question

A financial analyst is responsible for maintaining and controlling the firm's daily cash balances. Frequently manages the firm's short-term investments and coordinates short-term borrowing and banking relationships.

answer

FALSE

question

Marginal analysis states that financial decisions should be made and actions taken only when added benefits exceeds added costs.

answer

TRUE

question

When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that are expected to increase the firm's profitability.

answer

FALSE

question

The goal of ethics is to motivate business and market participants to adhere to both the letter and the spirit of laws and regulations in all aspects of business and professional practice.

answer

TRUE

question

Primary and secondary markets are for short-term and long-term securities, respectively.

answer

FALSE

question

The ordinary income of a corporation is income earned through the sale of a firm's goods and services and is currently taxed subject to the individual income tax rates.

answer

FALSE

question

Finance is concerned with the process institutions, markets, and instruments involved in teh transfer of money among and between individuals, businesses and government.

answer

TRUE

question

The corporate controller typically handles the accounting activities, such as tax management, data processing, and cost and financial accounting.

answer

TRUE

question

Financial analysis and planning is concerned with analyzing the mix of assets and liabilities.

answer

FALSE

question

To achieve the goal of profit maximization for each alternative being considered, the financial manager would select the one that is expected to result in the highest monetary return.

answer

TRUE

question

Financial markets are intermediaries that channel the savings of individuals, businesses and government into loans or investments.

answer

FALSE

question

The marginal tax rate represents the rate at which additional income is taxed.

answer

TRUE

question

Financial services are concerned with the duties of the financial manager.

answer

FALSE

question

The financial manager places primary emphasis on cash flows, the inflow and outflow of cash.

answer

TRUE

question

Financing decisions deal with the left-hand side of the firm's balance sheet and involve the most appropriate mix of current and fixed assets.

answer

FALSE

question

Dividend payments change directly with changes in earnings per share.

answer

FALSE

question

Money markets involve the trading of securities with maturities of one year or less while capital market involve the buying and selling of securities with maturities of more than one year.

answer

TRUE

question

All dividend income received by one corporation from an investment in the common and preferred stock of another corporation is excluded from taxation.

answer

FALSE

question

Financial managers actively manage the financial affairs of many types of business-financial and non-financial, private and public, for-profit and not-for-profit.

answer

TRUE

question

Managerial finance is concerned with design and delivery of advice and financial products to individuals, business, and government.

answer

FALSE

question

The key role of the financial manager is

answer

decision making.

question

The wealth of corporate owners is measured by the share price of the stock.

answer

TRUE

question

A financial institution is an intermediary that channels the savings of individuals, businesses, and governments into loans or investments.

answer

TRUE

question

Because of the dividend exclusion only 70% of intercorporate dividend income is included as ordinary income.

answer

FALSE

question

In partnerships, owners have unlimited liability and may have to cover debts of other less financially sound partners.

answer

TRUE

question

The corporate treasurer typically handles both the cost accounting and financial accounting

answer

FALSE

question

The key activities of the financial manager include all of the following EXCEPT

answer

managing financial accounting

question

Risk and the magnitude and timing of cash flows are the key determinants of share price, which represents teh wealth of the owners in the firm.

answer

TRUE

question

A public offering is teh sale of a new security issue -- typically debt or preferred stock -- directly to an investor or group of investors.

answer

FALSE

question

Tax laws often are used to accomplish economic goals such as providing incentives for corporate investment in certain types of assets.

answer

TRUE

question

In partnerships, a partner can readily transfer his/her wealth to other partners.

answer

FALSE

question

The accrual method recognizes revenue at the point of sale and recognizes expenses when incurred.

answer

TRUE

question

Included in teh primary activities of the financial manager are

answer

financial analysis and planning, making financing decisions, making investment decisions, analyzing and planning cash flows (all of the above)

question

A high earnings per share (EPS) does not necessarily translate into a high stock price.

answer

TRUE

question

Eurocurrency deposits arise when a corporation or individual makes a deposit in a bank in a currency other than the local currency of teh country where the bank is located.

answer

TRUE

question

With progressive tax rates, the average tax rate is always less than or equal to the marginal tax rate.

answer

TRUE

question

The board of directors is responsible for managing day-to-day operations an carrying out the policies established by the chief executive officer.

answer

FALSE

question

The accountant evaluates financial statements, develops additional data, and makes decisions based on his or her assessment of the associated returns and risks.

answer

FALSE

question

The financial manager may be responsible for any of the following EXCEPT

answer

monitoring of quarterly tax payments.

question

The profit maximization goal ignores the timing of returns, does not directly consider cash flows, and ignores risk.

