Question 1

The corporate controller is generally responsible for which one of these functions?

Accepted Answer

A) Capital expenditures 
B) Cash management 
C) Tax reporting 
D) Financial planning 
E) Credit management 
A) Capital expenditures 
B) Cash management 
C) Tax reporting 
D) Financial planning 
E) Credit management

Question 2

If a firm is currently profitable,then:

Accepted Answer

A) its current cash inflows must exceed its current cash outflows. 
B) its reported sales exceed its costs. 
C) its cash flows are known with certainty. 
D) it will always have sufficient cash to pay its bills in a timely manner. 
E) the timing of the related cash flows is irrelevant. 
A) its current cash inflows must exceed its current cash outflows. 
B) its reported sales exceed its costs. 
C) its cash flows are known with certainty. 
D) it will always have sufficient cash to pay its bills in a timely manner. 
E) the timing of the related cash flows is irrelevant.

Question 3

Which statement concerning corporations is correct?

Accepted Answer

A) There are time limits placed on the transfer of ownership. 
B) The ability to raise capital is limited to that of a general partnership. 
C) Primary shareholders have unlimited liability for corporate debts. 
D) The entity can outlive all of its initial owners. 
E) When the last original owner dies or withdraws,the entity is terminated. 
A) There are time limits placed on the transfer of ownership. 
B) The ability to raise capital is limited to that of a general partnership. 
C) Primary shareholders have unlimited liability for corporate debts. 
D) The entity can outlive all of its initial owners. 
E) When the last original owner dies or withdraws,the entity is terminated.

Question 4

In a limited partnership,each limited partner's liability for the partnership's debts is:

Accepted Answer

A) limited to his or her personal net worth. 
B) limited to the amount he or she invested into the partnership. 
C) limited to his or her total earnings received from the partnership. 
D) unlimited. 
E) limited to the total amount invested by all partners. 
A) limited to his or her personal net worth. 
B) limited to the amount he or she invested into the partnership. 
C) limited to his or her total earnings received from the partnership. 
D) unlimited. 
E) limited to the total amount invested by all partners.

Question 5

A conflict of interest between the stockholders and managers of a firm is referred to as the:

Accepted Answer

A) stockholders' liability. 
B) corporate breakdown. 
C) agency problem. 
D) corporate activism. 
E) legal liability. 
A) stockholders' liability. 
B) corporate breakdown. 
C) agency problem. 
D) corporate activism. 
E) legal liability.

Question 6

A financial manager should make decisions based on:

Accepted Answer

A) the effects those decisions will have on current profits. 
B) the best interests of the current employees. 
C) the welfare of the current shareholders. 
D) minimizing the firm's tax liability. 
E) their personal goals and ambitions. 
A) the effects those decisions will have on current profits. 
B) the best interests of the current employees. 
C) the welfare of the current shareholders. 
D) minimizing the firm's tax liability. 
E) their personal goals and ambitions.

Question 7

Partnership profits:

Accepted Answer

A) are fully distributed as taxable income to the partners. 
B) are distributed to general partners with interest paid to limited partners. 
C) are distributed to the partners on an aftertax basis. 
D) are generally reinvested in the firm rather than being distributed. 
E) are generally held by the partnership and later distributed as dividend payments. 
A) are fully distributed as taxable income to the partners. 
B) are distributed to general partners with interest paid to limited partners. 
C) are distributed to the partners on an aftertax basis. 
D) are generally reinvested in the firm rather than being distributed. 
E) are generally held by the partnership and later distributed as dividend payments.

Question 8

A business entity that provides each owner with limited liability while the firm is operated and taxed like a partnership is called a:

Accepted Answer

A) limited liability company. 
B) general partnership. 
C) limited proprietorship. 
D) limited partnership. 
E) corporation. 
A) limited liability company. 
B) general partnership. 
C) limited proprietorship. 
D) limited partnership. 
E) corporation.

Question 9

A firm's capital structure refers to the firm's:

Accepted Answer

A) mixture of various types of production equipment. 
B) investment selections for its excess cash reserves. 
C) combination of cash and cash equivalents. 
D) combination of accounts appearing on the left side of its balance sheet. 
E) proportions of financing from current and long-term debt and equity. 
A) mixture of various types of production equipment. 
B) investment selections for its excess cash reserves. 
C) combination of cash and cash equivalents. 
D) combination of accounts appearing on the left side of its balance sheet. 
E) proportions of financing from current and long-term debt and equity.

Question 10

The basic regulatory framework for the public trading of securities in the United States was provided by the:

Accepted Answer

A) New York Stock Exchange when it was founded. 
B) Securities Exchange Act of 1934. 
C) Federal Reserve Bank. 
D) Securities Act of 1933 and the Securities Exchange Act of 1934. 
E) Sarbanes-Oxley Act in 2002. 
A) New York Stock Exchange when it was founded. 
B) Securities Exchange Act of 1934. 
C) Federal Reserve Bank. 
D) Securities Act of 1933 and the Securities Exchange Act of 1934. 
E) Sarbanes-Oxley Act in 2002.

Question 11

Financial managers primarily create firm value by:

Accepted Answer

A) maximizing current dividends. 
B) investing in assets that generate cash in excess of their cost. 
C) lowering the earnings per share. 
D) increasing the firm's market share. 
E) maximizing current sales. 
A) maximizing current dividends. 
B) investing in assets that generate cash in excess of their cost. 
C) lowering the earnings per share. 
D) increasing the firm's market share. 
E) maximizing current sales.

