Midterm Exam

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|1. (TCO A) Which of the following statements is CORRECT? (Points : 10) | | | |      [pic] One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. | |      [pic] It is generally easier to transfer one’s ownership interest in a partnership than in a corporation. | |      [pic] One of the advantages of the corporate form of organization is that it avoids double taxation. | |      [pic] One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., “one | |person, one vote.” | |      [pic] Corporations of all types are subject to the corporate income tax. | | | | | | | |2. (TCO G) Which of the following statements is CORRECT? (Points : 10) | | | |      [pic] In the statement of cash flows, a decrease in accounts receivable is reported as a use of cash. | |      [pic] Dividends do not show up in the statement of cash flows because dividends are considered to be a financing activity, not an | |operating activity. | |      [pic] In the statement of cash flows, a decrease in accounts payable is reported as a use of cash. | |      [pic] In the statement of cash flows, depreciation charges are reported as a use of cash. | |      [pic] In the statement of cash flows, a decrease in inventories is reported as a use of cash. | | | | | | | |3. (TCO G) LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were | |$620,000, and its net income after taxes was $24,655. Stockholders recently voted in a new management team that has promised to lower costs | |and get the return on equity up to 15%. What profit margin would LeCompte need in order to achieve the 15% ROE, holding everything else | |constant? (Points : 10) | | | |      [pic] 7.57%...
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