 37

The balance sheet is a statement of a company's financial position over an accounting period.

Question 38

The net working capital of a firm would be cash and other assets that are expected to be converted into cash within a year.

Question 39

A corporation is a legal entity created under federal law with an unending life and limited financial liability to its owners.

Question 40

The liability of all owners in both a limited liability company and a limited partnership is limited to the owners' investment in the company.

Question 41

Market value added can be written as: the market value of stock plus the market value of debt minus the book value of stock minus the book value of debt.

Question 42

The balance sheet equation or accounting identity can be written as: assets equal liabilities minus owners' equity.

Question 43

Computation of a firm's market value added (MVA) includes all of the components EXCEPT:

A)market value of equity
B)market value of debt
C)book value of equity
D)book value of debt
E)all of the above are included

Question 44

Two basic tools that can be used to reduce the consequences of managers making self-serving decisions include offering managers stock options and offering managers restricted stock.

Question 45

Of the following forms of business organization, which have the advantage of limited liability but no stockholders?

A)proprietorships
B)partnerships
C)corporations
D)limited partnerships

Question 46

The actual disbursement of cash is recorded in which of the following financial statements?

A) income statement
B) balance sheet
C) statement of cash flows
D) treasurer’s report

Question 47

Of the following forms of organization, which businesses are the greatest in numbers?

A)proprietorships
B)partnerships
C)corporations
D)limited partnerships

Question 48

The goal of the firm is the maximization of profits and market share.

Question 49

Market value added can be written as: the market value of stock minus the market value of debt plus the book value of stock minus the book value of debt.

Question 50

Which one of the following is not a basic function of financial management?

A)financial planning and analysis
B)acquiring other business firms
C)asset management
D)raising of funds

Question 51

The Sarbanes-Oxley Act of 2002 was passed by the U.S.Congress in response several political ethical scandals.

Question 52

Which of the following are considered to be major financial management functions?

A)financial planning and analysis
B)asset management
C)raising funds
D)all of the above

Question 53

The current liabilities of a business may include:

A)notes payable
B)accounts receivable
C)prepaid expenses
D)depreciation reserves

Question 54

The Sarbanes-Oxley Act of 2002 was passed by the U.S.Congress in response several accounting scandals.

Question 55

Agency costs are the tangible and intangible expenses borne by shareholders because of the actual or potential self-serving actions of managers; and agency costs can include explicit, out-of-pocket expenses.

Question 56

The balance sheet equation or accounting identity can be written as: assets equal liabilities plus owners' equity.

Question 57

For a given accounting period, which of the following is likely to represent primarily variable costs?

A)cost of goods sold
B)general and administrative expenses
C)depreciation expense
D)interest expense

Question 58

The most desirable form of business organization in terms of ease of start-up is a corporation.

Question 59

Of the following forms of business organization, which have stockholders with limited liability?

A)proprietorships
B)partnerships
C)corporations
D)limited partnerships

Question 60

Agency costs are the tangible and intangible revenues expenses borne by shareholders because of the actual or potential self-serving actions of managersgenerated by shareholders because of the actual or potential selfless actions of managers; and agency coststhey include only imexplicit , out-of-pocket (no cash is spent explicitly) expenses.

Question 61

Which one of the following balance sheet accounts would not be considered to be a current liability?

A)account payable
B)bank notes payable
C)accrued liabilities
D)mortgage debt

Question 62

The average tax rate on a corporation with $75,000 in income and a tax liability of $15,000 is:

A)15%
B)20%
C)25%
D)39%

Question 63

Which of the following are required to file annual reports with the Securities and Exchange Commission?

A)proprietorships
B)partnerships
C)public corporations
D)all the above

Question 64

The accrued liabilities of a firm are:

A)retained earnings from past years
B)reflect the prepayment of certain expenses
C)owners' equity in the firm
D)amounts owed but not yet due

Question 65

A limited liability company (LLC):

A)must register with the SEC to sell securities to the public
B)is an ongoing entity, even if one of the owners leaves
C)has a limited number of shareholders
D)all the above
E)none of the above

Question 66

A limited partnership is comprised of:

A)only limited partners
B)only general partners
C)both general and limited partners
D)both partners and proprietors

Question 67

Information about which accounting principles were used by the firm are included in the:

A)balance sheet
B)footnotes to the financial statements
C)management discussion on annual report
D)none of the above

Question 68

The term ___________ conveys a relationship of equality between the assets of the business and the sources of funds for their acquisition.

A)statement of cash flows
B)cash transactions statement
C)income statement
D)balance sheet

Question 69

If a firm issues 10,000 shares of common stock with a par value of $5 and for a sales price of $15, what amount would be recorded in the capital paid-in capital excess of par account?

A)$10,000
B)$15,000
C)$50,000
D)$100,000

Question 70

Corporate stockholders:

A)cannot have limited liability
B)cannot easily transfer ownership
C)cannot be subject to taxes on dividends
D)can limit their liability to the amount of their investment

Question 71

Which of the following accounts is usually part of the owners' equity for a corporation?

A)common stock
B)paid-in-capital
C)retained earnings
D)all of the above

Question 72

Which of the following business organizations limit the liability of some or all of their owners to the extent of their investment in the company?

A)proprietorships and partnerships
B)corporations and proprietorships
C)limited partnerships and proprietorships
D)corporations and limited partnerships

Question 73

Which of the following business organizations do not limit the liability of some or all of their owners to the extent of their investment in the company?

A)proprietorships and partnerships
B)corporations and proprietorships
C)limited partnerships and proprietorships
D)corporations and limited partnerships

Question 74

Which of the following are considered to be major financial management functions?

A)financial planning and analysis
B)asset management
C)raising funds
D)all of the above

Question 75

Which form of business organization has a basic weakness of reaching araising capital limit?

A)proprietorship
B)partnership
C)limited partnership
D)all of the above

Question 76

A business organization that receives the limited liability of a corporation but is taxed as a proprietorship or partnership is called a:

A)limited proprietorship
B)limited partnership
C)limited corporation
D)S corporation

Question 77

Which of the following are included in an annual report?

A)balance sheet
B)income statement
C)statement of cash flows
D)all of the above
E)none of the above

Question 78

The notes receivable payable of a firm may be:

A)loans to other businesses
B)loans to employeesfrom a bank
C)loans to the CEOmoney owed by a customer
D)all of the above

Question 79

Nestle, IBM, and Coca-Cola are examples of: Not in the chapter

A)U.S.corporations
B)corporations with mainly domestic revenues
C)"stateless" corporations
D)multinational corporations based in the U.S.

Question 80

What would be recorded in the common stock par value account on the balance sheet if 20,000 shares are issued at a par value of $2 and the market value is $5?

A)$20,000
B)$40,000
C)$30,000
D)$60,000