Question

1. Which of the following statements is CORRECT?

a. corporate stakeholders are exposed to unlimited liability.

b. it is usually easier for proprietorships to raise large amounts of capital than corporations.

c. one disadvantage of the corporations is operations pay more taxes than other types of businesses such as proprietorships or partnerships.

d. corporations generally are subject to less regulations than proprietorships.

3. which of the following statements is NOT CORRECT?

a. your uncle purchased 200 shares of Starbucks stock through a brokerage firm this is a secondary market transaction.

b. mutual funds usually invest their money in a well-diversified portfolio of various financial securities such as stocks or bonds.

c. The New York Stock Exchange is an auction market, and it has a physical location.

d. money markets are markets for long-term financial securities such as preferred stocks and Common Stocks.

4. while financial economist generally view markets as efficient, many also believe that significant differences between a stock's intrinsic value and it's price:

a. can and have occurred.

b. theoretically impossible.

c. occurred all the time for all stocks.

d.can occur in theory but have never occurred in reality.

5. A primary function of financial institutions is to:

a. vote for members of the federal reserve.

b. stay open on the weekends and holidays.

c. offer checking accounts and issue credit cards.

d. facilitate the transfer of capital money (from savers to users that want to borrow to invest).

6. Other things held constant, which of the following actions would decrease the amount of cash on a company's balance sheet?

a. the company repurchases common stock.

b. the company issues common equity.

c. the company increases accounts payable.

d. the company reduces accounts receivable.

e. the company issues preferred stock.

8. Companies E and Q each reported the same earnings per share (EPS), but Company E's stock trades at a higher price. Which of the following statements is CORRECT?

a. company E must p[ay a lower dividend.

b. company E trades a lower P/E ratio.

c. company E is probably judged by investors to be riskier.

d. company E probably has more growth opportunities.

e. company E must have a higher market-to-book ratio.

9. ____ is listed on income statements as a cost even though there is no cash outlay.

a. depreciation

b. retained earnings

c. interest expense

d. tax

10. to assess the financial health of the company, a firmae's financial ratios could be compared to:

a. the same firmae's ratio in prior years

b. the ratios of the federal government

c. the ratios of any struggling firms from the same industry

d. the ratios of other firms from different industry

Answer 1

1. One disadvantage of corporation is that they will be generally paying higher amount of taxes than other form of ownership, because of operations are always identified by and large tax payments through corporate rate tax, and these are the organisations who are the primary reasons for the growth and development of an economy so they would be paying the most of the taxes.

Other statements are false because stakeholders are having limited liability and corporations are subject to more regulations.

Correct answer is option ( C).