Question 1

Which one of the following statements correctly depicts the common chain of command in a corporation?

Accepted Answer

A) The information systems manager reports to the treasurer. 
B) The credit manager reports to the treasurer. 
C) The controller reports to the chief executive officer. 
D) The tax manager reports to the treasurer. 
E) The capital expenditures manager reports to the controller. 
A) The information systems manager reports to the treasurer. 
B) The credit manager reports to the treasurer. 
C) The controller reports to the chief executive officer. 
D) The tax manager reports to the treasurer. 
E) The capital expenditures manager reports to the controller.

Question 2

Why might a professional group select the LLC form of business over a general partnership or a corporate structure?

Accepted Answer

A limited liability company (LLC)limits

Question 3

What should be the primary goal of the financial manager of a corporation? Explain why this is appropriate.

Accepted Answer

The appropriate goal is to maximize the

Question 4

Corporate bylaws:

Accepted Answer

A) establish the name of the corporation. 
B) establish the rights granted to its shareholders. 
C) set forth the purpose of the firm. 
D) establish the rules by which the corporation regulates its existence. 
E) set forth the number of members of the initial board of directors. 
A) establish the name of the corporation. 
B) establish the rights granted to its shareholders. 
C) set forth the purpose of the firm. 
D) establish the rules by which the corporation regulates its existence. 
E) set forth the number of members of the initial board of directors.

Question 5

Insider trading is:

Accepted Answer

A) prohibited by the Securities Act of 1933. 
B) prohibited by the Securities Exchange Act of 1934. 
C) impossible in today's efficient markets. 
D) highly discouraged,but still legal. 
E) prohibited by the Sarbanes-Oxley Act of 2002. 
A) prohibited by the Securities Act of 1933. 
B) prohibited by the Securities Exchange Act of 1934. 
C) impossible in today's efficient markets. 
D) highly discouraged,but still legal. 
E) prohibited by the Sarbanes-Oxley Act of 2002.

Question 6

Which one of these is a correct definition?

Accepted Answer

A) Net working capital equals current assets plus current liabilities. 
B) Current liabilities are debts that must be repaid in 18 months or less. 
C) Current assets are assets with short lives,such as accounts receivable. 
D) Long-term debt is defined as a residual claim on a firm's assets. 
E) Tangible assets are fixed assets such as patents. 
A) Net working capital equals current assets plus current liabilities. 
B) Current liabilities are debts that must be repaid in 18 months or less. 
C) Current assets are assets with short lives,such as accounts receivable. 
D) Long-term debt is defined as a residual claim on a firm's assets. 
E) Tangible assets are fixed assets such as patents.

Question 7

In a general partnership,the general partners have ________ liability for the firm's debts and have ________ control over day-to-day operations.

Accepted Answer

A) limited; no 
B) unlimited; total 
C) limited; total 
D) unlimited; no 
E) unlimited; limited 
A) limited; no 
B) unlimited; total 
C) limited; total 
D) unlimited; no 
E) unlimited; limited

Question 8

A partnership:

Accepted Answer

A) is taxed the same as a corporation. 
B) terminates at the death of any limited partner. 
C) creates an unlimited liability for all general partners for the partnership's debts. 
D) has the same ability as a corporation to raise capital. 
E) allows for easy transfer of interest from one general partner to another. 
A) is taxed the same as a corporation. 
B) terminates at the death of any limited partner. 
C) creates an unlimited liability for all general partners for the partnership's debts. 
D) has the same ability as a corporation to raise capital. 
E) allows for easy transfer of interest from one general partner to another.

Question 9

Which one of the following actions by a financial manager creates an agency problem?

Accepted Answer

A) Borrowing money when doing so creates value for the firm 
B) Lowering selling prices that will result in increased firm value 
C) Agreeing to expand the company at the expense of stockholders' value 
D) Agreeing to pay management bonuses based on the market value of the firm's stock 
E) Refusing to spend current cash on an unprofitable project 
A) Borrowing money when doing so creates value for the firm 
B) Lowering selling prices that will result in increased firm value 
C) Agreeing to expand the company at the expense of stockholders' value 
D) Agreeing to pay management bonuses based on the market value of the firm's stock 
E) Refusing to spend current cash on an unprofitable project

Question 10

The corporate treasurer oversees which one of these areas?

Accepted Answer

A) Financial planning 
B) Cost accounting 
C) Tax reporting 
D) Information systems 
E) Financial accounting 
A) Financial planning 
B) Cost accounting 
C) Tax reporting 
D) Information systems 
E) Financial accounting

Question 11

Which one of the following is least apt to help convince managers to work in the best interest of the stockholders?

Accepted Answer

A) Threat of a takeover of the firm by unsatisfied stockholders 
B) Implementation of a stock option plan 
C) Salary raises based on length of service 
D) Management compensation tied to the market value of the firm's stock 
E) Threat of a proxy fight 
A) Threat of a takeover of the firm by unsatisfied stockholders 
B) Implementation of a stock option plan 
C) Salary raises based on length of service 
D) Management compensation tied to the market value of the firm's stock 
E) Threat of a proxy fight

Question 12

Which type of business organization has the respective rights and privileges of a legal person?

