Question 1

In a corporation,the ultimate decisions regarding business matters are made by:

Accepted Answer

A) the Board of Directors. 
B) debt holders. 
C) shareholders. 
D) investors. 
A) the Board of Directors. 
B) debt holders. 
C) shareholders. 
D) investors. A

Question 2

Which of the following organization forms accounts for the most revenue?

Accepted Answer

A) "S" corporation 
B) Limited partnership 
C) "C" corporation 
D) Limited liability company 
A) "S" corporation 
B) Limited partnership 
C) "C" corporation 
D) Limited liability company C

Question 3

Which of the following are subject to double taxation?

Accepted Answer

A) Corporation 
B) Partnership 
C) Sole proprietorship 
D) A and B 
A) Corporation 
B) Partnership 
C) Sole proprietorship 
D) A and B A

Question 4

Which of the following statements regarding limited partnerships is TRUE?

Accepted Answer

A) There is no limit on a limited partner's liability. 
B) A limited partner's liability is limited by the amount of their investment. 
C) A limited partner is not liable until all the assets of the general partners have been exhausted. 
D) A general partner's liability is limited by the amount of their investment. 
A) There is no limit on a limited partner's liability. 
B) A limited partner's liability is limited by the amount of their investment. 
C) A limited partner is not liable until all the assets of the general partners have been exhausted. 
D) A general partner's liability is limited by the amount of their investment.

Question 5

A ________ is when a rich individual or organization purchases a large fraction of the stock of a poorly performing firm and in doing so gets enough votes to replace the board of directors and the CEO.

Accepted Answer

A) shareholder proposal 
B) leveraged buyout 
C) shareholder action 
D) hostile takeover 
A) shareholder proposal 
B) leveraged buyout 
C) shareholder action 
D) hostile takeover

Question 6

The most senior financial manager in a corporation is usually called:

Accepted Answer

A) the chief executive officer. 
B) the chief financial officer. 
C) the chief operating officer. 
D) the chairman of the board. 
A) the chief executive officer. 
B) the chief financial officer. 
C) the chief operating officer. 
D) the chairman of the board.

Question 7

Which of the following is/are an advantage of incorporation?

Accepted Answer

A) Access to capital markets 
B) Limited liability 
C) Unlimited life 
D) All of the above 
A) Access to capital markets 
B) Limited liability 
C) Unlimited life 
D) All of the above

Question 8

The Principal-Agent Problem arises:

Accepted Answer

A) because managers have little incentive to work in the interest of shareholders when this means working against their own self-interest. 
B) because of the separation of ownership and control in a corporation. 
C) Both A and B 
D) None of the above 
A) because managers have little incentive to work in the interest of shareholders when this means working against their own self-interest. 
B) because of the separation of ownership and control in a corporation. 
C) Both A and B 
D) None of the above

Question 9

The person charged with running the corporation by instituting the rules and policies set by the board of directors is called:

Accepted Answer

A) the chief operating officer. 
B) the company president. 
C) the chief executive officer. 
D) the chief financial officer. 
A) the chief operating officer. 
B) the company president. 
C) the chief executive officer. 
D) the chief financial officer.

Question 10

Which of the following statements is FALSE?

Accepted Answer

A) On Nasdaq,stocks can and do have multiple market makers who compete with each other.Each market maker must post bid and ask prices in the Nasdaq network where they can be viewed by all participants. 
B) Bid prices exceed ask prices. 
C) Because customers always buy at the ask and sell at the bid,the bid-ask spread is a transaction cost investors have to pay in order to trade. 
D) On the floor of the NYSE,prior to 2005 market makers (known on the NYSE as specialists)matched buyers and sellers. 
A) On Nasdaq,stocks can and do have multiple market makers who compete with each other.Each market maker must post bid and ask prices in the Nasdaq network where they can be viewed by all participants. 
B) Bid prices exceed ask prices. 
C) Because customers always buy at the ask and sell at the bid,the bid-ask spread is a transaction cost investors have to pay in order to trade. 
D) On the floor of the NYSE,prior to 2005 market makers (known on the NYSE as specialists)matched buyers and sellers.

Question 11

An investment is said to be liquid if the investment:

Accepted Answer

A) has large day to day fluctuations in price. 
B) has a large bid-ask spread. 
C) can easily be converted into cash. 
D) is traded on a stock exchange. 
A) has large day to day fluctuations in price. 
B) has a large bid-ask spread. 
C) can easily be converted into cash. 
D) is traded on a stock exchange.

