Principles of Managerial Finance 15th Global Edition by Chad J. Zutter Test bank
C) 22%
D) greater than 22%
Answer: C
Diff: 2
Topic: Taxes
Learning Obj.: LG 5
Learning Outcome: F-01
AACSB: Analytical Thinking
16) Corporate governance refers to ________.
A) the rules, processes, and laws by which companies are operated, controlled, and regulated
B) the fact that corporations heavily influence the actions of governments through their lobbying efforts
C) the notion that corporations act like a democracy in the sense that every shareholder has an equal vote on corporate decisions
D) the idea that a corporate CEO is really accountable to no one and must be constrained by government action
Answer: A
Diff: 1
Topic: Corporate Governance
Learning Obj.: LG 6
Learning Outcome: F-01
AACSB: Reflective Thinking
17) Agency costs are ________.
A) costs that managers bear when they do not act in the interests of shareholders
B) costs that firms must pay to comply with the regulations imposed by federal government agencies
C) costs that are exempt from taxation
D) costs that shareholders bear because managers pursue their own interests rather than acting in the interests of shareholders
Answer: D
Diff: 2
Topic: Legal Forms of Business Organization
Learning Obj.: LG 6
Learning Outcome: F-01
AACSB: Reflective Thinking
18) Firms are legally required to pay dividends to stockholders just as they must make interest payments to lenders.
Answer: FALSE
Diff: 1
Topic: Legal Forms of Business Organization
Learning Obj.: LG 5
Learning Outcome: F-01
AACSB: Reflective Thinking
19) Suppose a certain business pays 10% tax on its first $10,000 in come, 12% tax on income above $10,000 but below $40,000, and 22% tax on income above $40,000. Suppose the business earns $50,000 in income this year. Its average tax rate is closest to ________.
A) 22%
B) 14%
C) 10%
D) 17%
Answer: B
Diff: 2
Topic: Taxes
Learning Obj.: LG 5
Learning Outcome: F-01
AACSB: Analytical Thinking
20) Dividends are periodic distributions of cash to the stockholders of a firm.
Answer: TRUE
Diff: 1
Topic: Legal Forms of Business Organization
Learning Obj.: LG 5
Learning Outcome: F-01
AACSB: Reflective Thinking
21) Suppose a certain business pays 10% tax on its first $10,000 in come, 12% tax on income above $10,000 but below $40,000, and 22% tax on income above $40,000. Suppose the business earns $50,000 in income this year. It tax liability is ________.
A) $6,800
B) $11,000
C) $9,800
D) $5,800
Answer: A
Diff: 2
Topic: Taxes
Learning Obj.: LG 5
Learning Outcome: F-01
AACSB: Analytical Thinking
22) Under a flat tax structure, where the same tax rate applies to all income levels ________.
A) the marginal tax rate is greater than the average tax rate
B) the marginal tax rate is less than the average tax rate
C) the marginal tax rate is equal to the average tax rate
D) the marginal tax rate is irrelevant
Answer: C
Diff: 2
Topic: Taxes
Learning Obj.: LG 5
Learning Outcome: F-01
AACSB: Analytical Thinking
23) In partnerships, owners have unlimited liability and may have to cover debts of other less financially sound partners.
Answer: TRUE
Diff: 1
Topic: Legal Forms of Business Organization
Learning Obj.: LG 5
Learning Outcome: F-01
AACSB: Analytical Thinking
24) The board of directors is responsible for managing day-to-day operations and carrying out the policies established by the chief executive officer.
Answer: FALSE
Diff: 1
Topic: Corporate Governance
Learning Obj.: LG 6
Learning Outcome: F-26
AACSB: Analytical Thinking
25) Institutional investors are professional investors who work on behalf of individuals, business, and government.
Answer: TRUE
Diff: 1
Topic: Corporate Governance
Learning Obj.: LG 6
Learning Outcome: F-26
AACSB: Analytical Thinking
26) The major purpose of the Sarbanes-Oxley Act of 2002 was to place caps on the compensation that could be paid to corporate executives.
Answer: FALSE
Diff: 1
Topic: Corporate Governance
Learning Obj.: LG 6
Learning Outcome: F-26
AACSB: Analytical Thinking
27) The board of directors is typically responsible for ________.