Finance Questions

The Unearned Service Revenue account is a -asset-expense-revenue-liability

A credit to a liability account -indicates a decrease in the account -indicates an increase in the account -must be accompanied by a credit to an asset account -is an error

Cash dividends send which of the following signals to the market?A. Agency costs will be raised since the firm will have less flexibilityB. The firm is planning on downsizingC. The firm is currently, and expects to continue to be, profitableD. The firm will no longer conduct stock repurchases

Simon Company had the following summarized operations for the month of May: Revenues earned: for cash, $32,000; and on account, $18,000; and Expenses incurred: for cash, $5,000; and on account, $10,000. In addition, the company purchased Equipment for $8,000 on account and Supplies for $5,000 for cash. The net income for the month of May is -$45,000-$14,000-$27,000-$35,000

During 2022, Gibson Company's assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity therefore -increased $40,000 -decreased $140,000-decreased $40,000-increased $140,000

Given an interest rate of zero percent, the future value of a lump sum invested today will always:A. Remain constant, regardless of the investment time period.B. Decrease if the investment time period is shortened.C. Decrease if the investment time period is lengthened.D. Be infinite in value.

Which of the following would not be considered an internal user of accounting data for a company?- president of the company -controller of the company -Internal Revenue Service -Production manager

Revenues and expenses are reported on the -statement of stockholders' equity -balance sheet -statement of cash flows -income statement

Which of the following events is not recorded in the accounting records? - equipment is purchased on account -an employee is terminated -a cash investment is made into the business-the declaration of cash dividends

Stockholders' equity is equal to- revenues minus expenses - assets minus revenues - assets minus liabilities - assets plus liabilities

When dividends and capital gains are distributed, the value of the shares _____ and, they are _____ to the investor in the year they are paid out.

Which of the following statements is FALSE?A. MM Proposition 1, if there are no taxes, states the value of the firm does not depend whatsoever on its capital structure.B. MM Proposition 2, if there are no taxes, explains how the cost of equity decreases as the firm increases its use of debt financing.C. Because interest expense is tax deductible, leverage increases the firm's value by the amount of the present value of the interest tax shield.D. Because interest expense is tax deductible, a firm's WACC decreases as firms rely more heavily on debt financing.

Today, Courtney wants to invest an amount less than $5,000 with the goal of receiving $5,000 back some time in the future. Which one of the following statements is correct?A. The period of time she has to wait until she reaches her goal is not affected by the compounding of interest.B. The lower the rate of interest she earns, the shorter the time she will have to wait to reach her goal.C. The length of time she has to wait to reach her goal is directly related to the interest rate she earns.D. The period of time she has to wait decreases as the amount she invests today increases

Closed End Funds and Other Types of Investment Companies

Which of the following statements is FALSE?A. An easy way to compute the value of an annuity due (such as a lease) is to compute the value of a regular annuity, and then compound the result forward one period.B. The annual percentage rate (APR) is the best way to compare two investments with different compounding periods.C. Lenders and investors prefer daily compounding to annual compounding.D. The process of paying off a loan by making regular principal reductions is called amortizing.

Which of the following statements is FALSE?A. Over the long run, investments in small-company stocks have had the largest return but also the most risk, when compared with large-company stocks, bonds, and T-Bills.B. The average return is always less than the geometric return.C. Investors who hold bonds instead of stocks over long horizons can be rational and relatively averse to risk.D. Unlike the capital gains yield, the dividend yield can never be negative

Which of the following statements is TRUE?A. Bankruptcy occurs whenever a firm is unable to meet obligations or reports negative book equity.B. A Chapter 7 bankruptcy allows a firm to reorganize and continue operations as "debtor-in-possession."C. Under bankruptcy, trade creditors have lower priority than secured bank loans.D. Financial distress and bankruptcy costs cause WACC to decrease as leverage increases

Which of the following statements is TRUE?A. Efficient markets will protect investors from wrong choices if they do not diversify.B. Consistent with efficient markets, stock prices reach equilibrium several times per week.C. Efficient markets react to new information by instantly adjusting the price of a stock to its new fair market value without any delay or overreaction.D. Weak form efficiency implies that all information is reflected in stock prices.

Which of the following statements is FALSE?A. Like typical large US companies, Apple uses about 60% debt in its capital structure.B. In a Chapter 7 bankruptcy liquidation, employees and trade creditors have lower priority among claimants than senior and secured lenders.C. In a bankruptcy reorganization, middle managers or 'white collar' employees lose their jobs more commonly than production workers or 'blue collar' employees.D. Following a Chapter 11 filing a few years earlier and failed attempts to negotiate concessions with its unions, Hostess again in 2012 filed for bankruptcy with the intent to liquidate its assets

Which of the following statements is TRUE?A. It is better to use Geometric Return than Average Return to forecast what the stock market over the next 50 yearsB. The return earned in an average year over a multiyear period is known as the geometric returnC. The compound return earned per year over a multiyear period is known as the arithmetic average returnD. The average return is always smaller than the geometric return