financial management test 1 review
Question 1
Thoery
Match each key term with its most correct definition.
1. corporation The ability to make profits on financial securities because of having knowledge not available to the public. 2. dividend tax credit An agreement of partners specifying the ownership interest of a company. 3. articles of partnership A form of organization that represents single person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs. 4. capital structure theory Separate legal entity owned by shareholders who only have limited liability. 5. agency theory The study of the relative importance of debt and equity. 6. sole proprietorship Examines the relationship between the owners of the firm and the managers of the firm. 7. partnership A system to reduce the effect of double taxation. 8. insider trading A form of ownership that carries unlimited liability to the owners and where the profits are taxed at individual tax rates of the owners.
Question 2
P9-Page 49
Question 3
Income Statement ElectroWizard Company produces a popular video game called Destructo, which sells for $32. Last year ElectroWizard sold 50,000 Destructo games, each of which costs $6 to produce. ElectroWizard incurred selling and administrative expenses of $80,000 and amortization expense of $10,000. In addition, ElectroWizard has a $100,000 loan outstanding at 12%. Its tax rate is 40%. There are 100,000 common shares outstanding.
Prepare an income statement for ElectroWizard in good form (include EPS).
Question 4
Q30-Page 116
Question 5
Statement of Cash Flows Given the financial information for the A.E. Neuman Corporation,
A) Prepare a Statement of Cash Flows for the year ended December 31, 2005.
B) What is the dividend payout ratio?
C) If we increased the dividend payout ratio to 100%, what would happen to
Thoery
Match each key term with its most correct definition.
1. corporation The ability to make profits on financial securities because of having knowledge not available to the public. 2. dividend tax credit An agreement of partners specifying the ownership interest of a company. 3. articles of partnership A form of organization that represents single person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs. 4. capital structure theory Separate legal entity owned by shareholders who only have limited liability. 5. agency theory The study of the relative importance of debt and equity. 6. sole proprietorship Examines the relationship between the owners of the firm and the managers of the firm. 7. partnership A system to reduce the effect of double taxation. 8. insider trading A form of ownership that carries unlimited liability to the owners and where the profits are taxed at individual tax rates of the owners.
Question 2
P9-Page 49
Question 3
Income Statement ElectroWizard Company produces a popular video game called Destructo, which sells for $32. Last year ElectroWizard sold 50,000 Destructo games, each of which costs $6 to produce. ElectroWizard incurred selling and administrative expenses of $80,000 and amortization expense of $10,000. In addition, ElectroWizard has a $100,000 loan outstanding at 12%. Its tax rate is 40%. There are 100,000 common shares outstanding.
Prepare an income statement for ElectroWizard in good form (include EPS).
Question 4
Q30-Page 116
Question 5
Statement of Cash Flows Given the financial information for the A.E. Neuman Corporation,
A) Prepare a Statement of Cash Flows for the year ended December 31, 2005.
B) What is the dividend payout ratio?
C) If we increased the dividend payout ratio to 100%, what would happen to