Question 1

Do you think agency problems arise in sole proprietorships and/or partnerships?

Accepted Answer

Agency conflicts typically arise when th

Question 2

The cheapest business to form is typically the

Accepted Answer

A)  General corporation 
B)  Sub-chapter S Corporation 
C)  General Partnership 
D)  Limited Partnership 
E)  Sole proprietorship 
A)  General corporation 
B)  Sub-chapter S Corporation 
C)  General Partnership 
D)  Limited Partnership 
E)  Sole proprietorship

Question 3

A general partner:

Accepted Answer

A)  has less legal liability than a limited partner. 
B)  has more management responsibility than a limited partner. 
C)  faces double taxation whereas a limited partner does not. 
D)  cannot lose more than the amount of his/her equity investment. 
E)  is the term applied only to corporations which invest in partnerships. 
A)  has less legal liability than a limited partner. 
B)  has more management responsibility than a limited partner. 
C)  faces double taxation whereas a limited partner does not. 
D)  cannot lose more than the amount of his/her equity investment. 
E)  is the term applied only to corporations which invest in partnerships.

Question 4

Which one of the following best describes the primary advantage of being a limited partner rather than a general partner?

Accepted Answer

A)  Entitlement to a larger portion of the partnership's income 
B)  Ability to manage the day-to-day affairs of the business 
C)  No potential financial loss 
D)  Greater management responsibility 
E)  Liability for firm debts limited to the capital invested 
A)  Entitlement to a larger portion of the partnership's income 
B)  Ability to manage the day-to-day affairs of the business 
C)  No potential financial loss 
D)  Greater management responsibility 
E)  Liability for firm debts limited to the capital invested

Question 5

Which one of the following is a capital budgeting decision?

Accepted Answer

A)  Determining how much debt should be borrowed from a particular lender 
B)  Deciding whether or not to open a new store 
C)  Deciding when to repay a long-term debt 
D)  Determining how much inventory to keep on hand 
E)  Determining how much money should be kept in the checking account 
A)  Determining how much debt should be borrowed from a particular lender 
B)  Deciding whether or not to open a new store 
C)  Deciding when to repay a long-term debt 
D)  Determining how much inventory to keep on hand 
E)  Determining how much money should be kept in the checking account

Question 6

The person generally directly responsible for overseeing the tax management,cost accounting,financial accounting,and information system functions is the:

Accepted Answer

A)  treasurer. 
B)  director. 
C)  controller. 
D)  chairman of the board. 
E)  chief executive officer. 
A)  treasurer. 
B)  director. 
C)  controller. 
D)  chairman of the board. 
E)  chief executive officer.

Question 7

Assume for a moment that the stockholders in a corporation have unlimited liability for corporate debts. If so,what impact would this have on the functioning of primary and secondary markets for common stock?

Accepted Answer

With unlimited liability,you would be ve

Question 8

A business entity operated and taxed like a partnership,but with limited liability for the owners,is called a:

Accepted Answer

A)  limited liability company. 
B)  general partnership. 
C)  limited proprietorship. 
D)  sole proprietorship. 
E)  corporation. 
A)  limited liability company. 
B)  general partnership. 
C)  limited proprietorship. 
D)  sole proprietorship. 
E)  corporation.

Question 9

Which one of the following statements is correct concerning corporations?

Accepted Answer

A)  The largest firms are usually corporations. 
B)  The majority of firms are corporations. 
C)  The stockholders are usually the managers of a corporation. 
D)  The ability of a corporation to raise capital is quite limited. 
E)  The income of a corporation is taxed as personal income of the stockholders. 
A)  The largest firms are usually corporations. 
B)  The majority of firms are corporations. 
C)  The stockholders are usually the managers of a corporation. 
D)  The ability of a corporation to raise capital is quite limited. 
E)  The income of a corporation is taxed as personal income of the stockholders.

Question 10

Which of the following are advantages of the corporate form of business ownership?
I. limited liability for firm debt
II. double taxation
III. ability to raise capital
IV. unlimited firm life

Accepted Answer

A)  I and II only 
B)  III and IV only 
C)  I, II, and III only 
D)  II, III, and IV only 
E)  I, III, and IV only 
A)  I and II only 
B)  III and IV only 
C)  I, II, and III only 
D)  II, III, and IV only 
E)  I, III, and IV only

Question 11

Sole proprietorships are predominantly started because:

Accepted Answer

A)  they are easily and cheaply setup. 
B)  the proprietorship life is limited to the business owner's life. 
C)  all business taxes are paid as individual tax. 
D)  All of these. 
E)  None of these. 
A)  they are easily and cheaply setup. 
B)  the proprietorship life is limited to the business owner's life. 
C)  all business taxes are paid as individual tax. 
D)  All of these. 
E)  None of these.

Question 12

Accounting profits and cash flows are:

Accepted Answer

A)  generally the same since they reflect current laws and accounting standards. 
B)  generally the same since accounting profits reflect when the cash flows are received. 
C)  generally not the same since GAAP allows for revenue recognition separate from the receipt of cash flows. 
D)  generally not the same because cash inflows occur before revenue recognition. 
E)  Both generally not the same since GAAP allows for revenue recognition separate from the receipt of cash flows; and generally not the same because cash inflows occur before revenue recognition. 
A)  generally the same since they reflect current laws and accounting standards. 
B)  generally the same since accounting profits reflect when the cash flows are received. 
C)  generally not the same since GAAP allows for revenue recognition separate from the receipt of cash flows. 
D)  generally not the same because cash inflows occur before revenue recognition. 
E)  Both generally not the same since GAAP allows for revenue recognition separate from the receipt of cash flows; and generally not the same because cash inflows occur before revenue recognition.

