Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which one of these statements correctly applies to a limited partnership?

Accepted Answer

A)  All partners share the daily management duties. 
B)  All partners enjoy limited personal liability. 
C)  General partners have unlimited personal liability. 
D)  Taxes are imposed at both the firm and the personal level on profits earned. 
A)  All partners share the daily management duties. 
B)  All partners enjoy limited personal liability. 
C)  General partners have unlimited personal liability. 
D)  Taxes are imposed at both the firm and the personal level on profits earned.

Question 3

Investment banks like Morgan Stanley 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 4

A financial analyst in a corporation may be involved with all of the following EXCEPT:

Accepted Answer

A)  analyzing a new investment project. 
B)  monitoring risk. 
C)  managing investment of the company's cash. 
D)  purchasing the firm's plant and equipment. 
A)  analyzing a new investment project. 
B)  monitoring risk. 
C)  managing investment of the company's cash. 
D)  purchasing the firm's plant and equipment.

Question 5

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 6

Established firms can create value by developing long-term relationships and maintaining a good reputation.

Accepted Answer

A) True 
 B)False

Question 7

Corporate raiders will be looked upon most favorably if they:

Accepted Answer

A)  divide up large profitable entities. 
B)  take actions that increase current shareholder wealth. 
C)  create value for themselves through their actions. 
D)  change the capital structure of a firm by increasing its debt. 
A)  divide up large profitable entities. 
B)  take actions that increase current shareholder wealth. 
C)  create value for themselves through their actions. 
D)  change the capital structure of a firm by increasing its debt.

Question 8

Which of the following is a capital budgeting decision?

Accepted Answer

A)  Should the firm borrow money from a bank or sell bonds? 
B)  Should the firm shut down an unprofitable factory? 
C)  Should the firm buy or lease a new machine that it is committed to acquiring? 
D)  Should the firm issue preferred stock or common stock? 
A)  Should the firm borrow money from a bank or sell bonds? 
B)  Should the firm shut down an unprofitable factory? 
C)  Should the firm buy or lease a new machine that it is committed to acquiring? 
D)  Should the firm issue preferred stock or common stock?

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which of the following groups is least likely to be considered a stakeholder of the firm?

Accepted Answer

A)  Government 
B)  Customers 
C)  Competitors 
D)  Employees 
A)  Government 
B)  Customers 
C)  Competitors 
D)  Employees

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Which one of the following forms of compensation is most apt to align the interests of managers and shareholders?

Accepted Answer

A)  A fixed salary 
B)  A salary that is linked to current company profits 
C)  A salary that is paid partly in the form of the company's shares 
D)  A salary that is linked to the company's market share 
A)  A fixed salary 
B)  A salary that is linked to current company profits 
C)  A salary that is paid partly in the form of the company's shares 
D)  A salary that is linked to the company's market share

Question 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

Corporations that issue financial securities such as stock or debt obligations to the public do so primarily to:

Accepted Answer

A)  increase sales. 
B)  become profitable. 
C)  increase their access to funds. 
D)  avoid double taxation of their profits. 
A)  increase sales. 
B)  become profitable. 
C)  increase their access to funds. 
D)  avoid double taxation of their profits.

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 one of these is a capital budgeting decision?

Accepted Answer

A)  Deciding between issuing stock or debt securities 
B)  Deciding whether or not the firm should go public 
C)  Deciding if the firm should repurchase some of its outstanding shares 
D)  Deciding whether to buy a new machine or repair the old machine 
A)  Deciding between issuing stock or debt securities 
B)  Deciding whether or not the firm should go public 
C)  Deciding if the firm should repurchase some of its outstanding shares 
D)  Deciding whether to buy a new machine or repair the old machine

Question 18

Which one of these best defines the objective of a well-functioning financial market?

Accepted Answer

A)  Establishing accurate security prices 
B)  Creating higher security prices 
C)  Eliminating short-selling profits 
D)  Increasing shareholder value by any means possible 
A)  Establishing accurate security prices 
B)  Creating higher security prices 
C)  Eliminating short-selling profits 
D)  Increasing shareholder value by any means possible

Question 19

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 20

Which one of these is a disadvantage of the corporate form of business?

Accepted Answer

A)  Access to capital 
B)  Unlimited personal liability for owners 
C)  Limited firm life 
D)  Legal requirements 
A)  Access to capital 
B)  Unlimited personal liability for owners 
C)  Limited firm life 
D)  Legal requirements

Exam 1: Goals and Governance of the Firm

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

Which one of these statements correctly applies to a limited partnership?

Investment banks like Morgan Stanley or Goldman Sachs:

A financial analyst in a corporation may be involved with all of the following EXCEPT:

Short selling involves selling a security:

Established firms can create value by developing long-term relationships and maintaining a good reputation.

Corporate raiders will be looked upon most favorably if they:

Which of the following is a capital budgeting decision?

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

Which of the following groups is least likely to be considered a stakeholder of the firm?

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

Which one of the following forms of compensation is most apt to align the interests of managers and shareholders?

Which one of these statements is correct?

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

Corporations that issue financial securities such as stock or debt obligations to the public do so primarily to:

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

Which one of these is a capital budgeting decision?

Which one of these best defines the objective of a well-functioning financial market?

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

Which one of these is a disadvantage of the corporate form of business?

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