Question 1

Which of the following would not be considered a real asset?

Accepted Answer

A) a corporate bond 
B) a machine 
C) a patent 
D) a factory 
A) a corporate bond 
B) a machine 
C) a patent 
D) a factory

Question 2

Which of the following is least likely to be discussed in the articles of incorporation?

Accepted Answer

A) the maximum number of shares that can be issued. 
B) the purpose of the business. 
C) the price range of the shares of stock. 
D) the number of members of the board of directors. 
A) the maximum number of shares that can be issued. 
B) the purpose of the business. 
C) the price range of the shares of stock. 
D) the number of members of the board of directors.

Question 3

Distinguish between a firm's capital budgeting decision and financing decision.

Accepted Answer

Examples of the capital budgeting decisi

Question 4

The overall goal of capital budgeting projects should be to:

Accepted Answer

A) decrease the firm's reliance upon debt. 
B) increase the firm's sales. 
C) increase the firm's outstanding shares of stock. 
D) increase the wealth of the firm's shareholders. 
A) decrease the firm's reliance upon debt. 
B) increase the firm's sales. 
C) increase the firm's outstanding shares of stock. 
D) increase the wealth of the firm's shareholders.

Question 5

How may a reduction in cash dividends be in the best interests of current shareholders?

Accepted Answer

A) dividends are taxed at twice the rate of other gains. 
B) the firm will have available cash to increase current investment and future profits. 
C) reduced dividends increase managerial compensation, thus increasing their motivation. 
D) a reduction of cash dividends cannot be in the best interests of current shareholders. 
A) dividends are taxed at twice the rate of other gains. 
B) the firm will have available cash to increase current investment and future profits. 
C) reduced dividends increase managerial compensation, thus increasing their motivation. 
D) a reduction of cash dividends cannot be in the best interests of current shareholders.

Question 6

By organizing itself as a corporation, a business may be able to attract:

Accepted Answer

A) investors. 
B) partners. 
C) proprietors. 
D) agents. 
A) investors. 
B) partners. 
C) proprietors. 
D) agents.

Question 7

Which of the following would correctly differentiate general partners from limited partners in a limited partnership?

Accepted Answer

A) general partners have more job experience. 
B) general partners have an ownership interest. 
C) general partners are subject to double taxation. 
D) general partners have unlimited personal liability. 
A) general partners have more job experience. 
B) general partners have an ownership interest. 
C) general partners are subject to double taxation. 
D) general partners have unlimited personal liability.

Question 8

Agency problems can best be characterized as a:

Accepted Answer

A) dislike of firm's bondholders by its equity holders. 
B) differing incentives between managers and owners. 
C) spending corporate resources. 
D) friction between the primary and secondary markets. 
A) dislike of firm's bondholders by its equity holders. 
B) differing incentives between managers and owners. 
C) spending corporate resources. 
D) friction between the primary and secondary markets.

Question 9

Agency problems act as a hindrance to the goal of maximizing firm value.

Accepted Answer

A) True 
 B)False

Question 10

Today's capital investments generate returns, when?

Accepted Answer

A) In the future 
B) In the past 
C) Today 
D) All of the above 
A) In the future 
B) In the past 
C) Today 
D) All of the above

Question 11

When a corporation decides to issue long-term debt in order to pay for the acquisition of real assets, it has made a:

Accepted Answer

A) capital budgeting decision. 
B) financing decision. 
C) money market decision. 
D) secondary market decision. 
A) capital budgeting decision. 
B) financing decision. 
C) money market decision. 
D) secondary market decision.

Question 12

As your firm grows, you may decide to form a corporation.You may incorporate your firm federally, under the Canadian Business Corporation Act, or provincially, under the relevant provincial laws.

Accepted Answer

A) True 
 B)False

Question 13

The liability of sole proprietors is limited to the amount of their investment in the company.

Accepted Answer

A) True 
 B)False

Question 14

To obtain the necessary money a company sells financial assets or securities.

Accepted Answer

A) True 
 B)False

Question 15

The primary goal of corporate management should be to:

Accepted Answer

A) maximize the number of shareholders. 
B) maximize the firm's profit. 
C) minimize the firm's costs. 
D) maximize the shareholders' wealth. 
A) maximize the number of shareholders. 
B) maximize the firm's profit. 
C) minimize the firm's costs. 
D) maximize the shareholders' wealth.

Question 16

Profit-sharing plans may be beneficial when used to:

Accepted Answer

A) reduce the impact of corporate income taxes. 
B) improve managers' incentives for effective decision making. 
C) divert financial resources from shareholders. 
D) reduce the payment of cash dividends. 
A) reduce the impact of corporate income taxes. 
B) improve managers' incentives for effective decision making. 
C) divert financial resources from shareholders. 
D) reduce the payment of cash dividends.

Question 17

Briefly discuss income trusts.

Accepted Answer

An income trust is an investment fund, l

Question 18

Ethical decision making in business can be viewed as a long-term investment in reputation.

Accepted Answer

A) True 
 B)False

Question 19

Corporations are referred to as public companies when their:

Accepted Answer

A) shareholders have no tax liability. 
B) shares are held by the federal or state government. 
C) shares are widely traded. 
D) products or services are available to the public. 
A) shareholders have no tax liability. 
B) shares are held by the federal or state government. 
C) shares are widely traded. 
D) products or services are available to the public.

Question 20

How do corporations ensure that managers' and shareholders' interests coincide?

Accepted Answer

Conflicts of interest between managers a

Exam 1: Goals and Governance of the Firm

Which of the following would not be considered a real asset?

Which of the following is least likely to be discussed in the articles of incorporation?

Distinguish between a firm's capital budgeting decision and financing decision.

The overall goal of capital budgeting projects should be to:

How may a reduction in cash dividends be in the best interests of current shareholders?

By organizing itself as a corporation, a business may be able to attract:

Which of the following would correctly differentiate general partners from limited partners in a limited partnership?

Agency problems can best be characterized as a:

Agency problems act as a hindrance to the goal of maximizing firm value.

Today's capital investments generate returns, when?

When a corporation decides to issue long-term debt in order to pay for the acquisition of real assets, it has made a:

As your firm grows, you may decide to form a corporation.You may incorporate your firm federally, under the Canadian Business Corporation Act, or provincially, under the relevant provincial laws.

The liability of sole proprietors is limited to the amount of their investment in the company.

To obtain the necessary money a company sells financial assets or securities.

The primary goal of corporate management should be to:

Profit-sharing plans may be beneficial when used to:

Briefly discuss income trusts.

Ethical decision making in business can be viewed as a long-term investment in reputation.

Corporations are referred to as public companies when their:

How do corporations ensure that managers' and shareholders' interests coincide?

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