Question 1

The decision to issue additional shares of stock is an example of:

Accepted Answer

A)  working capital management. 
B)  a net working capital decision. 
C)  capital budgeting. 
D)  a controller's duties. 
E)  a capital structure decision. 
A)  working capital management. 
B)  a net working capital decision. 
C)  capital budgeting. 
D)  a controller's duties. 
E)  a capital structure decision.

Question 2

Sam, Alfredo, and Juan want to start a small U.S. business. Juan will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Alfredo will be involved as an active consultant and manager and will also contribute funds. Sam and Alfredo are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. Which form of business entity should these individuals adopt?

Accepted Answer

A)  Sole proprietorship 
B)  Joint stock company 
C)  Limited partnership 
D)  General partnership 
E)  Corporation 
A)  Sole proprietorship 
B)  Joint stock company 
C)  Limited partnership 
D)  General partnership 
E)  Corporation

Question 3

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

Accepted Answer

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

Question 4

Which one of the following correctly defines the upward chain of command in a typical corporate organizational structure?

Accepted Answer

A)  The vice president of finance reports to the chairman of the board. 
B)  The chief executive officer reports to the president. 
C)  The controller reports to the chief financial officer. 
D)  The treasurer reports to the president. 
E)  The chief operations officer reports to the vice president of production. 
A)  The vice president of finance reports to the chairman of the board. 
B)  The chief executive officer reports to the president. 
C)  The controller reports to the chief financial officer. 
D)  The treasurer reports to the president. 
E)  The chief operations officer reports to the vice president of production.

Question 5

Which one of the following statements concerning stock exchanges is correct?

Accepted Answer

A)  NASDAQ is a broker market. 
B)  The NYSE is a dealer market. 
C)  The exchange with the strictest listing requirements is NASDAQ. 
D)  Some large companies are listed on NASDAQ. 
E)  Most debt securities are traded on the NYSE. 
A)  NASDAQ is a broker market. 
B)  The NYSE is a dealer market. 
C)  The exchange with the strictest listing requirements is NASDAQ. 
D)  Some large companies are listed on NASDAQ. 
E)  Most debt securities are traded on the NYSE.

Question 6

The Sarbanes-Oxley Act of 2002 holds a public company's ________ responsible for the accuracy of the company's financial statements.

Accepted Answer

A)  managers 
B)  internal auditors 
C)  external legal counsel 
D)  internal legal counsel 
E)  Securities and Exchange Commission agent 
A)  managers 
B)  internal auditors 
C)  external legal counsel 
D)  internal legal counsel 
E)  Securities and Exchange Commission agent

Question 7

A business owned by a solitary individual who has unlimited liability for the firm's debt is called a:

Accepted Answer

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

Question 8

Agency problems are most associated with:

Accepted Answer

A)  sole proprietorships. 
B)  general partnerships. 
C)  limited partnerships. 
D)  corporations. 
E)  limited liability companies. 
A)  sole proprietorships. 
B)  general partnerships. 
C)  limited partnerships. 
D)  corporations. 
E)  limited liability companies.

Question 9

Corporate bylaws:

Accepted Answer

A)  must be amended should a firm decide to increase the number of shares authorized. 
B)  cannot be amended once adopted. 
C)  define the name by which the firm will operate. 
D)  describe the intended life and purpose of the organization. 
E)  determine how a corporation regulates itself. 
A)  must be amended should a firm decide to increase the number of shares authorized. 
B)  cannot be amended once adopted. 
C)  define the name by which the firm will operate. 
D)  describe the intended life and purpose of the organization. 
E)  determine how a corporation regulates itself.

Question 10

Working capital management decisions include determining:

Accepted Answer

A)  the minimum level of cash to be kept in a checking account. 
B)  the best method of producing a product. 
C)  the number of employees needed to work during a particular shift. 
D)  when to replace obsolete equipment. 
E)  if a competitor should be acquired. 
A)  the minimum level of cash to be kept in a checking account. 
B)  the best method of producing a product. 
C)  the number of employees needed to work during a particular shift. 
D)  when to replace obsolete equipment. 
E)  if a competitor should be acquired.

Question 11

Which one of the following statements is correct concerning the NYSE?

Accepted Answer

A)  The publicly traded shares of a NYSE-listed firm must be worth at least $250 million. 
B)  The NYSE is the largest dealer market for listed securities in the United States. 
C)  The listing requirements for the NYSE are more stringent than those of NASDAQ. 
D)  Any corporation desiring to be listed on the NYSE can do so for a fee. 
E)  The NYSE is an OTC market functioning as both a primary and a secondary market. 
A)  The publicly traded shares of a NYSE-listed firm must be worth at least $250 million. 
B)  The NYSE is the largest dealer market for listed securities in the United States. 
C)  The listing requirements for the NYSE are more stringent than those of NASDAQ. 
D)  Any corporation desiring to be listed on the NYSE can do so for a fee. 
E)  The NYSE is an OTC market functioning as both a primary and a secondary market.

