Question 1

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 2

Managers are subject to the scrutiny of specialists.Their actions are monitored by the security analyst who advises investors to buy,hold,or sell the company's shares.

Accepted Answer

A) True 
 B)False

Question 3

Which of the firm's financial managers is most likely to be involved with obtaining financing for the firm?

Accepted Answer

A)  treasurer 
B)  controller 
C)  chief executive officer 
D)  board of directors 
A)  treasurer 
B)  controller 
C)  chief executive officer 
D)  board of directors

Question 4

The legal "life" of a corporation is:

Accepted Answer

A)  coincident with that of its CEO. 
B)  equal to the life of the board of directors. 
C)  permanent, as long as shareholders don't change. 
D)  permanent, regardless of current ownership. 
A)  coincident with that of its CEO. 
B)  equal to the life of the board of directors. 
C)  permanent, as long as shareholders don't change. 
D)  permanent, regardless of current ownership.

Question 5

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 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

Are all investment decisions made by the financial manager multi-billion dollar investment?

Accepted Answer

No.Most investment decisions a

Question 8

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 9

In which of the following organizations would the existence of agency problems be least likely?

Accepted Answer

A)  a sole proprietorship 
B)  a partnership 
C)  a corporation 
D)  a closely held corporation 
A)  a sole proprietorship 
B)  a partnership 
C)  a corporation 
D)  a closely held corporation

Question 10

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 11

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 12

Which of the following is correct regarding board membership in a corporation?

Accepted Answer

A)  all corporations have board of directors. 
B)  in a private corporation, shareholders are also board members. 
C)  in a public corporation, shareholders are not board members. 
D)  All of the choices are correct. 
A)  all corporations have board of directors. 
B)  in a private corporation, shareholders are also board members. 
C)  in a public corporation, shareholders are not board members. 
D)  All of the choices are correct.

Question 13

One common reason for partnerships to convert to a corporate form of organization is that the partnership:

Accepted Answer

A)  faces rapidly growing financing requirements. 
B)  wishes to avoid double taxation of profits. 
C)  has issued all of its allotted shares. 
D)  agreement expires after ten years of use. 
A)  faces rapidly growing financing requirements. 
B)  wishes to avoid double taxation of profits. 
C)  has issued all of its allotted shares. 
D)  agreement expires after ten years of use.

Question 14

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 15

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 16

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

Accepted Answer

A) True 
 B)False

Question 17

A common problem for closely held corporations is:

Accepted Answer

A)  lack of access to substantial amounts of capital. 
B)  that shareholders receive only one vote each. 
C)  the separation of ownership and management. 
D)  an abundance of agency problems. 
A)  lack of access to substantial amounts of capital. 
B)  that shareholders receive only one vote each. 
C)  the separation of ownership and management. 
D)  an abundance of agency problems.

Question 18

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.

Exam 1: Goals and Governance of the Firm

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

Managers are subject to the scrutiny of specialists.Their actions are monitored by the security analyst who advises investors to buy,hold,or sell the company's shares.

Which of the firm's financial managers is most likely to be involved with obtaining financing for the firm?

The legal "life" of a corporation is:

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

Firms can alter their capital structure by:

Are all investment decisions made by the financial manager multi-billion dollar investment?

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

In which of the following organizations would the existence of agency problems be least likely?

Ethical decision making in business:

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

Which of the following is correct regarding board membership in a corporation?

One common reason for partnerships to convert to a corporate form of organization is that the partnership:

The term "corporate stakeholder" typically refers to:

Which of the following represents a financing decision?

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

A common problem for closely held corporations is:

The overall goal of capital budgeting projects should be to:

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 and Payout 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