Principles of Managerial Finance 15th Global Edition by Chad J. Zutter Test bank

A) approving strategic goals and plans
B) managing day-to-day operations
C) arranging finance for approved long-term investments
D) maintaining and controlling the firm's daily cash balances
Answer:  A
Diff: 1
Topic:  Corporate Governance
Learning Obj.:  LG 6
Learning Outcome:  F-26
AACSB:  Analytical Thinking
 

28) The responsibility for managing day-to-day operations and carrying out corporate policies belongs to the ________.
A) board of directors
B) chief executive officer
C) stockholders
D) creditors
Answer:  B
Diff: 1
Topic:  Corporate Governance
Learning Obj.:  LG 6
Learning Outcome:  F-26
AACSB:  Analytical Thinking
 
29) Which of the following is an example of agency cost?
A) costs incurred for setting up an agency
B) failure to make an investment that would make shareholders wealthier
C) payment of income tax
D) payment of interest
Answer:  B
Diff: 1
Topic:  The Agency Issue
Learning Obj.:  LG 6
Learning Outcome:  F-26
AACSB:  Ethical Understanding and Reasoning
30) Which of the following is a routine way that boards try to align the interests of managers and stockholders?
A) fire managers who are inefficient
B) remove management's perquisites
C) tie management compensation to the performance of the company's common stock price
D) tie management compensation to the level of dividend per share
Answer:  C
Diff: 1
Topic:  The Agency Issue
Learning Obj.:  LG 6
Learning Outcome:  F-26
AACSB:  Ethical Understanding and Reasoning
 
31) The marginal tax rate paid on a firm's ordinary income can be calculated by dividing its taxes by its net income.
Answer:  FALSE
Diff: 1
Topic:  Ordinary Income
Learning Obj.:  LG 5
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 

32) The average tax rate paid on the firm's ordinary income can be calculated by dividing its taxes by its taxable income.
Answer:  TRUE
Diff: 1
Topic:  Ordinary Income
Learning Obj.:  LG 5
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
33) The tax deductibility of various expenses such as general and administrative expenses ________.
A) increases their pretax cost
B) reduces their after-tax cost
C) has no effect on their after-tax cost
D) has an unpredictable effect on their after-tax cost
Answer:  B
Diff: 1
Topic:  Ordinary Income
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking
34) Jennings, Inc. has a tax liability of $170,000 on pretax income of $500,000. What is the average tax rate for Jennings, Inc.?
A) 34 percent
B) 46 percent
C) 25 percent
D) 40 percent
Answer:  A
Diff: 2
Topic:  Ordinary Income
Learning Obj.:  LG 5
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
35) The average tax rate of a corporation with ordinary income of $105,000 and a tax liability of $24,200 is ________.
A) 46 percent
B) 23 percent
C) 34 percent
D) 15 percent
Answer:  B
Diff: 2
Topic:  Ordinary Income
Learning Obj.:  LG 5
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 

36) If a corporation sells certain capital equipment for more than its initial purchase price, the difference between the sale price and the purchase price is called a(n) ________.
A) ordinary gain
B) revenue gain
C) capital gain
D) abnormal gain
Answer:  C
Diff: 1
Topic:  Capital Gains
Learning Obj.:  LG 5
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
37) In general, most corporate capital gains are taxed at ________ tax rate.
A) the average
B) the regular corporate
C) the historic
D) a 30 percent
Answer:  B
Diff: 1
Topic:  Capital Gains
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking
38) Corporation X needs $1,000,000 and can raise this through debt at an annual rate of 6 percent, or preferred stock at an annual cost of 8 percent. If the corporation has a 21 percent tax rate, the after-tax cost of each is ________.
A) debt: $60,000; preferred stock: $80,000
B) debt: $47,400; preferred stock: $63,200
C) debt: $47,400; preferred stock: $80,000
D) debt: $60,000; preferred stock: $63,200
Answer:  C
Diff: 2