Question 30 Which of the following statements is CORRECT? Answer One of the disa

Question

Question 30

Which of the following statements is CORRECT?

Answer

One of the disadvantages of incorporating your business is that you could become subject to the firm's liabilities in the event of bankruptcy.

Sole proprietorships are subject to more regulations than corporations.

In any partnership, every partner has the same rights, privileges, and liability exposure as every other partner.

Corporations of all types are subject to the corporate income tax.

Sole proprietorships and partnerships generally have a tax advantage over corporations.

2 points   

Question 31

You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following best describes this transaction?

Answer

This is an example of a direct transfer of capital.

This is an example of a primary market transaction.

This is an example of an exchange of physical assets.

This is an example of a money market transaction.

This is an example of a derivative market transaction.

2 points   

Question 32

Suppose all firms follow similar financing policies, face similar risks, have equal access to capital, and operate in competitive product and capital markets. However, firms face different operating conditions because, for example, the grocery store industry is different from the airline industry. Under these conditions, firms with high profit margins will tend to have high asset turnover ratios, and firms with low profit margins will tend to have low turnover ratios.

Answer True False

2 points   

Question 33

A firm wants to strengthen its financial position. Which of the following actions would INCREASE its current ratio?

Answer

Reduce the company

Explanation / Answer

Question: 31
This is an example of a direct transfer of capital.

Question: 37

d. The company sold some of its fixed assets.

That's whythe cash shown on its balance sheet increased and there wasa negative net cash flow, some assets where sold.

Question: 38

False

Question: 39

Suppose a firms total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%. Under these conditions, the ROE will increase.

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