question

the goal of a business should be

answer

maximization of owners wealth

question

under current tax laws the lowest marginal tax rate for both individual and corporation is

answer

15 %

question

For corporations the principal against relationship usually refers to the relationship between

answer

owners and managers

question

which of the following is not considered to be one of the three major forms of business

answer

public limited company

question

which one of the following alternatives is commonly used to reduce agency problems as they relate to corporate control

answer

stock options

question

Generally accepted accounting principles are formulated by the

answer

financial accounting standards board

question

which one of the following financial statements conveys a relationship of equality between assets and liabilities plus owners equity

answer

Balance sheet

question

under which of the following business organizations do the owners have unlimited liability for all the debts of the firms

answer

sole proprietorship

question

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

answer

20%

question

of the following forms of organization which businesses are the greatest in numbers

answer

a proprietorship

question

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

answer

corporations

question

of the following forms of business organizations which have the advantage of limited liability

answer

limited partnership

question

under which of the following business organizations do the owners have unlimited liability

answer

proprietors and partnership

question

the most important form of short term business financing is

answer

trade credit

question

a limited partnership is comprised of

answer

both general and limited partners

question

working capital does not include

answer

property, plant and equipment

question

deposits placed in foreign banks that remain denominated in the u.s. dollars are called

answer

Eurodollars

question

which of the following is not considered to be one of the five C's of credit analysis

answer

caution

question

commercial finance companies obtain loanable funds

answer

through both long term and short term financing

question

the small business administration

answer

lends to business with reasonable prospects of repayment but which cannot obtain

question

the bank line of credit is

answer

the loan limit that a bank had established for a business customer

question

a revolving credit agreement is a

answer

bankers stand by agreement to provide a guaranteed line of credit for a specified period of time

question

a business that needs short term credit in excess of its regular line of bank credit may

answer

pledge accounts receivables as specific collateral for additional loans

question

when a bank takes a business inventory as collateral for additional loans it

answer

usually establishes a field warehouse

question

for most fields of business the basic source of short term loan financing is

answer

commercial banks

question

if total assets are 100,000 fixed assets are 30,000 current liabilities are 20,000 the net working capital is

answer

50,000

question

if life insurance is pledges as collateral for a loan how much can be borrowed

answer

cash surrender value of the policy

question

a survey of financial managers found they spend nearly what percent of their time dealing with financial planning budgeting and working capital issues

answer

70%

question

which of the following asset accounts is not part of a firms working capital

answer

fixed assets

question

which of the following types of ratios indicate the ability to meet short term obligations to creditors as they come due

answer

liquidity ratios

question

if a firm actually sells its accounts receivable the process is known as

answer

factoring

question

which of the following is a private firm that operates as a credit reporting agency

answer

Dun & Bradstreet

question

Proprietors and partners

answer

Have unlimited liability and are liable for all the debts of their business, their personal assets can be attached if needed to satisfy the business obligation.

question

Corporate

answer

owners who are shareholders have limited liability. the most they can lose is the funds they have invested in the firm.

question

credit analysis

answer

involves appraising the credit worthiness or quality of a potential customer. it answers the question, should credit be changed or granted? the decision is made on the basis of the applicants characters, capacity, capital, collateral and conditions

question

the five C's of credit analysis

answer

1.Character is ethical quality upon which one can base a judgment about a customers willingness to pay bills. 2.Capacity the ability to pay bills. 3.Capital adequacy of owner equity relative to existing liabilities. 4.Collateral is whether assets are available to provide security. 5. Conditions are current economic climate and state of the of the business cycle.

question

sole proprietorship

answer

business venture that is owned by a single individual who personally receives all profits and assumes all responsibility for the debts and losses of the business.

question

Advantages of a sole proprietorship

answer

1. distribution and use of profits 2. control of the business 3. Government regulation 4.Closing the business 5. Secrecy

question

Disadvantages of a sole proprietorship

answer

1. unlimited liability 2.limited resources 3. existence of the business 4.limited management 5.Qualified employees.

question

Partnerships

answer

an association of two or more persons who carry on as co-owners of a business for a profit.

question

Advantages of a Partnership

answer

1. Ease of formation 2. better credit rating 3.Specialization 4. Decision making 5. Regulatory controls

question

Disadvantages of a Partnership

answer

1.Unlimited liability 2.Business responsibility 3.Life of the partnership 4.Limited sources of funds 5.Distribution of funds

question

Corporations

answer

a legal entity created by the state with assets and liabilities separate from those of the owners of the corporation. profits are distributed to the shareholders in the form of dividends.

question

Advantages of a Corporation

answer

1. limited liability 2.transfer of ownership 3.external sources of funds 4.expansion potential 5.perpetual life

question

disadvantages of a Corporation

answer

1.double taxation 2.legal requirement and regulatory red tape 3.cost and time involved in the incorporation 4.disclosure of information 5.employee-owner separation

question

Small business administration

answer

Created in 1953 provides variety of services in addition to loan guarantees.

question

How does the Small business administration provide financing to small business?

answer

Small business administration provides financing to firms unable to obtain loans through private channels .SBA assists in 3 different ways 1. makes direct loans to business 2. participate jointly with private banks in extending loans to business

Finance test 3 – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards