Question 1

A corporation is considered to be closely held when:

Accepted Answer

A)  only a few shareholders exist. 
B)  the market value of the shares is stable. 
C)  it operates in a small geographic area. 
D)  management also serves as the board of directors. 
A)  only a few shareholders exist. 
B)  the market value of the shares is stable. 
C)  it operates in a small geographic area. 
D)  management also serves as the board of directors.

Question 2

In a firm having both a treasurer and a controller,which of the following would most likely be handled by the controller?

Accepted Answer

A)  Internal auditing 
B)  Credit management 
C)  Banking relationships 
D)  Insurance 
A)  Internal auditing 
B)  Credit management 
C)  Banking relationships 
D)  Insurance

Question 3

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):

Accepted Answer

A)  financing decision. 
B)  investment decision. 
C)  capital budgeting decision. 
D)  capital market decision. 
A)  financing decision. 
B)  investment decision. 
C)  capital budgeting decision. 
D)  capital market decision.

Question 4

Long-term financing arrangements occur in the:

Accepted Answer

A)  money markets. 
B)  capital markets. 
C)  secondary markets. 
D)  tertiary markets. 
A)  money markets. 
B)  capital markets. 
C)  secondary markets. 
D)  tertiary markets.

Question 5

One corporate activity that is specifically reserved for the board of directors is the:

Accepted Answer

A)  declaration of dividends. 
B)  custody of records. 
C)  preparation of budgets. 
D)  day-to-day operation of the firm. 
A)  declaration of dividends. 
B)  custody of records. 
C)  preparation of budgets. 
D)  day-to-day operation of the firm.

Question 6

The first step in determining managerial objectives is to:

Accepted Answer

A)  develop appropriate compensation policies. 
B)  eliminate agency problems. 
C)  serve the needs of the customer. 
D)  select an appropriate capital structure. 
A)  develop appropriate compensation policies. 
B)  eliminate agency problems. 
C)  serve the needs of the customer. 
D)  select an appropriate capital structure.

Question 7

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 8

Capital budgeting decisions are used to determine how to raise the cash necessary for investments.

Accepted Answer

A) True 
 B)False

Question 9

Why is limited liability such an important aspect to investors?

Accepted Answer

Many investors would not be willing to c

Question 10

A board of directors is elected as a representative of the corporation's:

Accepted Answer

A)  top management. 
B)  stakeholders. 
C)  shareholders. 
D)  customers. 
A)  top management. 
B)  stakeholders. 
C)  shareholders. 
D)  customers.

Question 11

The primary goal of corporate management should be to:

Accepted Answer

A)  maximize the number of shareholders. 
B)  maximize the firm's profits. 
C)  minimize the firm's costs. 
D)  maximize the shareholders' wealth. 
A)  maximize the number of shareholders. 
B)  maximize the firm's profits. 
C)  minimize the firm's costs. 
D)  maximize the shareholders' wealth.

Question 12

Who is the financial manager?

Accepted Answer

Almost all managers are involv

Question 13

LVMH's issuance ofa 7-year bond in 2005,raising 600 million euros,is a financing decision.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not an advantage to incorporating a business?

Accepted Answer

A)  Easier access to financial markets 
B)  Limited liability 
C)  Becoming a permanent legal entity 
D)  Profits taxed at the corporate level and the shareholder level 
A)  Easier access to financial markets 
B)  Limited liability 
C)  Becoming a permanent legal entity 
D)  Profits taxed at the corporate level and the shareholder level

Question 15

In which of the following organizations would agency problems be least likely to occur?

Accepted Answer

A)  A sole proprietorship 
B)  A partnership 
C)  A corporation 
D)  A closely held corporation 
A)  A sole proprietorship 
B)  A partnership 
C)  A corporation 
D)  A closely held corporation

Question 16

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 17

Which of the following is least likely to represent an agency problem?

Accepted Answer

A)  Lavish spending on expense accounts 
B)  Plush remodeling of the executive suite 
C)  Excessive investment in "safe" projects 
D)  Executive incentive compensation plans 
A)  Lavish spending on expense accounts 
B)  Plush remodeling of the executive suite 
C)  Excessive investment in "safe" projects 
D)  Executive incentive compensation plans

Question 18

Tabulate and compare the differences among corporations,sole proprietorships,and partnerships.

Accepted Answer

The answer of Tabulate and compare the differences among corporations,sole...

Question 19

"Double taxation" refers to:

Accepted Answer

A)  all partners paying equal taxes on profits. 
B)  corporations paying taxes on both dividends and retained earnings. 
C)  paying taxes on profits at the corporate level and dividends at the personal level. 
D)  the fact that marginal tax rates are doubled for corporations. 
A)  all partners paying equal taxes on profits. 
B)  corporations paying taxes on both dividends and retained earnings. 
C)  paying taxes on profits at the corporate level and dividends at the personal level. 
D)  the fact that marginal tax rates are doubled for corporations.

Question 20

Unlimited liability is faced by the owners of:

Accepted Answer

A)  corporations. 
B)  partnerships and corporations. 
C)  sole proprietorships and partnerships. 
D)  all forms of business organization. 
A)  corporations. 
B)  partnerships and corporations. 
C)  sole proprietorships and partnerships. 
D)  all forms of business organization.

Exam 1: Goals and Governance of the Corporation

A corporation is considered to be closely held when:

In a firm having both a treasurer and a controller,which of the following would most likely be handled by the controller?

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):

Long-term financing arrangements occur in the:

One corporate activity that is specifically reserved for the board of directors is the:

The first step in determining managerial objectives is to:

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

Capital budgeting decisions are used to determine how to raise the cash necessary for investments.

Why is limited liability such an important aspect to investors?

A board of directors is elected as a representative of the corporation's:

The primary goal of corporate management should be to:

Who is the financial manager?

LVMH's issuance ofa 7-year bond in 2005,raising 600 million euros,is a financing decision.

Which of the following is not an advantage to incorporating a business?

In which of the following organizations would agency problems be least likely to occur?

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

Which of the following is least likely to represent an agency problem?

Tabulate and compare the differences among corporations,sole proprietorships,and partnerships.

"Double taxation" refers to:

Unlimited liability is faced by the owners of:

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

Risk, Return, and Capital Budgeting

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters