Question 1

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 2

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

Accepted Answer

A) True 
 B)False

Question 3

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 4

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 5

Why is limited liability such an important aspect to investors?

Accepted Answer

Many investors would not be willing to c

Question 6

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 7

What are the two major decisions made by a financial manager?

Accepted Answer

Financial management can be broken down

Question 8

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 9

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 10

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 11

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 12

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 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

When the management of a business is conducted by individuals other than the owners, the business is more likely to be a:

Accepted Answer

A) corporation. 
B) Sole proprietorship. 
C) Partnership. 
D) General partner. 
A) corporation. 
B) Sole proprietorship. 
C) Partnership. 
D) General partner.

Question 16

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 17

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

Accepted Answer

No.Most investment decisions a

Question 18

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 19

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 20

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 above 
A) Amount 
B) Timing 
C) Risk 
D) All of the above

Exam 1: Goals and Governance of the Firm

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

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

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

The term "corporate stakeholder" typically refers to:

Why is limited liability such an important aspect to investors?

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

What are the two major decisions made by a financial manager?

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

The term "capital structure" refers to:

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

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

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

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.

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

When the management of a business is conducted by individuals other than the owners, the business is more likely to be a:

A corporation is characterized by:

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

A corporation's board of directors:

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

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

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

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

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