Principles of Finance Select the single best answer for each question or stateme

Question

Principles of Finance Select the single best answer for each question or statement, then transfer your answers to the appropriate scan sheet provided As mergers, acquisitions, and restructuring have increased in importance, agency theory has become more important in assessing whether -a, a stock repurchase should be undertaken. b shareholder goals are truly being achieved by managers in the long run. C. managers are actually agents or only employees of the firm. d managers and owners are actually the same people with the same interests. 2 Total asset turnover indicates the firm's: a liquidity. b. debt position. c. ability to use its assets to generate sales. d. profitability.

Explanation / Answer

Q1) Ans. b

Agency theory suggests of having protection of shareholders’ interest. Such acquisition should not in any way deprives those shareholders because of not achieving their goals.

Q2) Ans. c

Ratio = Net sales / Average total assets

It gives idea about how the assets are used for getting sales. The high ratio indicates better use of assets.

Q3) Ans. b

Cash budget gives figure of collection from debtors, which is required to deduct from the gross amount of accounts receivable.

Q4) Ans. c

Financial statement gives idea about firm’s profit or loss situation; experience gives idea about firm’s payment; negative records are the key of being alert before providing loan. Credit rating to the firm should be based on all these variables.

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