Strategic Management

Question 71


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Paid-in Capital represents:

(a) Earnings retained for use in the business.

(b) The amount invested in the entity by the owners.

(c) Market value of the entity’s common stock.

(d) Net assets of the entity at the date of the statement.

Question 72


At the beginning of the fiscal year, the balance sheet showed assets of $1,364 and owners equity of $836. During the year, assets increased $ 74 and liabilities decreased $38. Owner’s equity at the end of the year totaled:


(a) $836

(b) $872

(c) $948

(d) $1438

Question 73

The number of times interest charges are earned is computed as:

(a) Net income plus interest charges, divided by interest charges.

(b) Income before income tax plus interest charges, divided by interest charges.

(c) Net income divided by interest charges.

(d) Income before income tax divided by interest charges.

Question 74


The tendency of the rate earned on stockholders equity to vary disproportionately from the rate earned on total assets is sometimes referred to as:

(a) Leverage.

(b) Solvency.

(c) Yield.

(d)  Quick assets.

Question 75

Which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows expected from capital investment proposals?

(a) Internal rate of return

(b) Cash Payback

(c) Net present value

(d) Average rate of return

Question 76


Statements in which all items are expressed only in relative terms (percentages of a common bas )are:

(a) Horizontal statements.

(b) Percentage statements

(c) Vertical statements.

(d) Common-size statements.


Question 77


The reason for recoding a prepaid expense as a current asset is:

(a) That the prepaid item will be returned for a cash refund.

(b) That the prepaid item has not yet become an expense.

(c) That the expense has been incurred but not yet paid.

(d) To avoid recognizing an expense so net income will be higher for the current accounting period.

Question 78


Current generally accepted Accounting Principles and auditing standards require that financial statements of an entity for the reporting period to include:


(a) Earnings and gross receipts of cash for the period.

(b) Projected earnings for the subsequent period.

(c) Financial position at the end of the period.

(d) Current market values of all assets at the end of the period.

Question 79


Which of the flowing ratios provides a solvency measure that shows the margin of safety of note holders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

(a) Ratio of fixed assets to long-term liabilities.

(b) Ratio of net sales to assets

(c) Number of days’ sales in receivables

(d) Rate earned on stockholders’ equity


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