Question 1

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 approves of 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 approves of management's actions. 
D)  if shareholders are pleased with the firm's performance. C

Question 2

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. B

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

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

Question 5

Ethical decision making in business:

Accepted Answer

A)  reduces the firm's profits. 
B)  requires adherence to implied rules as well as written rules. 
C)  is not in the best interests of shareholders. 
D)  is less important than good capital budgeting decisions. 
A)  reduces the firm's profits. 
B)  requires adherence to implied rules as well as written rules. 
C)  is not in the best interests of shareholders. 
D)  is less important than good capital budgeting decisions.

Question 6

A corporate director:

Accepted Answer

A)  is selected by and can be removed by management. 
B)  can be voted out of power by the shareholders. 
C)  has a lifetime appointment to the board. 
D)  is selected by a vote of all corporate stakeholders. 
A)  is selected by and can be removed by management. 
B)  can be voted out of power by the shareholders. 
C)  has a lifetime appointment to the board. 
D)  is selected by a vote of all corporate stakeholders.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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 9

The short-term decisions of financial managers are comprised of:

Accepted Answer

A)  capital structure decisions only. 
B)  investment decisions only. 
C)  financing decisions only. 
D)  both investment and financing decisions. 
A)  capital structure decisions only. 
B)  investment decisions only. 
C)  financing decisions only. 
D)  both investment and financing decisions.

Question 10

Which one of the following can best be characterized as an agency problem?

Accepted Answer

A)  differing opinions among directors as to the merits of paying a higher dividend. . 
B)  differing incentives between managers and owners. 
C)  persistently late delivery times by a major supplier. 
D)  Geological problems in the company's new gold mine. 
A)  differing opinions among directors as to the merits of paying a higher dividend. . 
B)  differing incentives between managers and owners. 
C)  persistently late delivery times by a major supplier. 
D)  Geological problems in the company's new gold mine.

Question 11

Which of the following is least likely to be discussed in the articles of incorporation?

Accepted Answer

A)  How the firm is to be financed 
B)  The purpose of the business 
C)  The price range of the shares of stock 
D)  How the board of directors is to be structured 
A)  How the firm is to be financed 
B)  The purpose of the business 
C)  The price range of the shares of stock 
D)  How the board of directors is to be structured

Question 12

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

Accepted Answer

A)  Shares of GE stock 
B)  A bond traded in the financial market 
C)  A mortgage loan issued and held by a bank 
D)  A convertible bond issued to the public 
A)  Shares of GE stock 
B)  A bond traded in the financial market 
C)  A mortgage loan issued and held by a bank 
D)  A convertible bond issued to the public

Question 13

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)  good systems of 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)  good systems of corporate governance. 
D)  electing senior managers to the board of directors.

Question 14

In the case of a limited liability partnership,________ has/have limited liability.

Accepted Answer

A)  only some of partners 
B)  only the managing partner 
C)  all of the partners 
D)  none of the partners 
A)  only some of partners 
B)  only the managing partner 
C)  all of the partners 
D)  none of the partners

Question 15

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

Accepted Answer

A)  improved capital structure. 
B)  enhanced firm reputation value. 
C)  increased managerial benefits. 
D)  higher current dividend payments. 
A)  improved capital structure. 
B)  enhanced firm reputation value. 
C)  increased managerial benefits. 
D)  higher current dividend payments.

Question 16

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 17

The overall goal of capital budgeting projects should be to:

Accepted Answer

A)  decrease the firm's reliance on debt. 
B)  increase the firm's sales. 
C)  increase the firm's outstanding shares of stock. 
D)  increase the wealth of the firm's shareholders. 
A)  decrease the firm's reliance on debt. 
B)  increase the firm's sales. 
C)  increase the firm's outstanding shares of stock. 
D)  increase the wealth of the firm's shareholders.

Question 18

A major disadvantage of partnerships is that they have double taxation of profits.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is a real asset?

Accepted Answer

A)  A patent 
B)  A share of stock issued by Bank of New York 
C)  An IOU ("I owe you") from your brother-in-law 
D)  A mortgage loan taken out to help pay for a new home 
A)  A patent 
B)  A share of stock issued by Bank of New York 
C)  An IOU ("I owe you") from your brother-in-law 
D)  A mortgage loan taken out to help pay for a new home

Exam 1: Goals and Governance of the Firm

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

A firm's reputation:

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

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

Ethical decision making in business:

A corporate director:

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

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

The short-term decisions of financial managers are comprised of:

Which one of the following can best be characterized as an agency problem?

Which of the following is least likely to be discussed in the articles of incorporation?

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

Agency problems can least be controlled by:

In the case of a limited liability partnership,________ has/have limited liability.

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

Which one of the following gives a corporation its permanence?

The overall goal of capital budgeting projects should be to:

A major disadvantage of partnerships is that they have double taxation of profits.

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

Which of the following is a real asset?

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 and Governance

Venture Capital, IPOs, and Seasoned Offerings

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