Question 1

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 fight 
A)  Stock options 
B)  Promotion 
C)  Sarbanes-Oxley Act 
D)  Agency play 
E)  Proxy fight E

Question 2

Which one of the following terms is defined as the mixture of a firm's debt and equity financing?

Accepted Answer

A)  Working capital management 
B)  Cash management 
C)  Cost analysis 
D)  Capital budgeting 
E)  Capital structure 
A)  Working capital management 
B)  Cash management 
C)  Cost analysis 
D)  Capital budgeting 
E)  Capital structure E

Question 3

Which business form 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 partnership 
A)  Sole proprietorship 
B)  Limited liability company 
C)  Corporation 
D)  General partnership 
E)  Limited partnership C

Question 4

The articles of incorporation:

Accepted Answer

A)  describe the purpose of the firm and set forth the number of shares of stock that can be issued. 
B)  are amended periodically especially prior to corporate elections. 
C)  explain how corporate directors are to be elected and the length of their terms. 
D)  sets forth the procedures by which a firm regulates itself. 
E)  include only the corporation's name and intended life. 
A)  describe the purpose of the firm and set forth the number of shares of stock that can be issued. 
B)  are amended periodically especially prior to corporate elections. 
C)  explain how corporate directors are to be elected and the length of their terms. 
D)  sets forth the procedures by which a firm regulates itself. 
E)  include only the corporation's name and intended life.

Question 5

Which one of the following represents a cash outflow from a corporation?

Accepted Answer

A)  Issuance of new securities 
B)  Payment of dividends 
C)  New loan proceeds 
D)  Receipt of tax refund 
E)  Initial sale of common stock 
A)  Issuance of new securities 
B)  Payment of dividends 
C)  New loan proceeds 
D)  Receipt of tax refund 
E)  Initial sale of common stock

Question 6

Public offerings of debt and equity must be registered with the:

Accepted Answer

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

Question 7

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 one limited partner. 
D)  has at least one partner who has unlimited liability for all of the partnership's debts. 
E)  consists solely of limited partners. 
A)  has an unlimited life. 
B)  can opt to be taxed as a corporation. 
C)  terminates at the death of any one limited partner. 
D)  has at least one partner who has unlimited liability for all of the partnership's debts. 
E)  consists solely of limited partners.

Question 8

Which one of the following questions is least likely to be addressed by financial managers?

Accepted Answer

A)  How should a product be marketed? 
B)  Should customers be given 30 or 45 days to pay for their credit purchases? 
C)  Should the firm borrow more money? 
D)  Should the firm acquire new equipment? 
E)  How much cash should the firm keep on hand? 
A)  How should a product be marketed? 
B)  Should customers be given 30 or 45 days to pay for their credit purchases? 
C)  Should the firm borrow more money? 
D)  Should the firm acquire new equipment? 
E)  How much cash should the firm keep on hand?

Question 9

Which one of the following terms is defined as the management of a firm's long-term investments?

Accepted Answer

A)  Working capital management 
B)  Financial allocation 
C)  Agency cost analysis 
D)  Capital budgeting 
E)  Capital structure 
A)  Working capital management 
B)  Financial allocation 
C)  Agency cost analysis 
D)  Capital budgeting 
E)  Capital structure

Question 10

A firm's short-term assets and its short-term liabilities are referred to as the firm's:

Accepted Answer

A)  working capital. 
B)  debt. 
C)  investment capital. 
D)  net capital. 
E)  capital structure. 
A)  working capital. 
B)  debt. 
C)  investment capital. 
D)  net capital. 
E)  capital structure.

Question 11

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 member 
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 member

Question 12

A partnership with four general partners:

Accepted Answer

A)  distributes profits based on percentage of ownership. 
B)  has an unlimited partnership life. 
C)  limits the active involvement in the firm to a single partner. 
D)  limits each partner's personal liability to 25 percent of the partnership's total debt. 
E)  must distribute 25 percent of the profits to each partner. 
A)  distributes profits based on percentage of ownership. 
B)  has an unlimited partnership life. 
C)  limits the active involvement in the firm to a single partner. 
D)  limits each partner's personal liability to 25 percent of the partnership's total debt. 
E)  must distribute 25 percent of the profits to each partner.