Question 12

Which one of these is a cash outflow from a corporation?

Accepted Answer

A) Sale of an asset 
B) Tax payment 
C) Sale of common stock 
D) Issuance of debt 
E) Profit retained by the firm 
A) Sale of an asset 
B) Tax payment 
C) Sale of common stock 
D) Issuance of debt 
E) Profit retained by the firm

Question 13

Which one of the following statements concerning a sole proprietorship is correct?

Accepted Answer

A) The ability to raise capital is limited by the owner's personal wealth. 
B) The proprietorship pays taxes at the corporate tax rate. 
C) The ownership of the firm is easy to transfer to another individual. 
D) The company must pay income taxes separate from the taxes paid by the owner. 
E) The legal costs to form a sole proprietorship are quite substantial. 
A) The ability to raise capital is limited by the owner's personal wealth. 
B) The proprietorship pays taxes at the corporate tax rate. 
C) The ownership of the firm is easy to transfer to another individual. 
D) The company must pay income taxes separate from the taxes paid by the owner. 
E) The legal costs to form a sole proprietorship are quite substantial.

Question 14

Which one of the following business types is best suited to raising large amounts of capital?

Accepted Answer

A) Sole proprietorship 
B) Limited liability company 
C) Corporation 
D) General partnership 
E) Limited partnership 
A) Sole proprietorship 
B) Limited liability company 
C) Corporation 
D) General partnership 
E) Limited partnership

Question 15

The Securities Act of 1933 focuses on:

Accepted Answer

A) all stock transactions. 
B) the sales of existing securities. 
C) the issuance of new securities. 
D) insider trading. 
E) Federal Deposit Insurance Corporation (FDI
C) insurance. 
A) all stock transactions. 
B) the sales of existing securities. 
C) the issuance of new securities. 
D) insider trading. 
E) Federal Deposit Insurance Corporation (FDI
C) insurance.

Question 16

Any debt that must be repaid within the next year is recorded on the balance sheet as:

Accepted Answer

A) a current liability. 
B) long-term debt. 
C) an intangible asset. 
D) accounts receivable. 
E) a current asset. 
A) a current liability. 
B) long-term debt. 
C) an intangible asset. 
D) accounts receivable. 
E) a current asset.

Question 17

The primary goal of financial management is to:

Accepted Answer

A) maximize current dividends per share of the existing stock. 
B) maximize the current value per share of the existing stock. 
C) avoid financial distress. 
D) minimize operational costs and maximize firm efficiency. 
E) maintain steady growth in both sales and net earnings. 
A) maximize current dividends per share of the existing stock. 
B) maximize the current value per share of the existing stock. 
C) avoid financial distress. 
D) minimize operational costs and maximize firm efficiency. 
E) maintain steady growth in both sales and net earnings.

Question 18

Which one of these best fits the description of an agency cost?

Accepted Answer

A) The costs of increasing the dividend payment per share 
B) The benefits received from reducing production costs per unit 
C) The payment of corporate income taxes 
D) The payment required for an outside audit of the firm 
E) The payment of interest on a firm's debts 
A) The costs of increasing the dividend payment per share 
B) The benefits received from reducing production costs per unit 
C) The payment of corporate income taxes 
D) The payment required for an outside audit of the firm 
E) The payment of interest on a firm's debts

Question 19

The owners of a limited liability company generally prefer:

Accepted Answer

A) being taxed like a corporation. 
B) having liability exposure similar to that of a sole proprietor. 
C) being taxed personally on all business income. 
D) having liability exposure similar to that of a general partner. 
E) being taxed like a corporation with liability like a partnership. 
A) being taxed like a corporation. 
B) having liability exposure similar to that of a sole proprietor. 
C) being taxed personally on all business income. 
D) having liability exposure similar to that of a general partner. 
E) being taxed like a corporation with liability like a partnership.

Question 20

Members of the board of directors are selected by:

Accepted Answer

A) shareholder voting. 
B) company management. 
C) the firm's Chief Executive Officer. 
D) the largest five shareholders. 
E) the firm's managers and employees. 
A) shareholder voting. 
B) company management. 
C) the firm's Chief Executive Officer. 
D) the largest five shareholders. 
E) the firm's managers and employees.

Exam 1: Introduction to Corporate Finance

The corporate controller is generally responsible for which one of these functions?

If a firm is currently profitable,then:

Which statement concerning corporations is correct?

In a limited partnership,each limited partner's liability for the partnership's debts is:

A conflict of interest between the stockholders and managers of a firm is referred to as the:

A financial manager should make decisions based on:

Partnership profits:

A business entity that provides each owner with limited liability while the firm is operated and taxed like a partnership is called a:

A firm's capital structure refers to the firm's:

The basic regulatory framework for the public trading of securities in the United States was provided by the:

Financial managers primarily create firm value by:

Which one of these is a cash outflow from a corporation?

Which one of the following statements concerning a sole proprietorship is correct?

Which one of the following business types is best suited to raising large amounts of capital?

The Securities Act of 1933 focuses on:

Any debt that must be repaid within the next year is recorded on the balance sheet as:

The primary goal of financial management is to:

Which one of these best fits the description of an agency cost?

The owners of a limited liability company generally prefer:

Members of the board of directors are selected by:

Financial Statements and Cash Flow

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, real Options, and Capital Budgeting

Interest Rates and Bond Valuation

Stock Valuation

Lessons From Market History

Return, risk, and the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Risk, cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers,acquisitions,and Divestitures

Financial Distress

International Corporate Finance

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