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Financial Terminology

1. Which of the following reasons is most responsible for corporations being the most important form of business organization in the United States?
a. Corporations have limited life.
b. Stockholders have unlimited liability.
c. Corporations are subject to less government regulation than the other forms of business organization.
d. Corporations have the ability to raise larger sums of capital than the other forms of business organization.
Objective: Explain how financial markets work in the United States.

2. Which of the following is NOT an advantage of a private placement (as compared to a public offering)?
a. Greater financing flexibility
b. Lower flotation costs
c. Lower interest costs
d. Quicker availability of funds
Objective: Assess the role of ethics and compliance in the finance environment.

3. Which of the following is a characteristic of an efficient market?
a. Small number of individuals.
b. Opportunities exist for investors to profit from publicly available information.
c. Security prices reflect fair value of the firm.
d. Immediate response occurs for new public information.
Objective: Evaluate financial performance using financial ratios.

4. Which of the following is included in the denominator of the times-interest-earned ratio?
a.Lease payments
b.Principal payments
c.Interest expense
d.Gross profit

Solution Preview

Objective: Define basic financial terminology in 50 words or so and explain why that is the correct answer.
1. Which of the following reasons is most responsible for corporations being the most important form of business organization in the United States?
a. Corporations have limited life.
b. Stockholders have unlimited liability.
c. Corporations are subject to less government regulation than the other forms of business organization.
d. Corporations have the ability to raise larger sums of capital than the other forms of business organization.
d. Corporations have the ability to raise larger sums of capital than the other forms of business organization.
Corporations do not have a limited life, but yes stockholders have unlimited liability. The corporations are subject to a high level of ...

Solution Summary

This answer provides you an excellent discussion on Financial Terminology

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