Question 1

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 2

A general partner

Accepted Answer

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

Question 3

Insider trading is

Accepted Answer

A) illegal. 
B) impossible to have in our efficient market. 
C) legal. 
D) discouraged,but legal. 
E) defined as the trading of stock by a corporate director based on publicly available information. 
A) illegal. 
B) impossible to have in our efficient market. 
C) legal. 
D) discouraged,but legal. 
E) defined as the trading of stock by a corporate director based on publicly available information.

Question 4

The goal of financial management focuses on the fact that

Accepted Answer

A) the company will grow in size. 
B) employee salaries should increase over time. 
C) the current stockholders are the owners of the corporation. 
D) the firm should expand faster than its competitors. 
E) the current corporate officers should be highly compensated. 
A) the company will grow in size. 
B) employee salaries should increase over time. 
C) the current stockholders are the owners of the corporation. 
D) the firm should expand faster than its competitors. 
E) the current corporate officers should be highly compensated.

Question 5

The key difference between the responsibilities of the controller and those of the treasurer is best defined as the separation of duties between

Accepted Answer

A) managing assets versus managing debt and equity. 
B) processing tax records versus accounting records. 
C) national versus international operations. 
D) production versus marketing. 
E) cash control versus accounting records. 
A) managing assets versus managing debt and equity. 
B) processing tax records versus accounting records. 
C) national versus international operations. 
D) production versus marketing. 
E) cash control versus accounting records.

Question 6

Which one of these is a corporate document that sets forth the intended life of the firm?

Accepted Answer

A) Federal charter 
B) Articles of incorporation 
C) Corporate bylaws 
D) Indenture contract 
E) State charter 
A) Federal charter 
B) Articles of incorporation 
C) Corporate bylaws 
D) Indenture contract 
E) State charter

Question 7

The articles of incorporation

Accepted Answer

A) can be used to remove company management. 
B) are amended annually by the company stockholders. 
C) set forth the number of shares of stock that can be issued. 
D) set forth the rules by which the corporation regulates its existence. 
E) can set forth the conditions under which the firm can avoid double taxation. 
A) can be used to remove company management. 
B) are amended annually by the company stockholders. 
C) set forth the number of shares of stock that can be issued. 
D) set forth the rules by which the corporation regulates its existence. 
E) can set forth the conditions under which the firm can avoid double taxation.

Question 8

The issuance of new equity shares is a cash flow from

Accepted Answer

A) long-term creditors to a firm. 
B) a firm to its shareholders. 
C) a firm's suppliers to the firm. 
D) the financial markets to a firm. 
E) any one of a firm's stakeholders to the firm. 
A) long-term creditors to a firm. 
B) a firm to its shareholders. 
C) a firm's suppliers to the firm. 
D) the financial markets to a firm. 
E) any one of a firm's stakeholders to the firm.

Question 9

Which type of business organization has all the respective rights and privileges of a legal person?

Accepted Answer

A) Sole proprietorship 
B) Corporation 
C) General partnership 
D) Limited partnership 
E) Limited liability company 
A) Sole proprietorship 
B) Corporation 
C) General partnership 
D) Limited partnership 
E) Limited liability company

Question 10

In a limited partnership,

Accepted Answer

A) each limited partner's liability is limited to his net worth. 
B) each limited partner's liability is limited to his annual salary. 
C) each limited partner's liability is limited to the amount he/she invested. 
D) there is no limitation on liability; only a limitation on what the partner can earn. 
E) limitations are placed on both the salary and personal liability of each limited partner. 
A) each limited partner's liability is limited to his net worth. 
B) each limited partner's liability is limited to his annual salary. 
C) each limited partner's liability is limited to the amount he/she invested. 
D) there is no limitation on liability; only a limitation on what the partner can earn. 
E) limitations are placed on both the salary and personal liability of each limited partner.

Question 11

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) Limited partnership 
D) General partnership 
E) Corporation 
A) Sole proprietorship 
B) Limited liability company 
C) Limited partnership 
D) General partnership 
E) Corporation

Question 12

Agency costs refer to

Accepted Answer

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

Question 13

The primary goal of financial management is to

Accepted Answer

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

Question 14

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

Accepted Answer

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

Question 15

Which one of the following actions by a financial manager least meets the goal of financial management?

