You are required to select the most appropriate/correct answer by writing only the problem number.
1) A conflict of interest between the shareholders and management of a firm would best be referred to as an ex of:
a. shareholders’ liability.
b. corporate breakdown.
c. the agency problem.
d. corporate activism.
e. legal liability.
2) A stakeholder is:
a. any person or entity that owns shares of a corporation.
b. any person or entity that has voting rights based on share ownership of a corporation.
c. a person who initially started a firm and currently has management control over the cash flows of the firm due to his/her current ownership of company share.
d. a creditor to whom the firm currently owes money and who consequently has a claim on the cash flows of the firm.
e. any person or entity other than a shareholder or lender who potentially has a claim on the cash flows of the firm.
3) The decisions made by financial managers should be made with the primary motive to increase the:
a. size of the firm.
b. growth rate of the firm.
c. marketability of the managers.
d. market value of the existing owners’ equity.
e. financial distress of the firm.
4) _____ refers to the cash flow that results from the firm’s on-going, core business activities.
a. Operating cash flow
b. Capital spending
c. Net working capital
d. Cash flow from assets
e. Cash flow to lenders
5) Earnings per share (EPS) is a market measure which indicates/provides information in relation to...
a. the profitability of a firm.
b. the amount of a company's profit that can be allocated to one share of its stock.
c. the gross income of the firm.
d. the amount of dividend paid out per share.
e. net profit after tax received in total to all shareholders.
6) Thompson’s Marketers CC has operating cash flow of R218. Depreciation is R45 and interest paid is R35. A net total of R69 was paid on long-term debt. The firm spent R180 on non-current assets and increased net working capital by R38. What is the amount of cash flow available to equity investors/to shareholders?
a. -R104
b. -R28
c. R28
d. R114
e. R142
7) The total long-term debt and equity of the firm is frequently called:
a. total assets.
b. total capitalization.
c. total financing.
d. debt- equity consolidation.
e. debt-equity reconciliation.
8) If a firm decreases their operating costs, all else constant, then:
a. the profit margin increases while the equity multiplier decreases.
b. the return on assets increases while the return on equity decreases.
c. the total asset turnover rate decreases while the profit margin increases.
d. both the profit margin and the equity multiplier increase.
e. both the return on assets and the return on equity increase.
9) Which of the following represent problems/weaknesses encountered when comparing the financial statements of one firm with those of another firm?
I. Either one, or both, of the firms may be conglomerates and thus have unrelated lines of business.
II. The operations of the two firms may vary geographically.
III. The firms may use differing accounting methods for inventory purposes.
IV. The two firms may be seasonal in nature and have different fiscal year ends.
a. I and II only
b. II and III only
c. I, III, and IV only
d. I, II, and III only
e. I, II, III, and IV
10) Which one of the following statements would be considered FALSE?
a. One would consider current assets and noncurrent assets when making investment decisions.
b. The performance of an entity’s operations would be represented in the Statement of Comprehensive Income.
c. Risk would be considered as the chance that an actual result may differ from a planned outcome.
d. A company would be considered highly geared if its operations were financed more by debt than funds from equity participants.
e. A financial manager would place primary emphasis on the accrual based profits of an organisation for decision making.