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BAM 313 FINAL EXAM (INTRODUCTION TO FINANCIAL MANAGEMENT)
Multiple Choice Questions(Enter your answers on the enclosed answer sheet)
1. The CEO of High Tech International decides to change an accounting method at the end of the current year. The change results in reported profits increasing by 5%, but the company’s cash flows are not changed. If capital markets are efficient, then:
a. The stock price will increase only if the accounting change will also result in higher profits in the next year.
b. The stock price will increase due to higher profits.
c. The stock price will decrease because accounting method changes are not permitted under generally accepted accounting principles.
d. The stock price will not be affected by the accounting change.
2. S-type corporations have all of the following advantages EXCEPT
a. The owners have limited liability.
b. All owners must be people, no corporations.
c. Distributions are taxed twice, similar to corporate dividend payments.