Exam 1: Goals and Governance of the Corporation

A firm decides to pay for a small investment project through a $1 million increase in short-term bank loans. This is best described as an example of a(n):

A well-designed compensation package can help a firm achieve its goal of maximizing market value.

The best criterion for success in a capital budgeting decision would be to:

Which one of these is a capital budgeting decision?

General partners have limited personal liability for business debts in a limited partnership.

Why is limited liability such an important aspect to investors?

Financial assets have value because they are claims on the firm's real assets and the cash that those assets will produce.

A successful investment is one that increases the value of the firm.

The overall goal of capital budgeting projects should be to:

Which one of the following statements more accurately describes the controller than the treasurer?

Which of the firm's financial managers is most likely to be involved with obtaining financing for the firm?

Fritz and Frieda went to business school together 10 years ago. They have just been hired by a midsized corporation that wants to bring in new financial managers. Fritz studied finance, with an emphasis on financial markets and institutions. Frieda majored in accounting and became a CPA 5 years ago. Who is more suited to be treasurer and who controller? Briefly explain.

Which one of these is not considered to be a security?

Which one of these determines the minimum acceptable rate of return on a capital investment?

When a corporation fails, the maximum that can be lost by an individual shareholder is:

Which of the following appears to be the most appropriate goal for corporate management?

Ethical decision making by management has a payoff for shareholders in terms of:

Which of the following statements best distinguishes the difference between real and financial assets?

A corporate board of directors should provide support for the top management team:

GlaxoSmithKline's spending of $6 billion in 2012 on research and development of new drugs is a capital budgeting decision but not a financing decision.