Case study

Pages: 12 (2759 mots) Publié le: 3 mars 2011
Multiple Choice
Identify the choice that best completes the statement or answers the question.
Note that no question is identified as the bonus question. There are a couple of questions that will take a little longer than average, but no super-long questions. If you get stuck on any question, move on and come back to this question later.

__C__ 1. Which of thefollowing statements is most correct?
|a. |One of the advantages of the corporate form of organization is that there is no double taxation. |
|b. |The partnership form of organization has easy transferability of ownership. |
|c. |One of the disadvantages of the sole proprietorship form of organization is that there isunlimited liability. |
|d. |All of these statements are correct. |

__A__ 2. Which of the following actions are likely to reduce agency conflicts between stockholders and managers?
|a. |Paying managers a large fixed salary.|
|b. |Increasing the threat of corporate takeover. X |
|c. |Placing restrictive covenants in debt agreements. |
|d. |All of the statements are correct.|

_C___ 3. Which of the following statements is most correct?
|a. |Bond covenants are a good way to resolve agency conflicts between stockholders and managers. |
|b. |Hostile takeovers tend to reduce a company's stock price. |
|c. |Corporations have limited liability.|
|d. |All of these statements are correct. |

__D__ 4. A start-up firm is making an initial investment in new plant and equipment. Currently, equipment is depreciated on a straight-line basis over 10 years. Assume that Congress is consideringlegislation that will allow the corporation to depreciate the equipment over 7 years. If the legislation becomes law, and the firm implements the 7-year depreciation basis, which of the following will occur?
|a. |The firm's tax payments will increase. |
|b. |The firm's net income will increase.|
|c. |The firm's taxable income will increase. |
|d. |The firm's net cash flow will increase. |
|e. |The firm's operating income (EBIT) will increase.|

__C__ 5. Company X has a higher ROE than Company Y, but Company Y has a higher ROA than Company X. Company X also has a higher total assets turnover ratio than Company Y; however, the two companies have the same total assets. Which of the following statements is most correct?
|a. |Company X has a lower debt ratio thanCompany Y. |
|b. |Company X has a higher profit margin than Company Y. |
|c. |Company X has a lower net income than Company Y. |
|d. |All of the statements are correct....
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