1. Which of the following statements best represents the “Agency Problem”？ a. Managers may attempt to benefit themselves in terms of salary and perquisites at the expense of shareholders. b. The agency problem results from the separation of management and the ownership of the firm. c. The agency problem may interfere with the implementation of maximizing shareholder wealth. d. Managers may make decisions that are not in the best interest of shareholders. e. All of the above 2. Which of the following has the most significant influence on return on equity? a. Common dividends b. Principal payments c. Accruals d. Operating Income 3. Which of the following ratios would be the best way to determine how customers are paying for their purchase? a. Inventory turnover b. Total asset turnover c. Current ratio d. Average collection period 4. Roxbury Brothers has sales of $2,250,000; a gross profit of $825,000; total operating cost of $620,000; income taxes of $74,800; and total assets of $995,000. What is Roxbury’s Income Return on Investment? a. 36.67% b. 14.32% c. 20.60% d. 4.99% 5. The SEC requires registration of a public issue in which of the following circumstances? a. a railroad issue b. an issue of commercial paper c. a public utility issue d. an issue of $5,000,000 6. Activities of the investment banker include: a. assuming the risk of selling a security issue b. selling new securities to the ultimate investors c. providing advice to firms issuing securities d. all of the above 7. Which of the following is an advantage of the sole proprietorship? a. limited liability for its owners b. double taxation for its owners c. no significant legal requirement for starting the business easily transferred ownership