Bus 320 Quiz 1 White Version 1 
Bus 320: Quiz 1 Solutions
White Version
True/False Questions: Circle the correct response. (2 points each)
1.
T
F
If a sole proprietorship fails, the owner may lose whatever was invested in the business, but the owner's personal assets are not at risk.
2.
T
F
A company that has an increase in its return on assets, but no noticeable change in asset turnover, has most likely experienced an increase in financial leverage. 3.
T
F
If a firm is not operating at full capacity, assuming assets grow with sales will likely overstate the firms funding needs.
4.
T
F
A firm with many growth opportunities would likely have a book value less than its market value.
5.
T
F
Joel (the owner) at Dave’s Cosmic Subs decides to get a diamond-encrusted sandwich toaster. This would be an example of an indirect agency cost.
6.
T
F
A grocery store will likely have a higher days’ sales in inventory than a car dealer. 7.
T
F
A Stakeholder is a group or individual who benefits from or is harmed by corporate actions.
8.
T
F
Many software firms capitalize (treat as an asset) the development costs associated with creating new software products. One motivation for doing this is because it increases accounting earnings.
9.
T
F
If a firm sells part of its inventory at a loss, its quick ratio will increase.
10. T
F
A firm wants to boost sales and reduce inventory so they lower the price of their product. All else equal, this will likely lower their profit margin and decrease total asset turnover.
11. T
F
Tech firms tend to have higher market-to-book ratios than brick-and-mortar firms. 12. T
F
If a firm uses accounts payable to purchase a new fixed asset, this will make the current ratio move away from one.
13. T
F
Manufacturing firms will likely have smaller differences between their Times
Interest Earned and Cash Coverage Ratios than consulting firms.
14. T
F
In the secondary market, investors trade previously-issued securities without
the
White Version
True/False Questions: Circle the correct response. (2 points each)
1.
T
F
If a sole proprietorship fails, the owner may lose whatever was invested in the business, but the owner's personal assets are not at risk.
2.
T
F
A company that has an increase in its return on assets, but no noticeable change in asset turnover, has most likely experienced an increase in financial leverage. 3.
T
F
If a firm is not operating at full capacity, assuming assets grow with sales will likely overstate the firms funding needs.
4.
T
F
A firm with many growth opportunities would likely have a book value less than its market value.
5.
T
F
Joel (the owner) at Dave’s Cosmic Subs decides to get a diamond-encrusted sandwich toaster. This would be an example of an indirect agency cost.
6.
T
F
A grocery store will likely have a higher days’ sales in inventory than a car dealer. 7.
T
F
A Stakeholder is a group or individual who benefits from or is harmed by corporate actions.
8.
T
F
Many software firms capitalize (treat as an asset) the development costs associated with creating new software products. One motivation for doing this is because it increases accounting earnings.
9.
T
F
If a firm sells part of its inventory at a loss, its quick ratio will increase.
10. T
F
A firm wants to boost sales and reduce inventory so they lower the price of their product. All else equal, this will likely lower their profit margin and decrease total asset turnover.
11. T
F
Tech firms tend to have higher market-to-book ratios than brick-and-mortar firms. 12. T
F
If a firm uses accounts payable to purchase a new fixed asset, this will make the current ratio move away from one.
13. T
F
Manufacturing firms will likely have smaller differences between their Times
Interest Earned and Cash Coverage Ratios than consulting firms.
14. T
F
In the secondary market, investors trade previously-issued securities without
the