Question 1

The relationship that exists on a balance sheet is:

		Assets = Liabilities Equity.
		None of the above
		Assets = Liabilities + Equity.
		Liabilities = Assets + Equity.

If a company generates positive net income, all else equal, cash will

		Uncertain Insufficient information
		Increase
		Stay the same
		Decrease

Question 3

If a typical firm reports a $20 Million dollars of retained earnings on its balance sheet, could its directors declare a $20 million dollar cash dividend without any qualms whatsoever?

		Yes, retained earnings represents the amount of equity built up in the company.
		Yes, retained earnings represents the amount of cash on hand.
		No, retained earnings is a liability and therefore can not be used to pay dividends.
		No, retained earnings, though an equity account does not reflect the firms ability to pay out cash in the form of dividends.

Question 4

A Major Corporation recently announced that its net income was lower than last year, however, analysts estimate that the companys net cash flow increased. What factors could explain this discrepancy?

		The companys interest expense declined
		The companys depreciation expense increased
		None of the answers listed is correct
		The company had an increase in its non-cash revenues.

Question 5

The primary goal of a publicly owned firm interested in serving the interests of stockholders should be to:

		Maximize market power
		Maximize total corporate net income
		Maximize shareholder value
		Minimize expenses

Question 6

What is the future value of $100 invested for 32 years at 12 percent interest?

Question 7

Assume a firms net income is equal to $600,000. If all revenue and operating expenses were paid in cash what would be the firms operating cash flow for the year if the firm paid a dividend of $200,000 and depreciation of $166,894?

Question 8

If a company purchases $1 million of its own common, all else equal, cash will

		Increase then decrease
		Stay the same
		Increase
		Decrease

Question 9

Assume that you face the marginal tax rate schedule below and your income is $103,718. What is your total tax?

Income Marginal Tax rate

Up to $15,600 10% $15,600-63,000 15% $63,000-128,500 25% Over $128,500 33%

Question 10

A major corporation has revenue of $1,500,000, operating expenses excluding depreciation of $500,000 and paid a $200,000 as a dividend. The companys depreciation is $100,000. The corporation is 100% equity financed, and it faces a 34% tax rate. What is the companys net income?