16. Restricted stock is: A. a special type of stock that is not transferable from the current holder to others until specific conditions are satisfied. B. a special type of stock that can be converted into corporate bonds after a specific amount of time has elapsed. C. a special type of stock that is a result of offering an employee stock ownership plan. D. None of these answers is

16. Restricted stock is: A. a special type of stock that is not transferable from the current holder to others until specific conditions are satisfied. B. a special type of stock that can be converted into corporate bonds after a specific amount of time has elapsed. C. a special type of stock that is a result of offering an employee stock ownership plan. D. None of these answers is correct.
17. All of the following are functions of the board of directors except ________. A. Hire the CEO B. Evaluate the CEO C. Provide reports to the auditors
D. Design compensation contracts for the CEO
18. The agency relationship in corporate finance refers to _______________________. A. when the corporate hires an advertising agency to market their new product/service B. when the shareholders hire a manager to run their company C. when the board of directors are elected to staggered terms D. when the board of directors oversee the CEO
19. The role of a credit analyst is to ______________. A. help firms access capital markets B. examine a firm’s financial strength for its debt holders C. monitor the business activities and report to the Securities Exchange Commission
D. follow a firm and conduct their own evaluations of the company’s business activities
20. All of the following are cash flows from financing activities except a(n) _________. A. Increase in accounts payable B. Stock Repurchases C. Paying dividends
D. Issuing stock
21. Cash flows available to pay the firm’s stockholders and debt holders after the firm has made the necessary working capital investments, fixed asset investments, and developed the necessary new products to sustain the firm’s ongoing operations is referred to as _________________. A. Net operating working capital B. Operating cash flow C. Free cash flow D. None of the above
22. All of the following are reasons that one should be cautious in interpreting financial statements except ____________. A. Firms can take steps to over- or understate earnings at various times. B. It is difficult to compare two firms that use different depreciation methods. C. Financial managers have quite a bit of latitude in using accounting rules to manage their reported earnings.
D. All of the above are reasons to be cautious in interpreting financial statements.
23. All of the following are cash flows from investing activities except a(n)___________. A. Increases in fixed assets B. Decreases in fixed assets C. Increases in marketable securities D. All of these items are cash flows from investing.
24. Which of the following is incorrect with respect to the Sarbanes-Oxley Act? A. The act requires public and private firms to ensure that their boards’ audit committees have considerable experience in applying generally accepted accounting principles for financial statements. B. The act requires that the firm’s senior management sign off on the financial statements certifying the statements as accurate and representative of the firm’s financial condition. C. This act was passed as result of extreme earnings management. D. All of these statements are correct.
25. A firm currently uses straight-line depreciation but is considering changing to MACRS. If the firm implements the change, which of the following will occur as a result of this change? A. The firm’s taxable income will increase. B. The firm will pay more in taxes. C. The firm’s EBIT will increase. D. None of the above.
26. The following are reasons that firms report ‘accounting’ income, except: A. accounting income is less erratic than cash flow B. Accounting income is a proxy for economic income. C. Accounting income reduces taxes that must be paid.
D. accounting income assumes the firm is a ‘going concern’.
27. The board of directors _____________. A. are hired by the CEO B. are elected by shareholders C. have unlimited liability since they oversee the day-to-day operations of the firm D. are employed by the Securities Exchange Commission to ensure its rules and regulations have been met
28. Which of the following is not a reason to report accounting profit in addition to cash flow? A. Accounting profit has less dramatic swings
B. Accounting profit reflects the idea of a ‘going concern
C. Accounting profit is a better proxy for economic profit D. Accounting profit takes into account the time value of money E. Accounting profit requires firm’s to record transactions with no cash flow
29. Is it possible for a firm to have positive net income and yet it has cash flow problems? A. Yes, this can occur when a firm is growing very rapidly. B. No, this is impossible since net income increases the firm’s cash. C. No, this is impossible since net income and cash are highly correlated.
D. Yes, this is possible if the firm window-dressed its financial statements.