Question 1

In the case of a professional corporation, ________ has/have limited liability.

Accepted Answer

A) only the professionals 
B) only the business 
C) Both the professionals and the business 
D) Neither the professionals nor the business 
A) only the professionals 
B) only the business 
C) Both the professionals and the business 
D) Neither the professionals nor the business

Question 2

Tabulate and compare the differences among corporations, proprietorships and partnerships.

Accepted Answer

The answer of Tabulate and compare the differences among corporations,...

Question 3

Why is limited liability such an important aspect to investors?

Accepted Answer

Many investors would not be willing to c

Question 4

Poorly performing companies are also more likely to be taken over by another firm.After the takeover, the old management team may find itself out on the street.

Accepted Answer

A) True 
 B)False

Question 5

Corporate managers are expected to make corporate decisions that are in the best interest of:

Accepted Answer

A) top corporate management. 
B) the corporation's board of directors. 
C) the corporation's shareholders. 
D) all corporate employees. 
A) top corporate management. 
B) the corporation's board of directors. 
C) the corporation's shareholders. 
D) all corporate employees.

Question 6

A managerial objective to increase market share is more likely to be successful in the long run if the firm is:

Accepted Answer

A) selling shares in the secondary market. 
B) the low-cost producer in the industry. 
C) managed by the board of directors. 
D) investing in capital budgeting projects. 
A) selling shares in the secondary market. 
B) the low-cost producer in the industry. 
C) managed by the board of directors. 
D) investing in capital budgeting projects.

Question 7

A first step in determining managerial objectives is to:

Accepted Answer

A) develop appropriate compensation policies. 
B) eliminate agency problems. 
C) serve the needs of the customer. 
D) select an appropriate capital structure. 
A) develop appropriate compensation policies. 
B) eliminate agency problems. 
C) serve the needs of the customer. 
D) select an appropriate capital structure.

Question 8

Ethical decision making in business:

Accepted Answer

A) reduces the firm's profits. 
B) requires adherence to implied rules as well as written rules. 
C) is not in the best interests of shareholders. 
D) is less important than good capital budgeting decisions. 
A) reduces the firm's profits. 
B) requires adherence to implied rules as well as written rules. 
C) is not in the best interests of shareholders. 
D) is less important than good capital budgeting decisions.

Question 9

A firm decides to pay for a small investment project through a $1 million increase in short-term bank loans.This is best described as an example of a(n):

Accepted Answer

A) financing decision. 
B) investment decision. 
C) capital budgeting decision. 
D) capital market decision. 
A) financing decision. 
B) investment decision. 
C) capital budgeting decision. 
D) capital market decision.

Question 10

What are the two critical decisions that have to be made by the financial manager?

Accepted Answer

A) investment and financing. 
B) short term and long term. 
C) debt and equity. 
D) All of the choices are correct. 
A) investment and financing. 
B) short term and long term. 
C) debt and equity. 
D) All of the choices are correct.

Question 11

A manager's compensation plan that offers financial incentives for increases in quarterly profitability may create agency problems in that:

Accepted Answer

A) the managers are not motivated by personal gain. 
B) the board of directors may claim the credit. 
C) short-term, not long-term, profits become the focus. 
D) investors desire stable profits. 
A) the managers are not motivated by personal gain. 
B) the board of directors may claim the credit. 
C) short-term, not long-term, profits become the focus. 
D) investors desire stable profits.

Question 12

The duties of a corporate controller typically include the preparation of financial statements.

Accepted Answer

A) True 
 B)False

Question 13

Capital budgeting decisions are used to determine how to raise the cash necessary for investments.

Accepted Answer

A) True 
 B)False

Question 14

A corporate board of directors should provide support for the top management team:

Accepted Answer

A) under all circumstances. 
B) in all decisions related to cash dividends. 
C) only when the board has confidence in management's actions. 
D) if shareholders are pleased with the firm's performance. 
A) under all circumstances. 
B) in all decisions related to cash dividends. 
C) only when the board has confidence in management's actions. 
D) if shareholders are pleased with the firm's performance.

Question 15

A board of directors is elected as a representative of the corporation's:

Accepted Answer

A) top management. 
B) stakeholders. 
C) shareholders. 
D) customers. 
A) top management. 
B) stakeholders. 
C) shareholders. 
D) customers.

Question 16

A major disadvantage of partnerships is that they have "double taxation" of profits.

Accepted Answer

A) True 
 B)False

Question 17

Ethical decision making by management has a payoff for shareholders in terms of:

Accepted Answer

A) improved capital structure. 
B) enhanced reputation value. 
C) increased managerial benefits. 
D) higher dividend payments. 
A) improved capital structure. 
B) enhanced reputation value. 
C) increased managerial benefits. 
D) higher dividend payments.

Question 18

When managers' compensation plans are tied in a meaningful manner to the profits of the firm, agency problems:

Accepted Answer

A) can be reduced. 
B) will be created. 
C) are shifted to other stakeholders. 
D) are eliminated entirely from the firm. 
A) can be reduced. 
B) will be created. 
C) are shifted to other stakeholders. 
D) are eliminated entirely from the firm.

Question 19

In some ways the financing decision is less important than the investment decision.

Accepted Answer

A) True 
 B)False

Question 20

An example of a firm's financing decision would include:

Accepted Answer

A) acquisition of a competitive firm. 
B) how much to pay for a specific asset. 
C) the issuance of ten-year versus twenty-year bonds. 
D) whether or not to increase the price of its products. 
A) acquisition of a competitive firm. 
B) how much to pay for a specific asset. 
C) the issuance of ten-year versus twenty-year bonds. 
D) whether or not to increase the price of its products.

Exam 1: Goals and Governance of the Firm

In the case of a professional corporation, ________ has/have limited liability.

Tabulate and compare the differences among corporations, proprietorships and partnerships.

Why is limited liability such an important aspect to investors?

Poorly performing companies are also more likely to be taken over by another firm.After the takeover, the old management team may find itself out on the street.

Corporate managers are expected to make corporate decisions that are in the best interest of:

A managerial objective to increase market share is more likely to be successful in the long run if the firm is:

A first step in determining managerial objectives is to:

Ethical decision making in business:

A firm decides to pay for a small investment project through a $1 million increase in short-term bank loans.This is best described as an example of a(n):

What are the two critical decisions that have to be made by the financial manager?

A manager's compensation plan that offers financial incentives for increases in quarterly profitability may create agency problems in that:

The duties of a corporate controller typically include the preparation of financial statements.

Capital budgeting decisions are used to determine how to raise the cash necessary for investments.

A corporate board of directors should provide support for the top management team:

A board of directors is elected as a representative of the corporation's:

A major disadvantage of partnerships is that they have "double taxation" of profits.

Ethical decision making by management has a payoff for shareholders in terms of:

When managers' compensation plans are tied in a meaningful manner to the profits of the firm, agency problems:

In some ways the financing decision is less important than the investment decision.

An example of a firm's financing decision would include:

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