Question 1

Sole proprietorships resolve the issue of agency problems primarily 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 2

Develop a case for the interrelationship of ethical decision making by corporate management and profitability of the firm.

Accepted Answer

Ethical decision making can have an impo

Question 3

Why does it make sense for corporations to maximize their market value?

Accepted Answer

Value maximization is the natural financ

Question 4

Shareholders welcome higher short-term profits even when they damage long-term profits.

Accepted Answer

A) True 
 B)False

Question 5

When managers' compensation plans are tied in a meaningful manner to the profits of the firm, agency problems:

Accepted Answer

A)  can be reduced. 
B)  will be created. 
C)  are shifted to other stakeholders. 
D) are eliminated entirely from the firm. 
A)  can be reduced. 
B)  will be created. 
C)  are shifted to other stakeholders. 
D) are eliminated entirely from the firm.

Question 6

Which one of these statements is correct?

Accepted Answer

A)  A dollar received next year has the same value as a dollar received today. 
B)  Risky cash flows are more valuable than certain cash flows. 
C)  Smart investment decisions create more value than smart financing decisions. 
D) Corporate governance is irrelevant. 
A)  A dollar received next year has the same value as a dollar received today. 
B)  Risky cash flows are more valuable than certain cash flows. 
C)  Smart investment decisions create more value than smart financing decisions. 
D) Corporate governance is irrelevant.

Question 7

If a project's value is less than its required investment, then the project is financially attractive.

Accepted Answer

A) True 
 B)False

Question 8

Who is a financial manager?

Accepted Answer

Almost all managers are involv

Question 9

Which one of these statements is correct?

Accepted Answer

A)  Financial managers have a fiduciary duty to stockholders. 
B)  Financial managers are concerned only with funds that flow to investors. 
C)  The chief financial officer generally reports directly to the corporate treasurer. 
D) The corporate controller is primarily responsible for overseeing a firm's cash functions. 
A)  Financial managers have a fiduciary duty to stockholders. 
B)  Financial managers are concerned only with funds that flow to investors. 
C)  The chief financial officer generally reports directly to the corporate treasurer. 
D) The corporate controller is primarily responsible for overseeing a firm's cash functions.

Question 10

Provide at least three examples each of real and financial assets that might appear on the balance sheet of General Motors.

Accepted Answer

Examples of real assets for General Moto

Question 11

Which one 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

Short selling involves selling a security:

Accepted Answer

A)  you do not own. 
B)  that you have owned for less than one year. 
C)  at a price below current market value. 
D) for less than you originally paid to purchase it. 
A)  you do not own. 
B)  that you have owned for less than one year. 
C)  at a price below current market value. 
D) for less than you originally paid to purchase it.

Question 13

Describe agency problems in general, and offer at least three examples from corporations.

Accepted Answer

Whenever the firm's managers are differe

Question 14

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)  stock is publicly 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)  stock is publicly traded. 
D) products or services are available to the public.

Question 15

The primary goal of any company should be to maximize current period profits.

Accepted Answer

A) True 
 B)False

Question 16

The term "capital structure" refers to:

Accepted Answer

A)  the manner in which a firm obtains its long-term sources of funding. 
B)  the length of time needed to repay debt. 
C)  whether or not the firm invests in capital budgeting projects. 
D) the types of assets a firm acquires. 
A)  the manner in which a firm obtains its long-term sources of funding. 
B)  the length of time needed to repay debt. 
C)  whether or not the firm invests in capital budgeting projects. 
D) the types of assets a firm acquires.

Question 17

In a large corporation, budget preparation would most likely be conducted by the:

Accepted Answer

A)  treasurer. 
B)  controller. 
C)  chief financial officer. 
D) financial manager. 
A)  treasurer. 
B)  controller. 
C)  chief financial officer. 
D) financial manager.

Question 18

Which one of the following is a financial asset?

Accepted Answer

A)  A corporate bond 
B)  A machine 
C)  A patent 
D) A factory 
A)  A corporate bond 
B)  A machine 
C)  A patent 
D) A factory

Question 19

Financial analysts are involved in monitoring and controlling the risk associated with investment projects and financing decisions.

Accepted Answer

A) True 
 B)False

Question 20

Which of these duties are responsibilities of the corporate treasurer?

Accepted Answer

A)  Financial statements and taxes 
B)  Cash management and tax reporting 
C)  Cash management and banking relationships 
D) Raising capital and financial statements 
A)  Financial statements and taxes 
B)  Cash management and tax reporting 
C)  Cash management and banking relationships 
D) Raising capital and financial statements

Exam 1: Goals and Governance of the Corporation

Sole proprietorships resolve the issue of agency problems primarily by:

Develop a case for the interrelationship of ethical decision making by corporate management and profitability of the firm.

Why does it make sense for corporations to maximize their market value?

Shareholders welcome higher short-term profits even when they damage long-term profits.

When managers' compensation plans are tied in a meaningful manner to the profits of the firm, agency problems:

Which one of these statements is correct?

If a project's value is less than its required investment, then the project is financially attractive.

Who is a financial manager?

Which one of these statements is correct?

Provide at least three examples each of real and financial assets that might appear on the balance sheet of General Motors.

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

Short selling involves selling a security:

Describe agency problems in general, and offer at least three examples from corporations.

Corporations are referred to as public companies when their:

The primary goal of any company should be to maximize current period profits.

The term "capital structure" refers to:

In a large corporation, budget preparation would most likely be conducted by the:

Which one of the following is a financial asset?

Financial analysts are involved in monitoring and controlling the risk associated with investment projects and financing decisions.

Which of these duties are responsibilities of the corporate treasurer?

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