Accepted Answer

A) Increasing current costs in order to increase the market value of the stockholders' equity 
B) Agreeing to expand the company at the expense of stockholders' value 
C) Refusing to lower selling prices if doing so will reduce the net profits 
D) Agreeing to pay bonuses based on the market value of the company stock 
E) Refusing to borrow money when doing so will create losses for the firm 
A) Increasing current costs in order to increase the market value of the stockholders' equity 
B) Agreeing to expand the company at the expense of stockholders' value 
C) Refusing to lower selling prices if doing so will reduce the net profits 
D) Agreeing to pay bonuses based on the market value of the company stock 
E) Refusing to borrow money when doing so will create losses for the firm

Question 16

Art purchased 2,500 shares of Delta stock.His purchase represents 10 percent ownership in the firm.His shares have increased in value from the $12 a share he originally paid to today's market value of $13 a share.Assume Delta goes bankrupt and owes $450,000 more in debts than the firm can pay after liquidating all of its assets.What is the maximum loss per share Art will incur on this investment?

Accepted Answer

A) $0 a share 
B) $12 a share 
C) $12.50 a share,computed as ($12 + $13)/ 2 
D) $13 a share 
E) $18 share,computed as (10% × $450,000)/ 2,500 shares 
A) $0 a share 
B) $12 a share 
C) $12.50 a share,computed as ($12 + $13)/ 2 
D) $13 a share 
E) $18 share,computed as (10% × $450,000)/ 2,500 shares

Question 17

A store receives cash when a customer

Accepted Answer

A) buys an item using store credit. 
B) exchanges one item for another at the same price. 
C) pays their bill from the store. 
D) places an item on layaway with no deposit. 
E) returns an item purchased with cash. 
A) buys an item using store credit. 
B) exchanges one item for another at the same price. 
C) pays their bill from the store. 
D) places an item on layaway with no deposit. 
E) returns an item purchased with cash.

Question 18

Which one of the following is a capital budgeting decision?

Accepted Answer

A) Deciding whether or not to open a new store 
B) Determining how much inventory to keep on hand 
C) Determining how much debt should be borrowed from a particular lender 
D) Deciding if stock shares should be repurchased 
E) Determining how much cash to keep on hand 
A) Deciding whether or not to open a new store 
B) Determining how much inventory to keep on hand 
C) Determining how much debt should be borrowed from a particular lender 
D) Deciding if stock shares should be repurchased 
E) Determining how much cash to keep on hand

Question 19

Capital structure refers to the

Accepted Answer

A) determination of the ideal mix of current versus long-term assets. 
B) methods by which fixed assets are used to produce a tangible product. 
C) mix of current assets and current liabilities. 
D) acquisition or disposition of a building or other long-term asset. 
E) decisions related to long-term debt and equity financing. 
A) determination of the ideal mix of current versus long-term assets. 
B) methods by which fixed assets are used to produce a tangible product. 
C) mix of current assets and current liabilities. 
D) acquisition or disposition of a building or other long-term asset. 
E) decisions related to long-term debt and equity financing.

Question 20

Which one of the following is a key requirement of the Sarbanes-Oxley Act?

Accepted Answer

A) Officers of the corporation must now own at least five percent of the firm's stock. 
B) Officers of the corporation must review and sign the annual reports. 
C) Annual reports must list the strengths of the internal controls. 
D) Firms must "go dark" every 5 years. 
E) Monthly financial statements must be provided to all shareholders. 
A) Officers of the corporation must now own at least five percent of the firm's stock. 
B) Officers of the corporation must review and sign the annual reports. 
C) Annual reports must list the strengths of the internal controls. 
D) Firms must "go dark" every 5 years. 
E) Monthly financial statements must be provided to all shareholders.

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

A general partner

Insider trading is

The goal of financial management focuses on the fact that

The key difference between the responsibilities of the controller and those of the treasurer is best defined as the separation of duties between

Which one of these is a corporate document that sets forth the intended life of the firm?

The articles of incorporation

The issuance of new equity shares is a cash flow from

Which type of business organization has all the respective rights and privileges of a legal person?

In a limited partnership,

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

Agency costs refer to

The primary goal of financial management is to

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 actions by a financial manager least meets the goal of financial management?

A store receives cash when a customer

Which one of the following is a capital budgeting decision?

Capital structure refers to the

Which one of the following is a key requirement of the Sarbanes-Oxley Act?

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters

Exam 1: Introduction to Corporate Finance

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

A general partner

Insider trading is

The goal of financial management focuses on the fact that

The key difference between the responsibilities of the controller and those of the treasurer is best defined as the separation of duties between

Which one of these is a corporate document that sets forth the intended life of the firm?

The articles of incorporation

The issuance of new equity shares is a cash flow from

Which type of business organization has all the respective rights and privileges of a legal person?

In a limited partnership,

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

Agency costs refer to

The primary goal of financial management is to

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 actions by a financial manager least meets the goal of financial management?

A store receives cash when a customer

Which one of the following is a capital budgeting decision?

Capital structure refers to the

Which one of the following is a key requirement of the Sarbanes-Oxley Act?

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters