FIN 534 Midterm Part 1

1239 words 5 pages
Question 1
2 out of 2 points

Which of the following statements is CORRECT?

Correct Answer: Sole proprietorships and partnerships generally have a tax advantage over many corporations, especially large ones.

Question 2
0 out of 2 points

Which of the following statements is CORRECT?

Correct Answer: One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.

Question 3
0 out of 2 points

You recently sold 100 shares of your new company, XYZ Corporation, to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following statements best describes this
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Answer

Correct Answer: The balance sheet gives us a picture of the firm's financial position at a point in time.

Question 18
2 out of 2 points

A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio?
Answer

Correct Answer: Issue new stock and then use some of the proceeds to purchase additional inventory and hold the remainder as cash.

Question 19
2 out of 2 points

Considered alone, which of the following would increase a company's current ratio?
Answer

Correct Answer: An increase in accounts receivable.

Question 20
0 out of 2 points

If a bank loan officer were considering a company's request for a loan, which of the following statements would you consider to be CORRECT?
Answer

Correct Answer: Other things held constant, the lower the debt ratio, the lower the interest rate the bank would charge the firm.

Question 21
0 out of 2 points

You observe that a firm's ROE is above the industry average, but its profit margin and debt ratio are both below the industry average. Which of the following statements is CORRECT?

Correct Answer: Its total assets turnover must be above the industry average.

Question 22
0 out of 2 points

Which of the following would indicate an improvement in a company's financial position, holding other things constant?
Answer

Correct Answer: The current and quick

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