Question 1

Sole proprietorships face the same agency problems as those associated with corporations.

Accepted Answer

A) True 
 B)False

Question 2

A common problem for closely held corporations is:

Accepted Answer

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

Question 3

Facebook's decision to spend $700 million to acquire Instagram is an investment decision.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a disadvantage 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 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  Lavish spending on expense accounts 
B)  Plush remodelling of the executive suite 
C)  Excessive avoidance of taxes 
D)  Executive incentive compensation plans 
A)  Lavish spending on expense accounts 
B)  Plush remodelling of the executive suite 
C)  Excessive avoidance of taxes 
D)  Executive incentive compensation plans

Question 7

Financial managers should only accept investment projects that:

Accepted Answer

A)  increase the current profits of the firm. 
B)  can increase the firm's market share. 
C)  earn a higher rate of return than the firm currently earns on its existing projects. 
D)  earn a higher rate of return than shareholders can get by investing on their own. 
A)  increase the current profits of the firm. 
B)  can increase the firm's market share. 
C)  earn a higher rate of return than the firm currently earns on its existing projects. 
D)  earn a higher rate of return than shareholders can get by investing on their own.

Question 8

A firm with spare cash

Accepted Answer

A)  should always reinvest it in new equipment. 
B)  should pay it out to shareholders unless the firm can earn a higher rate of return on the cash than the shareholders can earn by investing in the capital market. 
C)  should invest it in the safest projects available. 
D)  Should always invest it in U.S. equities. 
A)  should always reinvest it in new equipment. 
B)  should pay it out to shareholders unless the firm can earn a higher rate of return on the cash than the shareholders can earn by investing in the capital market. 
C)  should invest it in the safest projects available. 
D)  Should always invest it in U.S. equities.

Question 9

The separation of ownership and management is one distinctive feature of both corporations and sole proprietors.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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

Accepted Answer

A)  The alternative investment opportunities available to investors 
B)  The profit margin of the existing firm 
C)  The rate of return on the firm's outstanding shares 
D)  The rate of return on risk-free debt securities 
A)  The alternative investment opportunities available to investors 
B)  The profit margin of the existing firm 
C)  The rate of return on the firm's outstanding shares 
D)  The rate of return on risk-free debt securities

Question 12

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 13

Firms can alter their capital structure by:

Accepted Answer

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

Question 14

A block holder is commonly defined as an investor who:

Accepted Answer

A)  owns 5 percent or more of a firm's outstanding shares. 
B)  invests in more than one firm within the same industry. 
C)  is another corporation. 
D)  is also one of the firm's managers or directors. 
A)  owns 5 percent or more of a firm's outstanding shares. 
B)  invests in more than one firm within the same industry. 
C)  is another corporation. 
D)  is also one of the firm's managers or directors.

Sole proprietorships face the same agency problems as those associated with corporations.

A common problem for closely held corporations is:

Facebook's decision to spend $700 million to acquire Instagram is an investment decision.

Which of the following is a disadvantage to incorporating a business?

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

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

Financial managers should only accept investment projects that:

A firm with spare cash

The separation of ownership and management is one distinctive feature of both corporations and sole proprietors.

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

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

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

Firms can alter their capital structure by:

A block holder is commonly defined as an investor who:

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

Exam 1: Goals and Governance of the Firm

Sole proprietorships face the same agency problems as those associated with corporations.

A common problem for closely held corporations is:

Facebook's decision to spend $700 million to acquire Instagram is an investment decision.

Which of the following is a disadvantage to incorporating a business?

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

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

Financial managers should only accept investment projects that:

A firm with spare cash

The separation of ownership and management is one distinctive feature of both corporations and sole proprietors.

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

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

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

Firms can alter their capital structure by:

A block holder is commonly defined as an investor who:

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