Question 1

Why might a corporation wish to list its shares on a national exchange such as the NYSE as opposed to a regional exchange or NASDAQ?

Accepted Answer

Being listed on a regional exchange effe

Question 2

Which one of the following statements is correct?

Accepted Answer

A)  Both partnerships and corporations incur double taxation. 
B)  Both sole proprietorships and partnerships are taxed in a similar fashion. 
C)  Partnerships are the most complicated type of business to form. 
D)  Both partnerships and corporations have limited liability for general partners and shareholders. 
E)  All types of business formations have limited lives. 
A)  Both partnerships and corporations incur double taxation. 
B)  Both sole proprietorships and partnerships are taxed in a similar fashion. 
C)  Partnerships are the most complicated type of business to form. 
D)  Both partnerships and corporations have limited liability for general partners and shareholders. 
E)  All types of business formations have limited lives.

Question 3

Working capital management includes decisions concerning which of the following?
I. accounts payable
II. long-term debt
III. accounts receivable
IV. inventory

Accepted Answer

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

Question 4

The Sarbanes Oxley Act was enacted in:

Accepted Answer

A)  1952. 
B)  1967. 
C)  1998. 
D)  2002. 
E)  2006. 
A)  1952. 
B)  1967. 
C)  1998. 
D)  2002. 
E)  2006.

Question 5

Working capital management:

Accepted Answer

A)  ensures that sufficient equipment is available to produce the amount of product desired on a daily basis. 
B)  ensures that long-term debt is acquired at the lowest possible cost. 
C)  ensures that dividends are paid to all stockholders on an annual basis. 
D)  balances the amount of company debt to the amount of available equity. 
E)  is concerned with the upper portion of the balance sheet. 
A)  ensures that sufficient equipment is available to produce the amount of product desired on a daily basis. 
B)  ensures that long-term debt is acquired at the lowest possible cost. 
C)  ensures that dividends are paid to all stockholders on an annual basis. 
D)  balances the amount of company debt to the amount of available equity. 
E)  is concerned with the upper portion of the balance sheet.

Question 6

A stakeholder is:

Accepted Answer

A)  any person or entity that owns shares of stock of a corporation. 
B)  any person or entity that has voting rights based on stock ownership of a corporation. 
C)  a person who initially started a firm and currently has management control over the cash flows of the firm due to his/her current ownership of company stock. 
D)  a creditor to whom the firm currently owes money and who consequently has a claim on the cash flows of the firm. 
E)  any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of the firm. 
A)  any person or entity that owns shares of stock of a corporation. 
B)  any person or entity that has voting rights based on stock ownership of a corporation. 
C)  a person who initially started a firm and currently has management control over the cash flows of the firm due to his/her current ownership of company stock. 
D)  a creditor to whom the firm currently owes money and who consequently has a claim on the cash flows of the firm. 
E)  any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.

Question 7

Which one of the following business types is best suited to raising large amounts of capital?

Accepted Answer

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

Question 8

The Securities Act of 1933 focuses on:

Accepted Answer

A)  all stock transactions. 
B)  sales of existing securities. 
C)  issuance of new securities. 
D)  insider trading. 
E)  Federal Deposit Insurance Corporation (FDI
C)  insurancE. 
A)  all stock transactions. 
B)  sales of existing securities. 
C)  issuance of new securities. 
D)  insider trading. 
E)  Federal Deposit Insurance Corporation (FDI
C)  insurancE.

Question 9

Agency costs refer to:

Accepted Answer

A)  the total dividends paid to stockholders over the lifetime of a firm. 
B)  the costs that result from default and bankruptcy of a firm. 
C)  corporate income subject to double taxation. 
D)  the costs of any conflicts of interest between stockholders and management. 
E)  the total interest paid to creditors over the lifetime of the firm. 
A)  the total dividends paid to stockholders over the lifetime of a firm. 
B)  the costs that result from default and bankruptcy of a firm. 
C)  corporate income subject to double taxation. 
D)  the costs of any conflicts of interest between stockholders and management. 
E)  the total interest paid to creditors over the lifetime of the firm.

Question 10

List and briefly describe the three basic questions addressed by a financial manager.