Question 13

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 profits 
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 profits

Question 14

Which one of the following grants an individual the right to vote on behalf of a shareholder?

Accepted Answer

A)  Proxy 
B)  By-laws 
C)  Indenture agreement 
D)  Stock option 
E)  Stock audit 
A)  Proxy 
B)  By-laws 
C)  Indenture agreement 
D)  Stock option 
E)  Stock audit

Question 15

Financial managers should strive to maximize the current value per share of the existing stock to:

Accepted Answer

A)  guarantee the company will grow in size at the maximum possible rate. 
B)  increase employee salaries. 
C)  best represent the interests of the current shareholders. 
D)  increase the current dividends per share. 
E)  provide managers with shares of stock as part of their compensation. 
A)  guarantee the company will grow in size at the maximum possible rate. 
B)  increase employee salaries. 
C)  best represent the interests of the current shareholders. 
D)  increase the current dividends per share. 
E)  provide managers with shares of stock as part of their compensation.

Question 16

An example of a capital budgeting decision is deciding:

Accepted Answer

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

Question 17

A limited liability company:

Accepted Answer

A)  can only have a single owner. 
B)  is comprised of limited partners only. 
C)  is taxed similar to a partnership. 
D)  is taxed similar to a C corporation. 
E)  generates totally tax-free income. 
A)  can only have a single owner. 
B)  is comprised of limited partners only. 
C)  is taxed similar to a partnership. 
D)  is taxed similar to a C corporation. 
E)  generates totally tax-free income.

Question 18

Which of the following individuals have unlimited liability for a firm's debts based on their ownership interest?

Accepted Answer

A)  Only general partners 
B)  Only sole proprietors 
C)  All stockholders 
D)  Both limited and general partners 
E)  Both general partners and sole proprietors 
A)  Only general partners 
B)  Only sole proprietors 
C)  All stockholders 
D)  Both limited and general partners 
E)  Both general partners and sole proprietors

Question 19

Capital structure decisions include determining:

Accepted Answer

A)  which one of two projects to accept. 
B)  how to allocate investment funds to multiple projects. 
C)  the amount of funds needed to finance customer purchases of a new product. 
D)  how much debt should be assumed to fund a project. 
E)  how much inventory will be needed to support a project. 
A)  which one of two projects to accept. 
B)  how to allocate investment funds to multiple projects. 
C)  the amount of funds needed to finance customer purchases of a new product. 
D)  how much debt should be assumed to fund a project. 
E)  how much inventory will be needed to support a project.

Question 20

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

Accepted Answer

A)  An increase in the amount of the quarterly dividend 
B)  A decrease in the per unit production costs 
C)  An increase in the number of shares outstanding 
D)  A decrease in the net working capital 
E)  An increase in the market value per share 
A)  An increase in the amount of the quarterly dividend 
B)  A decrease in the per unit production costs 
C)  An increase in the number of shares outstanding 
D)  A decrease in the net working capital 
E)  An increase in the market value per share

Exam 1: Introduction to Corporate Finance

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

Which one of the following terms is defined as the mixture of a firm's debt and equity financing?

Which business form is best suited to raising large amounts of capital?

The articles of incorporation:

Which one of the following represents a cash outflow from a corporation?

Public offerings of debt and equity must be registered with the:

A limited partnership:

Which one of the following questions is least likely to be addressed by financial managers?

Which one of the following terms is defined as the management of a firm's long-term investments?

A firm's short-term assets and its short-term liabilities are referred to as the firm's:

Which one of the following is a primary market transaction?

A partnership with four general partners:

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

Which one of the following grants an individual the right to vote on behalf of a shareholder?

Financial managers should strive to maximize the current value per share of the existing stock to:

An example of a capital budgeting decision is deciding:

A limited liability company:

Which of the following individuals have unlimited liability for a firm's debts based on their ownership interest?

Capital structure decisions include determining:

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

Financial Statements, Taxes, and Cash Flow

Working with Financial Statements

Long-Term Financial Planning and Growth

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons from Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Enterprise Risk Management

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

Filters