Question 1

Which of the following groups is least likely to be considered a stakeholder of the firm?

Accepted Answer

A) government 
B) bondholders 
C) competitors 
D) employees 
A) government 
B) bondholders 
C) competitors 
D) employees C

Question 2

The financial manager is characterized by which two decisions?

Accepted Answer

A) Purchase real assets and sell financial assets 
B) Purchase real assets and purchase financial assets 
C) Sell real assets and sell financial assets 
D) Sell real assets and purchase financial assets 
A) Purchase real assets and sell financial assets 
B) Purchase real assets and purchase financial assets 
C) Sell real assets and sell financial assets 
D) Sell real assets and purchase financial assets A

Question 3

The financial manager has to determine a value to uncertain cash flows.The variables involved in this determination are:

Accepted Answer

A) amount 
B) timing 
C) risk 
D) All of the choices are correct. 
A) amount 
B) timing 
C) risk 
D) All of the choices are correct. D

Question 4

Long-term financing arrangements occur in the:

Accepted Answer

A) money markets. 
B) capital markets. 
C) secondary markets. 
D) primary markets. 
A) money markets. 
B) capital markets. 
C) secondary markets. 
D) primary markets.

Question 5

Managers are spurred on by incentive schemes that provide big returns if shareholders gain but are valueless if they do not.

Accepted Answer

A) True 
 B)False

Question 6

Firms can alter their capital structure by:

Accepted Answer

A) not accepting any capital budgeting projects. 
B) investing in non-tangible assets. 
C) issuing stock to repay debt. 
D) becoming a limited liability company. 
A) not accepting any capital budgeting projects. 
B) investing in non-tangible assets. 
C) issuing stock to repay debt. 
D) becoming a limited liability company.

Question 7

A corporation is considered to be closely held when:

Accepted Answer

A) only a few shareholders exist. 
B) the market value of the shares is stable. 
C) it operates in a small geographic area. 
D) management also serves as the board of directors. 
A) only a few shareholders exist. 
B) the market value of the shares is stable. 
C) it operates in a small geographic area. 
D) management also serves as the board of directors.

Question 8

The agency problem is mitigated in practice through several devices.

Accepted Answer

A) True 
 B)False

Question 9

What general factors may influence the decision of whether to organize as a sole proprietorship, a partnership, or a corporation?

Accepted Answer

Factors that may influence the decision

Question 10

For small firms, shareholders and management may be one and the same.But for large companies, separation of ownership and management is:

Accepted Answer

A) a practical necessity. 
B) not a necessity. 
C) a liability. 
D) a fraudulent move. 
A) a practical necessity. 
B) not a necessity. 
C) a liability. 
D) a fraudulent move.

Question 11

The corporate form of business organization is often accompanied by separation of ownership and management.

Accepted Answer

A) True 
 B)False

Question 12

"Double taxation" refers to:

Accepted Answer

A) all partners paying equal taxes on profits. 
B) corporations paying taxes on both dividends and retained earnings. 
C) paying taxes on profits at the corporate level and on dividends at the personal level. 
D) the fact that marginal tax rates are doubled for corporations. 
A) all partners paying equal taxes on profits. 
B) corporations paying taxes on both dividends and retained earnings. 
C) paying taxes on profits at the corporate level and on dividends at the personal level. 
D) the fact that marginal tax rates are doubled for corporations.

Question 13

The term "capital structure" refers to:

Accepted Answer

A) the manner in which a firm obtains its long-term sources of funding. 
B) the length of time needed to repay debt. 
C) whether the firm invests in capital budgeting projects. 
D) which specific assets the firm should invest in. 
A) the manner in which a firm obtains its long-term sources of funding. 
B) the length of time needed to repay debt. 
C) whether the firm invests in capital budgeting projects. 
D) which specific assets the firm should invest in.

Question 14

Sole proprietorships resolve the issue of agency problems by:

Accepted Answer

A) avoiding excessive expense accounts. 
B) discharging those who violate the rules. 
C) allowing owners to share the cost of their actions with others. 
D) forcing owners to bear the full cost of their actions. 
A) avoiding excessive expense accounts. 
B) discharging those who violate the rules. 
C) allowing owners to share the cost of their actions with others. 
D) forcing owners to bear the full cost of their actions.

Question 15

Explain why managers should use ethical decision making as a way to increase the profitability of a firm.

Accepted Answer

Ethical decision making can have an impo

Question 16

Which of the following is not an advantage to incorporating a business?

Accepted Answer

A) easier access to financial markets. 
B) limited liability. 
C) becoming a permanent legal entity. 
D) profits taxed at the corporate level and the shareholder level. 
A) easier access to financial markets. 
B) limited liability. 
C) becoming a permanent legal entity. 
D) profits taxed at the corporate level and the shareholder level.

Question 17

Which of the following appears to be the most appropriate goal for corporate management?

Accepted Answer

A) maximizing market value of the company's shares. 
B) maximizing the company's market share. 
C) maximizing the current profits of the company. 
D) minimizing the company's liabilities. 
A) maximizing market value of the company's shares. 
B) maximizing the company's market share. 
C) maximizing the current profits of the company. 
D) minimizing the company's liabilities.

Question 18

Capital investment decisions are also known as?

Accepted Answer

A) Capital budgeting 
B) Cash flow management 
C) Capital assets 
D) Capitalization 
A) Capital budgeting 
B) Cash flow management 
C) Capital assets 
D) Capitalization

Question 19

A corporation is characterized by:

Accepted Answer

A) a legal entity unto itself (may sue or be sued, engage in contracts, acquire property). 
B) non-profitable. 
C) sufficient funds to fulfill their needs. 
D) simplicity of decision making. 
A) a legal entity unto itself (may sue or be sued, engage in contracts, acquire property). 
B) non-profitable. 
C) sufficient funds to fulfill their needs. 
D) simplicity of decision making.

Question 20

Discuss the interrelationship between a firm's financing and capital structure decisions.

Accepted Answer

Although the capital budgeting decision

Exam 1: Goals and Governance of the Firm

Which of the following groups is least likely to be considered a stakeholder of the firm?

The financial manager is characterized by which two decisions?

The financial manager has to determine a value to uncertain cash flows.The variables involved in this determination are:

Long-term financing arrangements occur in the:

Managers are spurred on by incentive schemes that provide big returns if shareholders gain but are valueless if they do not.

Firms can alter their capital structure by:

A corporation is considered to be closely held when:

The agency problem is mitigated in practice through several devices.

What general factors may influence the decision of whether to organize as a sole proprietorship, a partnership, or a corporation?

For small firms, shareholders and management may be one and the same.But for large companies, separation of ownership and management is:

The corporate form of business organization is often accompanied by separation of ownership and management.

"Double taxation" refers to:

The term "capital structure" refers to:

Sole proprietorships resolve the issue of agency problems by:

Explain why managers should use ethical decision making as a way to increase the profitability of a firm.

Which of the following is not an advantage to incorporating a business?

Which of the following appears to be the most appropriate goal for corporate management?

Capital investment decisions are also known as?

A corporation is characterized by:

Discuss the interrelationship between a firm's financing and capital structure decisions.

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters