Question 1

Firms can alter their capital structure by:

Accepted Answer

A)  not accepting any new capital budgeting projects. 
B)  investing in intangible assets. 
C)  issuing stock to repay debt. 
D) becoming a limited liability company. 
A)  not accepting any new capital budgeting projects. 
B)  investing in intangible assets. 
C)  issuing stock to repay debt. 
D) becoming a limited liability company.

Question 2

Making good investment and financing decisions is the chief task of the financial manager.

Accepted Answer

A) True 
 B)False

Question 3

An example of a firm's financing decision would be:

Accepted Answer

A)  acquiring a competitive firm. 
B)  determining how much to pay for a specific asset. 
C)  issuing 10-year versus 20-year bonds. 
D) deciding whether or not to increase the price of its products. 
A)  acquiring a competitive firm. 
B)  determining how much to pay for a specific asset. 
C)  issuing 10-year versus 20-year bonds. 
D) deciding whether or not to increase the price of its products.

Question 4

Agency problems can least be controlled by:

Accepted Answer

A)  establishing good internal controls and procedures. 
B)  designing compensation packages that align manager's goals with those of the shareholders. 
C)  corporate governance. 
D) electing senior managers to the board of directors. 
A)  establishing good internal controls and procedures. 
B)  designing compensation packages that align manager's goals with those of the shareholders. 
C)  corporate governance. 
D) electing senior managers to the board of directors.

Question 5

The separation of ownership and management is one distinctive feature of corporations.

Accepted Answer

A) True 
 B)False

Question 6

Financial managers should only accept investment projects that:

Accepted Answer

A)  increase the current profits of the firm. 
B)  can increase the firm's market share. 
C)  earn a higher rate of return than the firm currently earns on its existing projects. 
D) earn a higher rate of return than shareholders can get by investing on their own. 
A)  increase the current profits of the firm. 
B)  can increase the firm's market share. 
C)  earn a higher rate of return than the firm currently earns on its existing projects. 
D) earn a higher rate of return than shareholders can get by investing on their own.

Question 7

A financial analyst in a corporation may be involved with all of the following EXCEPT:

Accepted Answer

A)  analyzing a new investment project. 
B)  monitoring risk. 
C)  managing investment of the company's cash. 
D) purchasing the firm's plant and equipment. 
A)  analyzing a new investment project. 
B)  monitoring risk. 
C)  managing investment of the company's cash. 
D) purchasing the firm's plant and equipment.

Question 8

An IOU ("I owe you") from your brother-in-law is a financial asset.

Accepted Answer

A) True 
 B)False

Question 9

Investment banks like Morgan Stanley or Goldman Sachs:

Accepted Answer

A)  collect deposits and relend the cash to corporations and individuals. 
B)  help companies sell their securities to investors. 
C)  design and sell insurance policies for businesses. 
D) lend to corporations and investors in commercial real estate. 
A)  collect deposits and relend the cash to corporations and individuals. 
B)  help companies sell their securities to investors. 
C)  design and sell insurance policies for businesses. 
D) lend to corporations and investors in commercial real estate.

Question 10

The legal "life" of a corporation is:

Accepted Answer

A)  coincidental with that of its CEO. 
B)  equal to the life of its board of directors. 
C)  permanent, as long as shareholders don't change. 
D) permanent, regardless of current ownership. 
A)  coincidental with that of its CEO. 
B)  equal to the life of its board of directors. 
C)  permanent, as long as shareholders don't change. 
D) permanent, regardless of current ownership.

Question 11

Which form of organization provides limited liability for the firm but yet allows the professionals working within that firm to be sued personally?

Accepted Answer

A)  Limited liability partnership 
B)  Limited liability company 
C)  Sole proprietorship 
D) Professional corporation 
A)  Limited liability partnership 
B)  Limited liability company 
C)  Sole proprietorship 
D) Professional corporation

Question 12

The separation of ownership and management is one distinctive feature of both corporations and sole proprietors.

Accepted Answer

A) True 
 B)False

Question 13

Provide examples of managerial goals other than the maximization of market value.

Accepted Answer

Managers may attempt to maximize profits

Question 14

Real assets can be intangible assets.

Accepted Answer

A) True 
 B)False

Question 15

Which one of these is a disadvantage of the corporate form of business?

Accepted Answer

A)  Access to capital 
B)  Unlimited personal liability for owners 
C)  Limited firm life 
D) Legal requirements 
A)  Access to capital 
B)  Unlimited personal liability for owners 
C)  Limited firm life 
D) Legal requirements

Question 16

Volkswagen's issuance of a 2.5 billion euro convertible bond is a financing decision.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Which one of the following gives a corporation its permanence?

Accepted Answer

A)  Multiple owners 
B)  Limited liability 
C)  Corporation taxation 
D) Separation of ownership and control 
A)  Multiple owners 
B)  Limited liability 
C)  Corporation taxation 
D) Separation of ownership and control

Question 19

The liability of sole proprietors is limited to the amount of their investment in the company.

Accepted Answer

A) True 
 B)False

Question 20

A firm's reputation:

Accepted Answer

A)  has no value. 
B)  is an important firm asset. 
C)  is irrelevant to shareholders. 
D) can be easily restored once damaged. 
A)  has no value. 
B)  is an important firm asset. 
C)  is irrelevant to shareholders. 
D) can be easily restored once damaged.

Exam 1: Goals and Governance of the Corporation

Firms can alter their capital structure by:

Making good investment and financing decisions is the chief task of the financial manager.

An example of a firm's financing decision would be:

Agency problems can least be controlled by:

The separation of ownership and management is one distinctive feature of corporations.

Financial managers should only accept investment projects that:

A financial analyst in a corporation may be involved with all of the following EXCEPT:

An IOU ("I owe you") from your brother-in-law is a financial asset.

Investment banks like Morgan Stanley or Goldman Sachs:

The legal "life" of a corporation is:

Which form of organization provides limited liability for the firm but yet allows the professionals working within that firm to be sued personally?

The separation of ownership and management is one distinctive feature of both corporations and sole proprietors.

Provide examples of managerial goals other than the maximization of market value.

Real assets can be intangible assets.

Which one of these is a disadvantage of the corporate form of business?

Volkswagen's issuance of a 2.5 billion euro convertible bond is a financing decision.

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

Which one of the following gives a corporation its permanence?

The liability of sole proprietors is limited to the amount of their investment in the company.

A firm's reputation:

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

How Corporations Raise Venture Capital and Issue Securities

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

Filters