answer

TRUE

question

A primary market is a financial market in which pre-owned securities are traded.

answer

FALSE

question

Dividends received by a corporation on an investment in the common and preferred stock of another corporation (where ownership in the dividend paying corporation is less than 20%) is subject to 70% exclusion for tax purposes.

answer

TRUE

question

The sole proprietor has unlimited liability; his or her total investment in teh business, but not his or her personal assets, can be taken to satisfay creditors.

answer

FALSE

question

The corporate treasurer is the officer responsible for the firm's accounting activities, such as corporate accounting, tax management, financial accounting, and cost accounting.

answer

FALSE

question

Making investment decisions includes all of the following EXCEPT

answer

notes payable

question

When considering each financial decision alternative or possible action in terms of its impact on the share price of the fim's stock, financial managers should accept only those actions that are expected to maximize shareholder value.

answer

TRUE

question

Loan transactions between commercial banks in which the federal government becomes involved are referred to as federal funds.

answer

FALSE

question

The tax deductibility of various expenses such as general and administrative expenses [BLANK] their after-tax cost.

answer

reduces

question

In limited partnerships, only one partner may assume limited liability. All other partners have to have unlimited liability.

answer

FALSE

question

The corporate controller is the officer responsible for the firm's financial activities such as financial planning and fund raising, making capital expenditure decisions, and managing cash, credit, the pension fund, and foreign exchange.

answer

FALSE

question

Making financing decisions includes all of the following EXCEPT

answer

analyzing quarterly budget and performance reports.

question

An increase in firm risk tends to result in a higher share price since the stockholder must be compensated for the greater risk.

answer

FALSE

question

If a corporation sells certain capital equipment for more than their initial purchase price, the difference between the sale price and the purchase price is called a(n)

answer

capital gain

question

Congress allows corporations to exclude from taxes 70 to 100% of dividends received from other corporations. Congress did this to

answer

avoid triple taxation on dividends.

question

The primary goal of the financial manager is

answer

maximizing wealth

question

Corporation A owns 15% of the stock of corporation B. Corporation B pays corporation A $100,000 in dividends in 2002. Corporation A must pay tax on

answer

$30,000 of ordinary income.

question

The accountant recognizes revenues and expenses on

answer

an accrual basis.

question

Most businesses raise money by selling their securities in a

answer

public offering.

question

The financial manager recognizes revenues and expenses utilizing

answer

the actual inflows and outflows of cash.

question

The [BLANK] is created by a financial relationship between suppliers and demanders fo short-term funds.

answer

money market

question

The financial manager is interested in the cash inflows and outflows of the firm, rather than the accounting data, in order to ensure

answer

sovency

question

If a company's managers are NOT owners of the company, then they are

answer

agents.

question

Economic theories that the financial manager must be able to utilize for efficient business operations, include

answer

price theory, profit-maximizing strategies, supply-and-demand analysis, and marginal analysis.

question

A competitive market that allocates funds to their most productive use is called a(n)

answer

efficient market.

question

The primary economic principle used in managerial finance is

answer

marginal analysis.

question

Which of the following legal forms of organization is most expensive to orgaize?

answer

Corporations.

question

Most money market transactions are made in

answer

marketable securities.

question

Agency costs include all of the following EXCEPT

answer

management reports to stockholders.

question

Under which of the following legal forms of organization, is ownership readily transferable?

answer

Corporation

question

One way often used to insure that management decisions are in the best interest of the stockholders is to

answer

tie management compensation to the performance of the company's common stock price.

question

The true owner(s) of the corporation is (are) the [BLANK].

answer

stockholders

question

The amount earned during teh accounting period on each outstanding share of common stock is called

answer

earnings per share.

question

The nonexclusive sale of either bonds or stocks to the general public is called

answer

public offering.

question

Marginal analysis states that financial decisions should be made and actions taken only when

answer

added benefits exceed added costs.

question

Profit maximization as a goal is not ideal because it does NOT directly consider

answer

risk and cash flow.

question

Profit maximization as the goal of the firm is NOT ideal because

answer

profit maximization does not consider risk.

question

Profit maximization fails because it ignores all EXCEPT

answer

earnings per share.

question

A major weakness of a partnership is

answer

difficulty liquidating or transferring ownership.

question

Long-term debt instruments used by both government and business are known as

answer

bonds.

question

The two key financial markets are

answer

money market and capital market.

question

Financial managers evaluating decision alternatives or potential actions must consider

answer

risk, return, and the impact on share price.

question

As the risk of a stock investment increases, investors'

answer

required rate of return will increase.

3310 – Ch 1 HW Questions – Flashcards

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