Question

1. One of the disadvantages of forming a proprietorship is that it is subject to many government regulations.

   True

   False

2.5 points   

QUESTION 2

1. Sarbanes-Oxley Act was passed by Congress in the wake of a series of accounting scandals in the early 2000s.

   True

   False

2.5 points   

QUESTION 3

1. A major disadvantage of operating as a proprietorship is that it creates unlimited liability for the business's debt.

   True

   False

2.5 points   

QUESTION 4

1. Double taxation can be avoided by forming a "S Corporation".

   True

   False

2.5 points   

QUESTION 5

1. An estimate of a stock's "true" value based on accurate risk and return is known as the company's market price.

   True

   False

2.5 points   

QUESTION 6

1. The verbal section of a company's annual report discusses the company's past year's performance and future prospects.

   True

   False

2.5 points   

QUESTION 7

1. Income Statement gives a "snapshot" of a company's assets and who has claims on them on a given date.

   True

   False

2.5 points   

QUESTION 8

1. Stockholders' Equity can be calculated by subtracting total liabilities from total assets.

   True

   False

2.5 points   

QUESTION 9

1. Cost of assets depleted in the production process such as machinery, equipment, vehicle, etc. is known as amortization.

   True

   False

2.5 points   

QUESTION 10

1. The amount of cash that could be withdrawn without harming a firm's ability to operate and produce future cash flow is known as free cash flow.

   True

   False

2.5 points   

QUESTION 11

1. The tax rate applicable to the last unit of a person's income is known as the marginal tax rate.

   True

   False

2.5 points   

QUESTION 12

1. Liquidity ratios measure a firm's ability to pay off debts that are maturing within one year.

   True

   False

2.5 points   

QUESTION 13

1. The DuPont Equation shows the relationships among asset management, debt management, and profitability ratios.

   True

   False

2.5 points   

QUESTION 14

1. Benchmarking refers to an analysis of a firm's financial ratios over time.

   True

   False

2.5 points   

QUESTION 15

1. Ratio Analysis is used by three main groups: managers, credit analysts, and stock analysts.

   True

   False

2.5 points   

QUESTION 16

1. A series of equal payments at fixed intervals for a specified number of periods is known as annuity.

   True

   False

2.5 points   

QUESTION 17

1. Market Value ratios give an idea of what investors think about the firm and its future prospects.

   True

   False

2.5 points   

QUESTION 18

1. Inventory Turnover Ratio is calculated by deducting inventories from current assets and then dividing by current liabilities.

   True

   False

2.5 points   

QUESTION 19

1. Times-Interest-Earned Ratio measures the firm's ability to honor its debt payments.

   True

   False

2.5 points   

QUESTION 20

1. The group of ratios that show the combined effects of liquidity, asset management, and debt management on operating results are known as profitability ratios.

   True

   False

2.5 points   

QUESTION 21

1. Ease of forming, being subject to few government regulations, and being subject to lower income taxes are advantages of:

   	A.	corporation
   	B.	publicly traded company
   	C.	proprietorship
   	D.	initial public offering

2.5 points   

QUESTION 22

1. The financial statement that shows how much cash the company began the year with and how much cash it ended up with is known as:

   	A.	balance sheet
   	B.	statement of cash flows
   	C.	income statement
   	D.	statement of stockholders' equity

2.5 points   

QUESTION 23

1. If paid in capital for Firm A is $7 million, retained earnings are $2 million, and net income is $1 million, what is Firm A's stockholder's Equity?

   	A.	$3 million
   	B.	$5 million
   	C.	$8 million
   	D.	$9 million

2.5 points   

QUESTION 24

1. If total assets are $1 million, current assets are $500,000, and current liabilities are $400,000, what is the net working capital?

   	A.	$100,000
   	B.	$300,000
   	C.	$600,000
   	D.	$900,000

2.5 points   

QUESTION 25

1. A decline in the value of intangible assets during the production process is known as:

   	A.	depreciation
   	B.	annulment
   	C.	amortization
   	D.	retained earnings

2.5 points   

QUESTION 26

1. Financial statements can be used to determine important questions such as:

   	A.	How large is the company?
   	B.	Is the company growing?
   	C.	Is the company making or losing money?
   	D.	All of the above.

2.5 points   

QUESTION 27

1. A tax system in which the tax rate is higher on higher incomes is known as __________________ system.

   		progressive tax
   		regressive tax
   		flat tax
   		inverse tax

2.5 points   

QUESTION 28

1. _______________ was created by Congress to make it more difficult for wealth individuals to avoid paying taxes through the use of various deductions.

   		Progressive tax
   		Alternative Minimum Tax
   		Regressive Tax
   		Flat Tax

2.5 points   

QUESTION 29

1. If Current Assets equal $500,000, Current liabilities equal $400,000, and inventories equal $100,000, what is the current ratio?

   	A.	1.25
   	B.	1.50
   	C.	1.75
   	D.	2.00

2.5 points   

QUESTION 30

1. If Current Assets equal $500,000, Current liabilities equal $400,000, and inventories equal $100,000, what is the quick ratio?

   	A.	1.00
   	B.	1.25
   	C.	1.50
   	D.	1.75

Answer 1

Q1)
A sole proprietorship is a one-man business.
It is the simplest form of the business, therefore it is not subject to many rules and regulations.
Thus the statement is FALSE.
Q2)
Sarbanes-Oxley Act was passed in 2002 to reform the business financial controls and audit procedures.
This law was enacted in response to the widespread accounting frauds occurred
during the 2000-2002 period mostly in response to the fraud at Enron.
Hence the statement is TRUE.
Q3)
A sole proprietorship is a one-man business and he is responsible for all the liabilities of the business.
Thus sole proprietorship creates unlimited liabilities for the business debt.
Hence the statement is TRUE.
Q4)
Normally a company pay income taxes on the income generated by the company
and shareholders pay income taxes on dividends they receive which result in double taxation.
S Corporation doesn't pay income tax as a business entity and thus it avoids double taxation.
Hence the statement is TRUE.