Question 12

A general partner:

Accepted Answer

A)  is personally responsible for all partnership debts. 
B)  has no say over a firm's daily operations. 
C)  faces double taxation whereas a limited partner does not. 
D)  has a maximum loss equal to his or her equity investment. 
E)  receives a salary in lieu of a portion of the profits. 
A)  is personally responsible for all partnership debts. 
B)  has no say over a firm's daily operations. 
C)  faces double taxation whereas a limited partner does not. 
D)  has a maximum loss equal to his or her equity investment. 
E)  receives a salary in lieu of a portion of the profits.

Question 13

Which of the following parties are considered stakeholders of a firm?

Accepted Answer

A)  Employees and the government 
B)  Long-term creditors 
C)  Government and common stockholders 
D)  Common stockholders 
E)  Long-term creditors and common stockholders 
A)  Employees and the government 
B)  Long-term creditors 
C)  Government and common stockholders 
D)  Common stockholders 
E)  Long-term creditors and common stockholders

Question 14

Financial managers should primarily focus on the interests of:

Accepted Answer

A)  stakeholders. 
B)  the vice president of finance. 
C)  their immediate supervisor. 
D)  shareholders. 
E)  the board of directors. 
A)  stakeholders. 
B)  the vice president of finance. 
C)  their immediate supervisor. 
D)  shareholders. 
E)  the board of directors.

Question 15

One disadvantage of the corporate form of business ownership is the:

Accepted Answer

A)  limited liability of its shareholders for the firm's debts. 
B)  double taxation of distributed profits. 
C)  firm's greater ability to raise capital than other forms of ownership. 
D)  firm's potential for an unlimited life. 
E)  firm's ability to issue additional shares of stock. 
A)  limited liability of its shareholders for the firm's debts. 
B)  double taxation of distributed profits. 
C)  firm's greater ability to raise capital than other forms of ownership. 
D)  firm's potential for an unlimited life. 
E)  firm's ability to issue additional shares of stock.

Question 16

The growth of both sole proprietorships and partnerships is frequently limited by the firm's:

Accepted Answer

A)  double taxation. 
B)  bylaws. 
C)  inability to raise cash. 
D)  limited liability. 
E)  agency problems. 
A)  double taxation. 
B)  bylaws. 
C)  inability to raise cash. 
D)  limited liability. 
E)  agency problems.

Question 17

When evaluating the timing of a project's projected cash flows, a financial manager is analyzing:

Accepted Answer

A)  the amount of each expected cash flow. 
B)  only the start-up costs that are expected to require cash resources. 
C)  only the date of the final cash flow related to the project. 
D)  the amount by which cash receipts are expected to exceed cash outflows. 
E)  when each cash flow is expected to occur. 
A)  the amount of each expected cash flow. 
B)  only the start-up costs that are expected to require cash resources. 
C)  only the date of the final cash flow related to the project. 
D)  the amount by which cash receipts are expected to exceed cash outflows. 
E)  when each cash flow is expected to occur.

Question 18

Decisions made by financial managers should primarily focus on increasing the:

Accepted Answer

A)  size of the firm. 
B)  growth rate of the firm. 
C)  gross profit per unit produced. 
D)  market value per share of outstanding stock. 
E)  total sales. 
A)  size of the firm. 
B)  growth rate of the firm. 
C)  gross profit per unit produced. 
D)  market value per share of outstanding stock. 
E)  total sales.

Question 19

Which one of the following statements is correct?

Accepted Answer

A)  A general partnership is legally the same as a corporation. 
B)  Income from both sole proprietorships and partnerships that is taxable is treated as individual income. 
C)  Partnerships are the most complicated type of business to form. 
D)  All business organizations have bylaws. 
E)  Only firms organized as sole proprietorships have limited lives. 
A)  A general partnership is legally the same as a corporation. 
B)  Income from both sole proprietorships and partnerships that is taxable is treated as individual income. 
C)  Partnerships are the most complicated type of business to form. 
D)  All business organizations have bylaws. 
E)  Only firms organized as sole proprietorships have limited lives.

Question 20

Which one of the following is a cash flow from a corporation into the financial markets?

Accepted Answer

A)  Borrowing of long-term debt 
B)  Payment of government taxes 
C)  Payment of loan interest 
D)  Issuance of corporate debt 
E)  Sale of common stock 
A)  Borrowing of long-term debt 
B)  Payment of government taxes 
C)  Payment of loan interest 
D)  Issuance of corporate debt 
E)  Sale of common stock

Exam 1: Introduction to Corporate Finance

The decision to issue additional shares of stock is an example of:

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

Which one of the following correctly defines the upward chain of command in a typical corporate organizational structure?

Which one of the following statements concerning stock exchanges is correct?

The Sarbanes-Oxley Act of 2002 holds a public company's ________ responsible for the accuracy of the company's financial statements.

A business owned by a solitary individual who has unlimited liability for the firm's debt is called a:

Agency problems are most associated with:

Corporate bylaws:

Working capital management decisions include determining:

Which one of the following statements is correct concerning the NYSE?

A general partner:

Which of the following parties are considered stakeholders of a firm?

Financial managers should primarily focus on the interests of:

One disadvantage of the corporate form of business ownership is the:

The growth of both sole proprietorships and partnerships is frequently limited by the firm's:

When evaluating the timing of a project's projected cash flows, a financial manager is analyzing:

Decisions made by financial managers should primarily focus on increasing the:

Which one of the following statements is correct?

Which one of the following is a cash flow from a corporation into the financial markets?

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