Question 1

Which one of the following statements is correct?

Accepted Answer

A)   The majority of firms in the U.S.are structured as corporations.
B)   Corporate profits are taxable income to the shareholders when earned.
C)   Corporations can raise large amounts of capital generally easier than partnerships can.
D)   Stockholders face no potential losses related to their corporate investment.
E)   Corporate shareholders elect the corporate president.F) A) and D)
G) A) and C)

Question 2

Which one of the following is defined as a firm's short-term assets and its short-term liabilities?

Accepted Answer

A)   working capital
B)   debt
C)   investment capital
D)   net capital
E)   capital structureF) A) and E)
G) A) and D)

Question 3

A stakeholder is:

Accepted Answer

A)   a person who owns shares of stock.
B)   any person who has voting rights based on stock ownership of a corporation.
C)   a person who initially founded a firm and currently has management control over that firm.
D)   a creditor to whom a firm currently owes money.
E)   any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm.F) A) and C)
G) C) and E)

Question 4

Which one of the following is a working capital management decision?

Accepted Answer

A)   determining the amount of equipment needed to complete a job
B)   determining whether to pay cash for a purchase or use the credit offered by the supplier
C)   determining the amount of long-term debt required to complete a project
D)   determining the number of shares of stock to issue to fund an acquisition
E)   determining whether or not a project should be acceptedF) B) and E)
G) A) and B)

Question 5

Which one of the following is a capital budgeting decision?

Accepted Answer

A)   determining how many shares of stock to issue
B)   deciding whether or not to purchase a new machine for the production line
C)   deciding how to refinance a debt issue that is maturing
D)   determining how much inventory to keep on hand
E)   determining how much money should be kept in the checking accountF) A) and B)
G) A) and C)

Question 6

Public offerings of debt and equity must be registered with which one of the following?

Accepted Answer

A)   New York Board of Governors
B)   Federal Reserve
C)   NYSE Registration Office
D)   Securities and Exchange Commission
E)   Market Dealers ExchangeF) A) and E)
G) A) and C)

Question 7

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

Accepted Answer

A)   maximize current dividends per share
B)   maximize the current value per share
C)   increase cash flow and avoid financial distress
D)   minimize operational costs while maximizing firm efficiency
E)   maintain steady growth while increasing current profitsF) A) and B)
G) A) and C)

Question 8

Which one of the following is a primary market transaction?

Accepted Answer

A)   sale of currently outstanding stock by a dealer to an individual investor
B)   sale of a new share of stock to an individual investor
C)   stock ownership transfer from one shareholder to another shareholder
D)   gift of stock from one shareholder to another shareholder
E)   gift of stock by a shareholder to a family memberF) B) and C)
G) A) and C)

Question 9

Which one of the following statements is generally correct?

Accepted Answer

A)   Private placements must be registered with the SEC.
B)   All secondary markets are auction markets.
C)   Dealer markets have a physical trading floor.
D)   Auction markets match buy and sell orders.
E)   Dealers arrange trades but never own the securities traded.F) All of the above
G) A) and E)

Question 10

Which one of the following business types is best suited to raising large amounts of capital?

Accepted Answer

A)   sole proprietorship
B)   limited liability company
C)   corporation
D)   general partnership
E)   limited partnershipF) A) and B)
G) A) and E)

Question 11

Why should financial managers strive to maximize the current value per share of the existing stock?

Accepted Answer

A)   doing so guarantees the company will grow in size at the maximum possible rate
B)   doing so increases employee salaries
C)   because they have been hired to represent the interests of the current shareholders
D)   because this will increase the current dividends per share
E)   because managers often receive shares of stock as part of their compensationF) A) and C)
G) A) and B)

Question 12

A limited partnership:

Accepted Answer

A)   has an unlimited life.
B)   can opt to be taxed as a corporation.
C)   terminates at the death of any limited partner.
D)   has a greater ability to raise capital than a sole proprietorship.
E)   consists solely of limited partners.F) A) and E)
G) B) and E)

Question 13

Which of the following should a financial manager consider when analyzing a capital budgeting project?
I.project start up costs
II.timing of all projected cash flows
III.dependability of future cash flows
IV.dollar amount of each projected cash flow

Accepted Answer

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

Question 14

A business created as a distinct legal entity and treated as a legal "person" is called a:

Accepted Answer

A)   corporation.
B)   sole proprietorship.
C)   general partnership.
D)   limited partnership.
E)   unlimited liability company.F) C) and E)
G) A) and E)

Question 15

Which one of the following is an unintended result of the Sarbanes-Oxley Act?

