Question 1

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 above. 
A) Investment and financing. 
B) Short term and long term. 
C) Debt and equity. 
D) All of the above.

Question 2

"Double taxation" refers to:

Accepted Answer

A) All partners paying equal taxes on profits. 
B) Corporations paying taxes on both dividends and retained earnings. 
C) Paying taxes on profits at the corporate level and dividends at the personal level. 
D) The fact that marginal tax rates are doubled for corporations. 
A) All partners paying equal taxes on profits. 
B) Corporations paying taxes on both dividends and retained earnings. 
C) Paying taxes on profits at the corporate level and dividends at the personal level. 
D) The fact that marginal tax rates are doubled for corporations.

Question 3

A financial manager facing a capital budgeting decision must decide whether to:

Accepted Answer

A) Issue stock or debt securities. 
B) Use the money market or capital market. 
C) Use primary markets or secondary markets. 
D) Buy new machinery or repair the old. 
A) Issue stock or debt securities. 
B) Use the money market or capital market. 
C) Use primary markets or secondary markets. 
D) Buy new machinery or repair the old.

Question 4

The agency problem is mitigated in practice through several devices.

Accepted Answer

A) True 
 B)False

Question 5

What does "real asset" mean? What is a "financial asset"?

Accepted Answer

Real assets include all assets used in t

Question 6

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

Accepted Answer

A) True 
 B)False

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

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

Sole proprietorships resolve the issue of agency problems by:

Accepted Answer

A) Avoiding excessive expense accounts. 
B) Discharging those who violate the rules. 
C) Allowing owners to share the cost of their actions with others. 
D) Forcing owners to bear the full cost of their actions. 
A) Avoiding excessive expense accounts. 
B) Discharging those who violate the rules. 
C) Allowing owners to share the cost of their actions with others. 
D) Forcing owners to bear the full cost of their actions.

Question 11

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 12

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

Accepted Answer

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

Question 13

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 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

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 16

Explain why managers should use ethical decision making as a way to increase the profitability of a firm.

Accepted Answer

Ethical decision making can have an impo

Question 17

Which of the following is least likely to represent an agency problem?

Accepted Answer

A) Lavish spending on expense accounts. 
B) Plush remodeling of the executive suite. 
C) Excessive investment in "safe" projects. 
D) Executive incentive compensation plans. 
A) Lavish spending on expense accounts. 
B) Plush remodeling of the executive suite. 
C) Excessive investment in "safe" projects. 
D) Executive incentive compensation plans.

Question 18

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 19

Which of the following would be considered a capital budgeting decision?

Accepted Answer

A) Planning to issue common stock rather than issuing preferred stock 
B) A decision to expand into a new line of products, at a cost of $5 million 
C) Repurchasing shares of common stock 
D) Issuing debt in the form of long-term bonds 
A) Planning to issue common stock rather than issuing preferred stock 
B) A decision to expand into a new line of products, at a cost of $5 million 
C) Repurchasing shares of common stock 
D) Issuing debt in the form of long-term bonds

Question 20

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.

Exam 1: Goals and Governance of the Firm

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

"Double taxation" refers to:

A financial manager facing a capital budgeting decision must decide whether to:

The agency problem is mitigated in practice through several devices.

What does "real asset" mean? What is a "financial asset"?

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

A first step in determining managerial objectives is to:

Profit-sharing plans may be beneficial when used to:

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

Sole proprietorships resolve the issue of agency problems by:

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

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

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

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

Corporations are referred to as public companies when their:

Explain why managers should use ethical decision making as a way to increase the profitability of a firm.

Which of the following is least likely to represent an agency problem?

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

Which of the following would be considered a capital budgeting decision?

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

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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