Question 12

The distinguishing feature of a corporation is that:

Accepted Answer

A) their is no legal difference between the corporation and its owners. 
B) it is a legally defined,artificial being,separate from its owners. 
C) it spreads liability for its corporate obligations to all shareholders. 
D) provides limited liability only to small shareholders. 
A) their is no legal difference between the corporation and its owners. 
B) it is a legally defined,artificial being,separate from its owners. 
C) it spreads liability for its corporate obligations to all shareholders. 
D) provides limited liability only to small shareholders.

Question 13

Use the table for the question(s)below.
Consider the following two quotes for XYZ stock:  
-What are your net proceeds if you purchased 2500 shares of XYZ stock on November 11th and then sold them a week later on November 18th?

Accepted Answer

buy at ask price 11/11 = 2500

Question 14

Which of the following organization forms accounts for the greatest number of firms?

Accepted Answer

A) "S" corporation 
B) Limited partnership 
C) Sole proprietorship 
D) "C" corporation 
A) "S" corporation 
B) Limited partnership 
C) Sole proprietorship 
D) "C" corporation

Question 15

You are a shareholder in a "C" corporation.This corporation earns $4 per share before taxes.After it has paid taxes,it will distribute the remainder of its earnings to you as a dividend.The dividend is income to you,so you will then pay taxes on these earnings.The corporate tax rate is 35% and your tax rate on dividend income is 15%.The effective tax rate on your share of the corporations earnings is closest to:

Accepted Answer

A) 15% 
B) 35% 
C) 45% 
D) 50% 
A) 15% 
B) 35% 
C) 45% 
D) 50%

Question 16

Explain the difference between a sub-chapter "S" corporation and a sub-chapter "C" corporation.

Accepted Answer

The answer of Explain the difference between a sub-chapter "S"...

Question 17

What type of company trades on an organized stock exchange?

Accepted Answer

A) A limited liability company 
B) A private company 
C) An "S" corporation 
D) A public company 
A) A limited liability company 
B) A private company 
C) An "S" corporation 
D) A public company

Question 18

Which of the following is NOT an advantage of a sole proprietorship?

Accepted Answer

A) Single taxation 
B) Ease of setup 
C) Limited liability 
D) No separation of ownership and control 
A) Single taxation 
B) Ease of setup 
C) Limited liability 
D) No separation of ownership and control

Question 19

You own 100 shares of a "C" corporation.The corporation earns $5.00 per share before taxes.Once the corporation has paid any corporate taxes that are due,it will distribute the rest of its earnings to its shareholders in the form of a dividend.If the corporate tax rate is 40% and your personal tax rate on (both dividend and non-dividend)income is 30%,then how much money is left for you after all taxes have been paid?

Accepted Answer

A) $210 
B) $300 
C) $350 
D) $500 
A) $210 
B) $300 
C) $350 
D) $500

Question 20

An agency problem can be alleviated by:

Accepted Answer

A) requiring all firms to be sole proprietorships. 
B) compensating managers in such a way that acting in the best interest of shareholders is also in the best interest of managers. 
C) asking managers to take on more risk than they are comfortable taking. 
D) A and B. 
A) requiring all firms to be sole proprietorships. 
B) compensating managers in such a way that acting in the best interest of shareholders is also in the best interest of managers. 
C) asking managers to take on more risk than they are comfortable taking. 
D) A and B.

Exam 1: The Corporation

In a corporation,the ultimate decisions regarding business matters are made by:

Which of the following organization forms accounts for the most revenue?

Which of the following are subject to double taxation?

Which of the following statements regarding limited partnerships is TRUE?

A ________ is when a rich individual or organization purchases a large fraction of the stock of a poorly performing firm and in doing so gets enough votes to replace the board of directors and the CEO.

The most senior financial manager in a corporation is usually called:

Which of the following is/are an advantage of incorporation?

The Principal-Agent Problem arises:

The person charged with running the corporation by instituting the rules and policies set by the board of directors is called:

Which of the following statements is FALSE?

An investment is said to be liquid if the investment:

The distinguishing feature of a corporation is that:

Use the table for the question(s)below. Consider the following two quotes for XYZ stock: -What are your net proceeds if you purchased 2500 shares of XYZ stock on November 11th and then sold them a week later on November 18th?

Which of the following organization forms accounts for the greatest number of firms?

Explain the difference between a sub-chapter "S" corporation and a sub-chapter "C" corporation.

What type of company trades on an organized stock exchange?

Which of the following is NOT an advantage of a sole proprietorship?

An agency problem can be alleviated by:

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Financial Options

Option Valuation

Real Options

Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

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