Question 1

Real assets can be intangible assets.

Accepted Answer

A) True 
 B)False

Question 2

Firms can alter their capital structure by:

Accepted Answer

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

Question 3

Maximizing profits is the same as maximizing the value of the firm.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)  Real assets have less value than financial assets. 
B)  Real assets are tangible; financial assets are not. 
C)  Financial assets represent claims to income that is generated by real assets. 
D)  Financial assets appreciate in value; real assets depreciate in value. 
A)  Real assets have less value than financial assets. 
B)  Real assets are tangible; financial assets are not. 
C)  Financial assets represent claims to income that is generated by real assets. 
D)  Financial assets appreciate in value; real assets depreciate in value.

Question 5

The stockholders in a sole proprietorship are represented by:

Accepted Answer

A)  the owner of the firm. 
B)  the general partner of the firm. 
C)  the board of directors of the firm. 
D)  no one; sole proprietorships have no stockholders. 
A)  the owner of the firm. 
B)  the general partner of the firm. 
C)  the board of directors of the firm. 
D)  no one; sole proprietorships have no stockholders.

Question 6

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

Accepted Answer

A)  minimize the cost of the investment. 
B)  maximize the number of capital budgeting projects. 
C)  maximize the difference between cash inflows and cost. 
D)  finance all capital budgeting projects with debt. 
A)  minimize the cost of the investment. 
B)  maximize the number of capital budgeting projects. 
C)  maximize the difference between cash inflows and cost. 
D)  finance all capital budgeting projects with debt.

Question 7

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

Accepted Answer

A)  under all circumstances. 
B)  in all decisions related to cash dividends. 
C)  only when the board has confidence in management's actions. 
D)  if shareholders are pleased with the firm's performance. 
A)  under all circumstances. 
B)  in all decisions related to cash dividends. 
C)  only when the board has confidence in management's actions. 
D)  if shareholders are pleased with the firm's performance.

Question 8

A common problem for closely held corporations is:

Accepted Answer

A)  lack of access to substantial amounts of capital. 
B)  that shareholders receive only one vote each. 
C)  the separation of ownership and management. 
D)  an abundance of agency problems. 
A)  lack of access to substantial amounts of capital. 
B)  that shareholders receive only one vote each. 
C)  the separation of ownership and management. 
D)  an abundance of agency problems.

Question 9

What two major decisions are made by financial managers?

Accepted Answer

Financial management can be broken down

Question 10

Boards of directors are often portrayed as active supporters of top management.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would not be considered a financial asset?

Accepted Answer

A)  A patent 
B)  A personal IOU 
C)  A checking account balance 
D)  A share of stock 
A)  A patent 
B)  A personal IOU 
C)  A checking account balance 
D)  A share of stock

Question 12

In a partnership form of organization,income tax liability,if any,is incurred by:

Accepted Answer

A)  the partnership itself. 
B)  the partners individually. 
C)  both the partnership and the partners. 
D)  neither the partnership nor the partners. 
A)  the partnership itself. 
B)  the partners individually. 
C)  both the partnership and the partners. 
D)  neither the partnership nor the partners.

Question 13

Is there a conflict between "doing well" and "doing good"? When there are conflicts,how may government regulations or laws tilt the firm toward doing good?

Accepted Answer

As the text notes,the first step in doin

Question 14

WorldCom's failure to report $3.8 billion of operating expenses is an example of:

Accepted Answer

A)  an effort to conform to changed accounting rules. 
B)  an attempt to maximize the value of the shareholders' investment in the firm. 
C)  an effort to serve the needs of the customer. 
D)  an attempt to increase the company's market value in an unethical way. 
A)  an effort to conform to changed accounting rules. 
B)  an attempt to maximize the value of the shareholders' investment in the firm. 
C)  an effort to serve the needs of the customer. 
D)  an attempt to increase the company's market value in an unethical way.

Question 15

Investment banks like Merrill Lynch 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 16

When a corporation decides to issue long-term debt in order to pay for the acquisition of real assets,it has made a:

Accepted Answer

A)  capital budgeting decision. 
B)  financing decision. 
C)  money market decision. 
D)  secondary market decision. 
A)  capital budgeting decision. 
B)  financing decision. 
C)  money market decision. 
D)  secondary market decision.

Question 17

A manager's compensation plan that offers financial incentives for increases in quarterly profitability may create agency problems in that:

Accepted Answer

A)  the managers are not motivated by personal gain. 
B)  the board of directors may claim the credit. 
C)  short-term, not long-term profits become the focus. 
D)  investors desire stable profits. 
A)  the managers are not motivated by personal gain. 
B)  the board of directors may claim the credit. 
C)  short-term, not long-term profits become the focus. 
D)  investors desire stable profits.

Question 18

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 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

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

Accepted Answer

A)  Maximizing market value of the company's shares 
B)  Maximizing the company's market share 
C)  Maximizing the current profits of the company 
D)  Minimizing the company's liabilities 
A)  Maximizing market value of the company's shares 
B)  Maximizing the company's market share 
C)  Maximizing the current profits of the company 
D)  Minimizing the company's liabilities

Exam 1: Goals and Governance of the Corporation

Real assets can be intangible assets.

Firms can alter their capital structure by:

Maximizing profits is the same as maximizing the value of the firm.

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

The stockholders in a sole proprietorship are represented by:

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

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

A common problem for closely held corporations is:

What two major decisions are made by financial managers?

Boards of directors are often portrayed as active supporters of top management.

Which of the following would not be considered a financial asset?

In a partnership form of organization,income tax liability,if any,is incurred by:

Is there a conflict between "doing well" and "doing good"? When there are conflicts,how may government regulations or laws tilt the firm toward doing good?

WorldCom's failure to report $3.8 billion of operating expenses is an example of:

Investment banks like Merrill Lynch or Goldman Sachs:

When a corporation decides to issue long-term debt in order to pay for the acquisition of real assets,it has made a:

A manager's compensation plan that offers financial incentives for increases in quarterly profitability may create agency problems in that:

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

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

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

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