Finance Exam 1 Review – Flashcards

Given an anticipated inflation premium of 1.25% and a nominal rate of interest of 5.05%, what is the real interest rate? Round your answer to 4 decimal places.

Given an anticipated inflation premium of 1.40% and a real rate of interest of 4.14%, what is the nominal interest rate? Round your answer to 4 decimal places.

Which of the following best describes the goal of the firm?

Dividends paid by the firm ________.

Capital losses may be _______.

What is the tax liability for a corporation with $10,200,000 in taxable income?

What is the tax liability for a corporation with $13,100,000 in taxable income?

The yield curve is typically _______.

The New York Stock Exchange is an example of _________.

If you sell 100 shares of General Electric common stock, this transaction takes place in:

What is underwriting?

What business type is a business owned by individual, therefore subject to a limited life and unlimited liability?

What distinguishes the money market from the capital market?

The legal form of business that allows a firm to function separate and apart from its owners is the _________.

Cash available from operations after the firm pays for investments (in operating working capital and fixed assets) is called:

Capital market instruments include _________.

If a new security issue is marketed to a definite and select group of investors (such as current stockholders, employees or customers) the issue is called:

Suppose your firm had the following taxable income amounts: 2012 ($2 million) operating loss 2013 ($2 million) operating loss 2014 ($2 million) operating loss 2015 $10 million After you "carry forward" the operating losses, what is the effective taxable income for 2015?

Last year, your company had sales of $3.6 million, cost of goods sold of $2.3 million and operating expenses amounting to $840,000. The firm had $114,000 in depreciation expense. In addition, the firm paid 8% interest on $625,000 in bonds, received $30,000 in dividend income, and sold property for a $10,000 capital loss. What was the firm's tax payment?

Given an anticipated inflation premium of 1.35% and a nominal rate of interest of 5.40%, what is the real interest rate? Round your answer to 4 decimal places.

Given an anticipated inflation premium of 1.40% and a real rate of interest of 4.14%, what is the nominal interest rate? Round your answer to 4 decimal places.

According to our text, which of the following statements is true?

Last year, California Sushi and Such (CSS) had sales of $65 million. The firm's operating expenses amounted to $20 million and costs of goods sold totaled $15 million. In addition, CSS received $80,000 in dividend income, and paid $300,000 in dividends to its stockholders. CSS has $25 million in bonds outstanding with an annual interest payment of 9%. The firm also had $8 million in depreciation expense, and sold land for $3.5 million that had been purchased for $2.5 million several years earlier. What is the firm's tax liability?

Which of the following are tax deductible expenses for a corporation?

Dividends paid by the firm ________.

What is the tax liability for a corporation with $12,500,000 in taxable income?

What is the tax liability for a corporation with $17.5 million of taxable income?

Which of the term structure theories claims that investors are limited to certain maturity ranges due to legal restrictions and personal preferences?

Suppose your firm selects an investment banking firm to assist with your firm's $10 million stock issue. The investment banker will act as a broker and will attempt to sell each new share of stock for a commission for each share sold. This distribution method is referred to as ________.

Since there is a virtual certainty that the U.S. government will pay interest on Treasury securities and will redeem them at face value when they mature, Treasury securities are free of any _________ risk.

If a new security issue is marketed to a definite and select group of investors (such as current stockholders, employees or customers) the issue is called:

Of the legal forms of organizations discussed in chapter 1, which form of organization has the advantage of limited liability for all owners?

If Electro Corporation sells a $20 million stock issue to an investment banking firm such as Merrill Lynch, this transaction takes place in:

The true owners of a corporation are the _______.

To raise $5 million, Southeastern Corporation decides to issue bonds. If Southeastern does not register the bonds with the SEC and then sells the entire bond issue to Metropolitan Life Insurance Company, this issue is called a(n):

Suppose your firm had the following taxable income amounts: 2012 ($2 million) operating loss 2013 ($2 million) operating loss 2014 ($2 million) operating loss 2015 $5 million After you "carry forward" the operating losses, how much operating loss can you carry forward to 2016?

If an issuing firm sells securities to the investing public without involving an investment banker, the issue is called:

Given an anticipated inflation premium of 1.45% and a real rate of interest of 4.34%, what is the nominal interest rate? Round your answer to 4 decimal places.

Last year, California Sushi and Such (CSS) had sales of $65 million. The firm's operating expenses amounted to $20 million and costs of goods sold totaled $15 million. In addition, CSS received $80,000 in dividend income, and paid $300,000 in dividends to its stockholders. CSS has $25 million in bonds outstanding with an annual interest payment of 9%. The firm also had $6 million in depreciation expense, and sold land for $3.5 million that had been purchased for $2.5 million several years earlier. What is the firm's tax liability?

Dividends received by the firm:

Since there is a virtual certainty that the U.S. government will pay interest on Treasury securities and will redeem them at face value when they mature, Treasury securities are free of any _________ risk.

If an issuing firm sells securities to the investing public without involving an investment banker, the issue is called:

The least liquid current asset is _______.