1. What is the goal of financial management for a sole proprietorship?
[pic]decrease long-term debt to reduce the risk to the owner
[pic]maximize net income given the resources of the firm
[pic]maximize the market value of the equity
[pic]minimize the tax impact on the proprietor
[pic]minimize costs and increase production

2. Working capital management includes which of the following?
[pic]establishing the inventory level
[pic]deciding when to pay suppliers
[pic]determining the amount of cash needed on a daily basis
[pic]establishing credit terms for customers
[pic]all of the above

3. Market value reflects which of the following:
[pic]The amount someone is willing to pay today for an asset.
[pic]The value of the asset based on generally-accepted accounting principles.
[pic]The asset’s historical cost.
[pic]A and B only
[pic]None of the above

4. Which of the following is true regarding income statements?
[pic]It reveals the net cash flows of a firm over a stated period of time.
[pic]It reflects the financial position of a firm as of a particular date.
[pic]It records revenue only when cash is received for the product or service provided.
[pic]It records expenses based on the recognition principle.
[pic]None of the above is a true statement.

5. Telemarket Inc. has sales of $625,000. They paid $43,000 in interest during the year and depreciation was $79,000. Administrative costs were $100,000 and other costs were $160,000. Assuming a tax rate of 35 percent, what is Telemarket’s taxable income?
[pic]$157,950
[pic]$322,000
[pic]$243,000
[pic]$200,000

6. Home Best Hardware had $315,000 in taxable income last year. Using the tax rates provided in Table 2.3, what is the approximate average tax rate?
[pic]35%
[pic]39%
[pic]34%
[pic]32%

7. Pizza A had earnings after taxes of $390,000 in the year 2008 and 300,000 shares