Accepted Answer

A)   more detailed and accurate financial reporting
B)   increased management awareness of internal controls
C)   corporations delisting from major exchanges
D)   increased responsibility for corporate officers
E)   identification of internal control weaknessesF) B) and D)
G) None of the above

Question 16

Which of the following are advantages of the corporate form of business ownership?
I.limited liability for firm debt
II.double taxation
III.ability to raise capital
IV.unlimited firm life

Accepted Answer

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

Question 17

Which one of the following is a means by which shareholders can replace company management?

Accepted Answer

A)   stock options
B)   promotion
C)   Sarbanes-Oxley Act
D)   agency play
E)   proxy fightF) A) and B)
G) A) and C)

Question 18

A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:

Accepted Answer

A)   corporation.
B)   sole proprietorship.
C)   general partnership.
D)   limited partnership.
E)   limited liability company.F) B) and E)
G) B) and C)

Question 19

Which one of the following is an agency cost?

Accepted Answer

A)   accepting an investment opportunity that will add value to the firm
B)   increasing the quarterly dividend
C)   investing in a new project that creates firm value
D)   hiring outside accountants to audit the company's financial statements
E)   closing a division of the firm that is operating at a lossF) B) and D)
G) A) and D)

Question 20

Which of the following help convince managers to work in the best interest of the stockholders? Assume there are no golden parachutes.
I.compensation based on the value of the stock
II.stock option plans
III.threat of a company takeover
IV.threat of a proxy fight

Accepted Answer

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

Exam 1: Introduction to Corporate Finance

A business created as a distinct legal entity and treated as a legal "person" is called a:

Correct AnswerverifiedShow Answer

Which one of the following is a means by which shareholders can replace company management?

Correct AnswerverifiedShow Answer

Which one of the following is an unintended result of the Sarbanes-Oxley Act?

Correct AnswerverifiedShow Answer

Which of the following help convince managers to work in the best interest of the stockholders? Assume there are no golden parachutes. I.compensation based on the value of the stock II.stock option plans III.threat of a company takeover IV.threat of a proxy fight

Correct AnswerverifiedShow Answer

Which one of the following is a working capital management decision?

Correct AnswerverifiedShow Answer

Why should financial managers strive to maximize the current value per share of the existing stock?

Correct AnswerverifiedShow Answer

A limited partnership:

Correct AnswerverifiedShow Answer

Which one of the following is a capital budgeting decision?

Correct AnswerverifiedShow Answer

Which one of the following statements is generally correct?

Correct AnswerverifiedShow Answer

Which one of the following is an agency cost?

Correct AnswerverifiedShow Answer

A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:

Correct AnswerverifiedShow Answer

Which one of the following is a primary market transaction?

Correct AnswerverifiedShow Answer

Public offerings of debt and equity must be registered with which one of the following?

Correct AnswerverifiedShow Answer

A stakeholder is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which one of the following business types is best suited to raising large amounts of capital?

Correct AnswerverifiedShow Answer

Which of the following should a financial manager consider when analyzing a capital budgeting project? I.project start up costs II.timing of all projected cash flows III.dependability of future cash flows IV.dollar amount of each projected cash flow

Correct AnswerverifiedShow Answer

Which of the following are advantages of the corporate form of business ownership? I.limited liability for firm debt II.double taxation III.ability to raise capital IV.unlimited firm life

Correct AnswerverifiedShow Answer

Which one of the following is defined as a firm's short-term assets and its short-term liabilities?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified