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Corporate shareholders:


A) are proportionately liable for the firm's debts.
B) are protected from all losses.
C) have the ability to change the corporation's bylaws.
D) receive tax-free distributions since all profits are taxed at the corporate level.
E) have basically no control over the actual corporation.

F) B) and E)
G) All of the above

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In a general partnership,each partner is personally liable for:


A) the partnership debts that he or she created.
B) his or her proportionate share of all partnership debts regardless of which partner incurred that debt.
C) the total debts of the partnership, even if he or she was unaware of those debts.
D) the debts of the partnership up to the amount he or she invested in the firm.
E) all personal and partnership debts incurred by any partner, even if he or she was unaware of those debts.

F) All of the above
G) A) and D)

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Limited liability companies are primarily designed to:


A) allow a portion of their owners to enjoy limited liability while granting the other portion of their owners control over the entity.
B) provide the benefits of the corporate structure to foreign-based entities.
C) spin off a wholly owned subsidiary.
D) allow companies to reorganize themselves through the bankruptcy process.
E) provide limited liability while avoiding double taxation.

F) A) and B)
G) None of the above

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The Sarbanes-Oxley Act in 2002 was prompted by which one of the following from the 1990s?


A) Increased stock market volatility
B) Corporate accounting and financial fraud
C) Increased executive compensation
D) Increased foreign investment in U.S. stock markets
E) Increased use of tax loopholes

F) None of the above
G) C) and E)

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Maria is the sole proprietor of an antique store that she has operated at the same location for the past 16 years.The store rents the space in which it is located but does own all of the inventory and fixtures.The store has an outstanding loan with the local bank but no other debt obligations.There are no specific loan covenants or assets pledged as security for the loan.Due to a sudden and unexpected downturn in the economy,the store is unable to generate sufficient funds to pay the loan payments due to the bank.Which of the following options does the bank have to collect the money it is owed? I.Sell the inventory and use the cash raised to apply to the debt II.Sell the store fixtures and use the cash raised to apply to the debt III.Take funds from Maria's personal account at the bank to pay the store's debt IV.Sell any assets Maria personally owns and apply the proceeds to the store's debt


A) I only
B) III only
C) I and II only
D) I, II, and III only
E) I, II, III, and IV

F) B) and E)
G) C) and D)

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Which one of the following is a working capital decision?


A) How should the firm raise additional capital to fund its expansion?
B) What debt-equity ratio is best suited to the firm?
C) What is the cost of debt financing?
D) Which type of debt is best suited to finance the inventory?
E) How much cash should the firm keep in reserve?

F) D) and E)
G) B) and E)

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Which one of the following best matches the primary goal of financial management?


A) Increasing the dollar amount of each sale
B) Increasing traffic flow within the firm's stores
C) Transforming fixed costs into variable costs
D) Increasing the firm's liquidity
E) Increasing the market value of the firm

F) A) and B)
G) A) and C)

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Which type of financial market,dealer or auction,is best suited to expanding internationally and why?

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A dealer market is best suited...

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Which one of the following occupations best fits into the international area of finance?


A) Bank teller
B) Treasury bill analyst
C) Currency trader
D) Insurance risk manager
E) Local bank manager

F) C) and E)
G) B) and D)

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The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?


A) Organizational
B) Structural
C) Formation
D) Agency
E) Territorial

F) A) and B)
G) B) and C)

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The daily financial operations of a firm are primarily controlled by managing the:


A) total debt level.
B) working capital.
C) capital structure.
D) capital budget.
E) long-term liabilities.

F) C) and E)
G) C) and D)

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Assume a firm has both a controller and a treasurer.Identify the types of responsibilities each should have and explain why their duties should be separated as you suggest.

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The key point that students need to incl...

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A corporation:


A) is ultimately controlled by its board of directors.
B) is a legal entity separate from its owners.
C) is prohibited from entering into contractual agreements.
D) has its identity defined by its bylaws.
E) has its existence regulated by the rules set forth in its charter.

F) None of the above
G) B) and C)

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If you accept a job as a domestic security analyst for a brokerage firm,you are most likely working in which one of the following financial areas?


A) International finance
B) Private placements
C) Corporate finance
D) Capital management
E) Investments

F) A) and B)
G) A) and C)

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Which one of the following is most apt to create a situation where an agency conflict could arise?


A) Increasing the size of a firm's operations
B) Downsizing a firm
C) Separating management from ownership
D) Decreasing employee turnover
E) Reducing both management and nonmanagement salaries

F) A) and C)
G) All of the above

Correct Answer

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What is the goal of financial management for a sole proprietorship?


A) Maximize net income given the current resources of the firm
B) Decrease long-term debt to reduce the risk to the owner
C) Minimize the tax impact on the proprietor
D) Maximize the market value of the equity
E) Minimize the reliance on fixed costs

F) C) and D)
G) B) and D)

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The primary goal of financial management is to maximize which one of the following for a corporation?


A) Current profits
B) Market share
C) Number of shares outstanding
D) Market value of existing stock
E) Revenue growth

F) C) and D)
G) A) and E)

Correct Answer

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Explain the primary goal of the Sarbanes-Oxley Act in 2002 and discuss whether or not this act appears to be effectively meeting that goal.

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The primary goal of the Sarbanes-Oxley A...

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Valerie bought 200 shares of Able stock today.Able stock has been trading for some time on the NYSE.Valerie's purchase occurred in which market?


A) Dealer market
B) Over-the-counter market
C) Secondary market
D) Primary market
E) Tertiary market

F) A) and E)
G) A) and C)

Correct Answer

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Which one of the following is a general characteristic of a securities broker?


A) Trades from his or her own inventory
B) Trades only foreign securities
C) Trades listed securities in an auction market
D) Trades electronically from any geographic location
E) Is the principal trader of debt securities

F) A) and B)
G) C) and D)

Correct Answer

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