1. (TCO A) Which of the following statements is CORRECT? (Points : 10) X -One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. It is generally easier to transfer one’s ownership interest in a partnership than in a corporation. One of the advantages of the corporate form of organization is that it avoids double taxation. One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., “one person, one vote.” Corporations of all types are subject to the corporate income tax. |

2. (TCO G) Which of the following statements is CORRECT? (Points : 10) In the statement of cash flows, a decrease in accounts receivable is reported as a use of cash. Dividends do not show up in the statement of cash flows because dividends are considered to be a financing activity, not an operating activity. X - In the statement of cash flows, a decrease in accounts payable is reported as a use of cash. In the statement of cash flows, depreciation charges are reported as a use of cash. In the statement of cash flows, a decrease in inventories is reported as a use of cash. |

3. (TCO G) An investor is considering starting a new business. The company would require $475,000 of assets, and it would be financed entirely with common stock. The investor will go forward only if she thinks the firm can provide a 13.5% return on the invested capital, which means that the firm must have a ROE of 13.5%. How much net income must be expected to warrant starting the business? (Points : 10) $52,230 $54,979 $57,873 $60,919 X -$64,125 |

4. (TCO B) Suppose a State of New York bond will pay $1,000 10 years from now. If the going interest rate on these 10-year bonds is 5.5%,