Accepted Answer

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

Question 13

Which one of these characteristics best describes the primary advantage of being a limited partner rather than a general partner?

Accepted Answer

A) Entitlement to a larger portion of the partnership's income 
B) Day-to-day management control of the business 
C) Profits free of any income taxation 
D) Overall control of the partnership 
E) Personal financial liability limited to the capital invested 
A) Entitlement to a larger portion of the partnership's income 
B) Day-to-day management control of the business 
C) Profits free of any income taxation 
D) Overall control of the partnership 
E) Personal financial liability limited to the capital invested

Question 14

One intent of the Sarbanes Oxley Act of 2002 is to:

Accepted Answer

A) prevent minority investors from making demands on corporations. 
B) protect corporate directors from frivolous lawsuits. 
C) guarantee the repayment of all future personal loans to corporate officers and directors. 
D) protect investors from corporate abuses. 
E) require all public corporations to "go dark" within the next twenty years. 
A) prevent minority investors from making demands on corporations. 
B) protect corporate directors from frivolous lawsuits. 
C) guarantee the repayment of all future personal loans to corporate officers and directors. 
D) protect investors from corporate abuses. 
E) require all public corporations to "go dark" within the next twenty years.

Question 15

The process of planning and managing a firm's long-term assets is called:

Accepted Answer

A) working capital management. 
B) cash management. 
C) cost accounting management. 
D) capital budgeting. 
E) capital structure management. 
A) working capital management. 
B) cash management. 
C) cost accounting management. 
D) capital budgeting. 
E) capital structure management.

Question 16

Which one of these accounts is included in net working capital?

Accepted Answer

A) Copyright 
B) Manufacturing equipment 
C) Common stock 
D) Long-term debt 
E) Inventory 
A) Copyright 
B) Manufacturing equipment 
C) Common stock 
D) Long-term debt 
E) Inventory

Question 17

Stock options granted to a corporation's managers are primarily designed to:

Accepted Answer

A) reduce agency costs. 
B) increase current profits. 
C) replace salary increases. 
D) reward long-term employment. 
E) replace promotions. 
A) reduce agency costs. 
B) increase current profits. 
C) replace salary increases. 
D) reward long-term employment. 
E) replace promotions.

Question 18

Which one of the following is a capital budgeting decision?

Accepted Answer

A) Determining how much debt should be borrowed from a particular lender 
B) Deciding whether or not a new production facility should be built 
C) Deciding when to repay a long-term debt 
D) Determining how much inventory to keep on hand 
E) Deciding how much credit to grant to a particular customer 
A) Determining how much debt should be borrowed from a particular lender 
B) Deciding whether or not a new production facility should be built 
C) Deciding when to repay a long-term debt 
D) Determining how much inventory to keep on hand 
E) Deciding how much credit to grant to a particular customer

Question 19

The decisions made by financial managers should all be ones which increase the:

Accepted Answer

A) size of the firm. 
B) growth rate of the firm. 
C) marketability of the managers. 
D) market value of the existing owners' equity. 
E) firm's current sales. 
A) size of the firm. 
B) growth rate of the firm. 
C) marketability of the managers. 
D) market value of the existing owners' equity. 
E) firm's current sales.

Question 20

What advantages and disadvantages does the corporate form of organization have compared to sole proprietorships and general partnerships?

Accepted Answer

The advantages of the corporate form of

Exam 1: Introduction to Corporate Finance

Which one of the following statements correctly depicts the common chain of command in a corporation?

Why might a professional group select the LLC form of business over a general partnership or a corporate structure?

What should be the primary goal of the financial manager of a corporation? Explain why this is appropriate.

Corporate bylaws:

Insider trading is:

Which one of these is a correct definition?

In a general partnership,the general partners have ________ liability for the firm's debts and have ________ control over day-to-day operations.

A partnership:

Which one of the following actions by a financial manager creates an agency problem?

The corporate treasurer oversees which one of these areas?

Which one of the following is least apt to help convince managers to work in the best interest of the stockholders?

Which type of business organization has the respective rights and privileges of a legal person?

Which one of these characteristics best describes the primary advantage of being a limited partner rather than a general partner?

One intent of the Sarbanes Oxley Act of 2002 is to:

The process of planning and managing a firm's long-term assets is called:

Which one of these accounts is included in net working capital?

Stock options granted to a corporation's managers are primarily designed to:

Which one of the following is a capital budgeting decision?

The decisions made by financial managers should all be ones which increase the:

What advantages and disadvantages does the corporate form of organization have compared to sole proprietorships and general partnerships?

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

Filters

In a general partnership,the general partners have liability for the firm's debts and have control over day-to-day operations.