Question 13

The primary goal of financial management is to:

Accepted Answer

A)  maximize current dividends per share of the existing stock. 
B)  maximize the current value per share of the existing stock. 
C)  avoid financial distress. 
D)  minimize operational costs and maximize firm efficiency. 
E)  maintain steady growth in both sales and net earnings. 
A)  maximize current dividends per share of the existing stock. 
B)  maximize the current value per share of the existing stock. 
C)  avoid financial distress. 
D)  minimize operational costs and maximize firm efficiency. 
E)  maintain steady growth in both sales and net earnings.

Question 14

Which of the following are disadvantages of a partnership?
I. Limited life of the firm
II. Personal liability for firm debt
III. Greater ability to raise capital than a sole proprietorship
IV. Lack of ability to transfer partnership interest

Accepted Answer

A)  I and II only 
B)  III and IV only 
C)  II and III only 
D)  I, II, and IV only 
E)  I, III, and IV only 
A)  I and II only 
B)  III and IV only 
C)  II and III only 
D)  I, II, and IV only 
E)  I, III, and IV only

Question 15

Which of the following help convince managers to work in the best interest of the stockholders?
I. compensation based on the value of the stock
II. stock option plans
III. threat of a proxy fight
IV. threat of conversion to a partnership

Accepted Answer

A)  I and II only 
B)  II and III only 
C)  I, II and III only 
D)  I and III only 
E)  I, II, III, and IV 
A)  I and II only 
B)  II and III only 
C)  I, II and III only 
D)  I and III only 
E)  I, II, III, and IV

Question 16

Which form of business structure faces the greatest agency problems?

Accepted Answer

A)  sole proprietorship 
B)  general partnership 
C)  limited partnership 
D)  corporation 
E)  limited liability company 
A)  sole proprietorship 
B)  general partnership 
C)  limited partnership 
D)  corporation 
E)  limited liability company

Question 17

The rules by which corporations govern themselves are called:

Accepted Answer

A)  indenture provisions. 
B)  indemnity provisions. 
C)  charter agreements. 
D)  bylaws. 
E)  articles of incorporation. 
A)  indenture provisions. 
B)  indemnity provisions. 
C)  charter agreements. 
D)  bylaws. 
E)  articles of incorporation.

Question 18

A business formed by two or more individuals who each have unlimited liability for business debts is called a:

Accepted Answer

A)  corporation. 
B)  sole proprietorship. 
C)  general partnership. 
D)  limited partnership. 
E)  limited liability company. 
A)  corporation. 
B)  sole proprietorship. 
C)  general partnership. 
D)  limited partnership. 
E)  limited liability company.

Question 19

The process of planning and managing a firm's long-term investments is called:

Accepted Answer

A)  working capital management. 
B)  financial depreciation. 
C)  agency cost analysis. 
D)  capital budgeting. 
E)  capital structurE. 
A)  working capital management. 
B)  financial depreciation. 
C)  agency cost analysis. 
D)  capital budgeting. 
E)  capital structurE.

Question 20

In a general partnership,the general partners have

Accepted Answer

A)  Limited liability 
B)  Unlimited liability 
C)  No liability 
D)  Minimal liability 
E)  It depends on the partners' decision 
A)  Limited liability 
B)  Unlimited liability 
C)  No liability 
D)  Minimal liability 
E)  It depends on the partners' decision

Exam 1: Introduction to Corporate Finance

Do you think agency problems arise in sole proprietorships and/or partnerships?

The cheapest business to form is typically the

A general partner:

Which one of the following best describes the primary advantage of being a limited partner rather than a general partner?

Which one of the following is a capital budgeting decision?

The person generally directly responsible for overseeing the tax management,cost accounting,financial accounting,and information system functions is the:

Assume for a moment that the stockholders in a corporation have unlimited liability for corporate debts. If so,what impact would this have on the functioning of primary and secondary markets for common stock?

A business entity operated and taxed like a partnership,but with limited liability for the owners,is called a:

Which one of the following statements is correct concerning corporations?

Which of the following are advantages of the corporate form of business ownership? I. limited liability for firm debt II. double taxation III. ability to raise capital IV. unlimited firm life

Sole proprietorships are predominantly started because:

Accounting profits and cash flows are:

The primary goal of financial management is to:

Which of the following are disadvantages of a partnership? I. Limited life of the firm II. Personal liability for firm debt III. Greater ability to raise capital than a sole proprietorship IV. Lack of ability to transfer partnership interest

Which of the following help convince managers to work in the best interest of the stockholders? I. compensation based on the value of the stock II. stock option plans III. threat of a proxy fight IV. threat of conversion to a partnership

Which form of business structure faces the greatest agency problems?

The rules by which corporations govern themselves are called:

A business formed by two or more individuals who each have unlimited liability for business debts is called a:

The process of planning and managing a firm's long-term investments is called:

In a general partnership,the general partners have

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return: Lessons From Market History

Return and Risk: the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: The Arbitrage Pricing Theory

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers, Acquisitions, and Divestitures

Financial Distress

International Corporate Finance

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