Question 1

One continuing problem with managerial incentive-compensation plans is that:

Accepted Answer

A) the plans increase agency problems. 
B) managers prefer guaranteed salaries. 
C) effectiveness of the plans is difficult to evaluate. 
D) the plans do not reward shareholders. 
A) the plans increase agency problems. 
B) managers prefer guaranteed salaries. 
C) effectiveness of the plans is difficult to evaluate. 
D) the plans do not reward shareholders.

Question 2

Which type of corporation has more flexibility when it comes to raising financing?

Accepted Answer

A) Public 
B) Private 
C) Income trust 
D) Hybrid 
A) Public 
B) Private 
C) Income trust 
D) Hybrid

Question 3

A corporation's board of directors:

Accepted Answer

A) is selected by and can be removed by management. 
B) can be voted out of power by the shareholders. 
C) has a lifetime appointment to the board. 
D) is selected by a vote of all corporate stakeholders. 
A) is selected by and can be removed by management. 
B) can be voted out of power by the shareholders. 
C) has a lifetime appointment to the board. 
D) is selected by a vote of all corporate stakeholders.

Question 4

General partners have limited personal liability for business debts in a limited partnership.

Accepted Answer

A) True 
 B)False

Question 5

Discuss why corporations typically exhibit separation of ownership and management, as distinguished from sole proprietorships or partnerships.

Accepted Answer

One reason corporations typically exhibi

Question 6

Within the realm of ethical decision making, managers should attempt to maximize:

Accepted Answer

A) the market value of the shareholders' wealth. 
B) their compensation plans. 
C) their firm's market share. 
D) the profits of the firm. 
A) the market value of the shareholders' wealth. 
B) their compensation plans. 
C) their firm's market share. 
D) the profits of the firm.

Question 7

Which of the following represents a financing decision?

Accepted Answer

A) a decision to borrow $10 million through a bank loan. 
B) a decision to invest in the common stock of another corporation. 
C) a decision to buy a new mainframe computer. 
D) a decision to pay $1 million of accounts payable. 
A) a decision to borrow $10 million through a bank loan. 
B) a decision to invest in the common stock of another corporation. 
C) a decision to buy a new mainframe computer. 
D) a decision to pay $1 million of accounts payable.

Question 8

In a partnership form of organization, income tax liability, if any, is incurred by:

Accepted Answer

A) the partnership itself. 
B) the partners individually. 
C) Both the partnership and the partners. 
D) Neither the partnership nor the partners. 
A) the partnership itself. 
B) the partners individually. 
C) Both the partnership and the partners. 
D) Neither the partnership nor the partners.

Question 9

The term "corporate stakeholder" typically refers to:

Accepted Answer

A) a company's customers. 
B) anyone with a financial interest in the firm. 
C) the equity holders of the firm. 
D) the management and board of directors of the firm. 
A) a company's customers. 
B) anyone with a financial interest in the firm. 
C) the equity holders of the firm. 
D) the management and board of directors of the firm.

Question 10

Which of the following statements best distinguishes the difference between real and financial assets?

Accepted Answer

A) real assets have less value than financial assets. 
B) real assets are tangible; financial assets are not. 
C) financial assets represent claims to income that are generated by real assets. 
D) financial assets appreciate in value; real assets depreciate in value. 
A) real assets have less value than financial assets. 
B) real assets are tangible; financial assets are not. 
C) financial assets represent claims to income that are generated by real assets. 
D) financial assets appreciate in value; real assets depreciate in value.

Question 11

Microsoft has what type of financing strategy?

Accepted Answer

A) Simple, with little debt 
B) Simple, with lots of debt 
C) Complex, with little debt 
D) Complex, with lots of debt 
A) Simple, with little debt 
B) Simple, with lots of debt 
C) Complex, with little debt 
D) Complex, with lots of debt

Question 12

Describe agency problems in general, and offer at least three examples from corporations.

Accepted Answer

Whenever the firm's managers are differe

Question 13

When a corporation fails, the maximum that can be lost by an investor protected by limited liability is:

Accepted Answer

A) the amount of the initial investment. 
B) the amount of the profit on the investment. 
C) the amount necessary to pay the corporation's debts. 
D) the amount of the investor's personal wealth. 
A) the amount of the initial investment. 
B) the amount of the profit on the investment. 
C) the amount necessary to pay the corporation's debts. 
D) the amount of the investor's personal wealth.

Question 14

Small investment decisions are unimportant and insignificant.Why or why not?

Accepted Answer

Most investment decisions are smaller an

Question 15

One corporate activity that is specifically reserved for the board of directors is the:

Accepted Answer

A) declaration of dividends. 
B) custody of records. 
C) preparation of budgets. 
D) day-to-day operation of the firm. 
A) declaration of dividends. 
B) custody of records. 
C) preparation of budgets. 
D) day-to-day operation of the firm.

Question 16

Whom of the following is not a financial manager?

Accepted Answer

A) the treasurer. 
B) the controller. 
C) the chief financial officer (CFO). 
D) the marketing manager. 
A) the treasurer. 
B) the controller. 
C) the chief financial officer (CFO). 
D) the marketing manager.

Question 17

The primary goal of any company should be to maximize current period profit.

Accepted Answer

A) True 
 B)False

Question 18

If employee compensation plans are not designed properly, they can create incentives for errant behaviour by management.

Accepted Answer

A) True 
 B)False

Question 19

A successful investment is one that increases the value of the firm.

Accepted Answer

A) True 
 B)False

Question 20

Profit maximization is not a well-defined corporate objective, because?

Accepted Answer

A) It leaves open the question of which year's profits. 
B) Decreasing current returns in order to free up cash and increase future profits. 
C) Different accountants will calculate different profits. 
D) All are reasons why profit maximization is not a well-defined corporate objective. 
A) It leaves open the question of which year's profits. 
B) Decreasing current returns in order to free up cash and increase future profits. 
C) Different accountants will calculate different profits. 
D) All are reasons why profit maximization is not a well-defined corporate objective.

Exam 1: Goals and Governance of the Firm

One continuing problem with managerial incentive-compensation plans is that:

Which type of corporation has more flexibility when it comes to raising financing?

A corporation's board of directors:

General partners have limited personal liability for business debts in a limited partnership.

Discuss why corporations typically exhibit separation of ownership and management, as distinguished from sole proprietorships or partnerships.

Within the realm of ethical decision making, managers should attempt to maximize:

Which of the following represents a financing decision?

In a partnership form of organization, income tax liability, if any, is incurred by:

The term "corporate stakeholder" typically refers to:

Which of the following statements best distinguishes the difference between real and financial assets?

Microsoft has what type of financing strategy?

Describe agency problems in general, and offer at least three examples from corporations.

When a corporation fails, the maximum that can be lost by an investor protected by limited liability is:

Small investment decisions are unimportant and insignificant.Why or why not?

One corporate activity that is specifically reserved for the board of directors is the:

Whom of the following is not a financial manager?

The primary goal of any company should be to maximize current period profit.

If employee compensation plans are not designed properly, they can create incentives for errant behaviour by management.

A successful investment is one that increases the value of the firm.

Profit maximization is not a well-defined corporate objective, because?

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