Study Guide Quiz 1

Topics: Balance sheet, Generally Accepted Accounting Principles, Revenue Pages: 15 (1774 words) Published: January 26, 2014
Part 1 of 1 - Week 1 Quiz100.0 Points

Question 1 of 254.0 Points
The firm’s price-earnings (P/E) ratio is influenced by its

A.capital structure.
B.earnings volatility.
C.sales, profit margins, and earnings.
D.all of these.

Answer Key: D

Question 2 of 254.0 Points
The primary disadvantage of accrual accounting is that

A.it does not match revenues and expenses in the period in which they are incurred.
B.it does not appropriately measure accounting profit.
C.it does not recognize accounts receivable.
D.it does not adequately show the actual cash flow position of the firm.

Answer Key: D

Question 3 of 254.0 Points
Total assets of a firm are financed with liabilities and stockholders' equity.

True
False

Answer Key: True

Question 4 of 254.0 Points
Gross profit is equal to

A.sales minus cost of goods sold.
B.sales minus (selling and administrative expenses).
C.sales minus (cost of goods sold and selling and administrative expenses).
D.sales minus (cost of goods sold and depreciation expense).

Answer Key: A

Question 5 of 254.0 Points
The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.

A. True
B. False

Answer Key: False

Question 6 of 254.0 Points
Ratios are used to compare different firms in the same industry.

A. True
B. False

Answer Key: True

Question 7 of 254.0 Points
The Sarbanes-Oxley Act was passed in an effort to

A.protect small business from large corporations dominating the market.
B.ensure that partnerships divide profits among partners in a fair manner.
C.guarantee outside auditors can control corporate accounting practices. D.control corrupt corporate behavior.

Answer Key: D

Question 8 of 254.0 Points
Which of the following is not subtracted out in arriving at operating income?

A.interest expense
B.cost of goods sold
C.depreciation
D.selling and administrative expense

Answer Key: A

Question 9 of 254.0 Points
Which of the following is not a primary source of capital to the firm?

A.assets
B.common stock
C.preferred stock
D.bonds

Answer Key: A

Question 10 of 254.0 Points
A firm has $1,500,000 in its common stock account and $1,000,000 in its paid-in capital account. The firm issued 100,000 shares of common stock. What was the original issue price if only one stock issue has ever been sold?

A.$35 per share
B.$25 per share
C.$15 per share
D.Not enough information to tell

Answer Key: B

Question 11 of 254.0 Points
Debt utilization ratios are used to evaluate the firm's debt position with regard to its asset base and earning power.

A. True
B. False

Answer Key: True

Question 12 of 254.0 Points
A firm with earnings per share of $3 and a price-earnings ratio of 20 will have a stock price of

A.$60.00
B.$15.00
C.$6.67
D.the market assigns a stock price independent of EPS and the P/E ratio.

Answer Key: A

Feedback: Stock price = EPS x P/E ratio = $3 x 20 = $60

Question 13 of 254.0 Points
The P/E ratio is strongly related to the past performance of the firm.

A. True
B. False

Answer Key: False

Question 14 of 254.0 Points
Money markets would include which of the following securities?

A.common stock and corporate bonds.
B.treasury bills and commercial paper.
C.certificates of deposit and preferred stock.
D.all of these.

Answer Key: B

Question 15 of 254.0 Points
Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.

A. True
B. False

Answer Key: False

Question 16 of 254.0 Points
Preferred stock is excluded from stockholders equity because it does not have full voting rights.

A. True
B. False

Answer Key: False

Question 17 of...
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