Accepted Answer

The three areas are:
1. Capital budgetin

Question 11

A proxy fight occurs when:

Accepted Answer

A)  the board solicits renewal of current members. 
B)  a group solicits proxies to replace the board of directors. 
C)  a competitor offers to sell their ownership in the firm. 
D)  the firm files for bankruptcy. 
E)  the firm is declared insolvent. 
A)  the board solicits renewal of current members. 
B)  a group solicits proxies to replace the board of directors. 
C)  a competitor offers to sell their ownership in the firm. 
D)  the firm files for bankruptcy. 
E)  the firm is declared insolvent.

Question 12

The management of a firm's short-term assets and liabilities is called:

Accepted Answer

A)  working capital management. 
B)  debt management. 
C)  equity management. 
D)  capital budgeting. 
E)  capital structurE. 
A)  working capital management. 
B)  debt management. 
C)  equity management. 
D)  capital budgeting. 
E)  capital structurE.

Question 13

The person generally directly responsible for overseeing the cash and credit functions,financial planning,and capital expenditures is the:

Accepted Answer

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

Question 14

If the corporate form of business organization has so many advantages over the sole proprietorship,why is it so common for small businesses to initially be formed as sole proprietorships?

Accepted Answer

A significant advantage of the sole prop

Question 15

Which one of the following parties is considered a stakeholder of a firm?

Accepted Answer

A)  employee 
B)  short-term creditor 
C)  long-term creditor 
D)  preferred stockholder 
E)  common stockholder 
A)  employee 
B)  short-term creditor 
C)  long-term creditor 
D)  preferred stockholder 
E)  common stockholder

Question 16

Managers are encouraged to act in shareholders' interests by:

Accepted Answer

A)  shareholder election of a board of directors who select management. 
B)  the threat of a takeover by another firm. 
C)  compensation contracts that tie compensation to corporate success. 
D)  Both shareholder election of a board of directors who select management; and the threat of a takeover by another firm. 
E)  All of 
A)  shareholder election of a board of directors who select management. 
B)  the threat of a takeover by another firm. 
C)  compensation contracts that tie compensation to corporate success. 
D)  Both shareholder election of a board of directors who select management; and the threat of a takeover by another firm. 
E)  All of

Question 17

The corporate document that sets forth the business purpose of a firm is the:

Accepted Answer

A)  indenture contract. 
B)  state tax agreement. 
C)  corporate bylaws. 
D)  debt charter. 
E)  articles of incorporation. 
A)  indenture contract. 
B)  state tax agreement. 
C)  corporate bylaws. 
D)  debt charter. 
E)  articles of incorporation.

Question 18

Which of the following are key requirements of the Sarbanes-Oxley Act?
I. Officers of the corporation must review and sign annual reports.
II. Officers of the corporation must now own more than 5% of the firm's stock.
III. Annual reports must list deficiencies in internal controls.
IV. Annual reports must be filed with the SEC within 30 days of year end.

Accepted Answer

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

Question 19

A business created as a distinct legal entity composed of one or more individuals or entities is called a:

Accepted Answer

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

Question 20

The division of profits and losses among the members of a partnership is formalized in the:

Accepted Answer

A)  indemnity clause. 
B)  indenture contract. 
C)  statement of purpose. 
D)  partnership agreement. 
E)  group charter. 
A)  indemnity clause. 
B)  indenture contract. 
C)  statement of purpose. 
D)  partnership agreement. 
E)  group charter.

Exam 1: Introduction to Corporate Finance

Why might a corporation wish to list its shares on a national exchange such as the NYSE as opposed to a regional exchange or NASDAQ?

Which one of the following statements is correct?

Working capital management includes decisions concerning which of the following? I. accounts payable II. long-term debt III. accounts receivable IV. inventory

The Sarbanes Oxley Act was enacted in:

Working capital management:

A stakeholder is:

Which one of the following business types is best suited to raising large amounts of capital?

The Securities Act of 1933 focuses on:

Agency costs refer to:

List and briefly describe the three basic questions addressed by a financial manager.

A proxy fight occurs when:

The management of a firm's short-term assets and liabilities is called:

The person generally directly responsible for overseeing the cash and credit functions,financial planning,and capital expenditures is the:

If the corporate form of business organization has so many advantages over the sole proprietorship,why is it so common for small businesses to initially be formed as sole proprietorships?

Which one of the following parties is considered a stakeholder of a firm?

Managers are encouraged to act in shareholders' interests by:

The corporate document that sets forth the business purpose of a firm is the:

A business created as a distinct legal entity composed of one or more individuals or entities is called a:

The division of profits and losses among the members of a partnership is formalized in the:

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

Filters