FIN 571 TUTOR Let's Do This /fin571tutor.com FIN 571 TUTOR Let's Do This /fin571tutor.com | Page 27

C. Difficulties encountered when changing ownership.
D. Double taxation of profits.
E. Firms ability to raise cash.
Question 13 Which one of the following statements about preferred stock
is true?
A. There is no significant difference in the voting rights granted to preferred
and common shareholders.
B. If preferred dividends are non-cumulative, then preferred dividends not
paid in a particular year will be carried forward to the next year.
C. Preferred stock usually has a stated liquidating value of $100 per share.
D. Unlike dividends paid on common stock. Dividends paid on preferred
stock are a tax-deductible expenses.
E. Dividends on preferred stock payable during the next twelve months are
considered to be a corporate liability.
Question 14 Book value :
A. Is adjusted to market value whenever the market value exceeds the
stated book value.
B. Is based on historical cost.
C. Is equivalent to market value for firms with fixed assets.
D. Generally tends to exceed market value when fixed assets are included.
E. Is more of a financial than an accounting valuation.
Question 15 The primary goal of financial management is to:
A. Avoid financial distress.
B. Maintain steady growth sales and net earnings.
C. Maximize the current value per share of the existing stock.
D. Minimize operational costs and maximize firm efficiency.
E. Maximize current dividends per share of the existing stock.
Question 16 Which term defines the tax rate that applies to the next dollar
of taxable income earned ?
A. Deductible
B. Total
C. Marginal
D. Residual
E. Average