Question 1

The Sarbanes-Oxley Act requires public corporations to:

Accepted Answer

A) assess the company's internal control structure at least quarterly. 
B) distribute at least 90 percent of their profits in dividends on an annual basis. 
C) list any deficiencies in internal controls. 
D) file annual audit reports if the firm has "gone dark". 
E) disclose all personal loans to corporate officers or directors made after 2002. 
A) assess the company's internal control structure at least quarterly. 
B) distribute at least 90 percent of their profits in dividends on an annual basis. 
C) list any deficiencies in internal controls. 
D) file annual audit reports if the firm has "gone dark". 
E) disclose all personal loans to corporate officers or directors made after 2002.

Question 2

Financial managers should primarily strive to:

Accepted Answer

A) minimize costs while increasing current dividends. 
B) maximize the current profits of the firm. 
C) maximize the current value per share of existing stock. 
D) maximize current dividends even if doing so adds financial distress costs to the firm. 
E) maximize current market share in every market in which the firm participates. 
A) minimize costs while increasing current dividends. 
B) maximize the current profits of the firm. 
C) maximize the current value per share of existing stock. 
D) maximize current dividends even if doing so adds financial distress costs to the firm. 
E) maximize current market share in every market in which the firm participates.

Question 3

The intent of the registration statement required for all new securities by the Securities Act of 1933 is to:

Accepted Answer

A) provide a governmental evaluation of the risks associated with those new securities. 
B) set the price at which the securities will be offered. 
C) guarantee the profitability of the new securities. 
D) prevent any insider trading. 
E) provide all necessary information to allow a potential investor to make an informed decision. 
A) provide a governmental evaluation of the risks associated with those new securities. 
B) set the price at which the securities will be offered. 
C) guarantee the profitability of the new securities. 
D) prevent any insider trading. 
E) provide all necessary information to allow a potential investor to make an informed decision.

Question 4

The understanding of the work and cash to be contributed to a partnership by each member of that partnership is formalized in the:

Accepted Answer

A) indemnity clause. 
B) indenture contract. 
C) statement of purpose. 
D) partnership agreement. 
E) group charter. 
A) indemnity clause. 
B) indenture contract. 
C) statement of purpose. 
D) partnership agreement. 
E) group charter.

Question 5

Why might a highly successful sole proprietor change the structure of his/her firm to the corporate form of ownership if that change results in the sharing of profits with other investors?

Accepted Answer

A sole proprietorship has a limited life

Question 6

The articles of incorporation:

Accepted Answer

A) can be used to remove the firm's management. 
B) are amended annually by the firm's stockholders. 
C) set forth the rights granted to shareholders. 
D) set forth the rules by which the corporation regulates its existence. 
E) can set forth the conditions under which the firm can avoid double taxation. 
A) can be used to remove the firm's management. 
B) are amended annually by the firm's stockholders. 
C) set forth the rights granted to shareholders. 
D) set forth the rules by which the corporation regulates its existence. 
E) can set forth the conditions under which the firm can avoid double taxation.

Question 7

List and briefly describe the three basic areas addressed by a financial manager.

Accepted Answer

The three areas are: ∙ Capital budgeting

Question 8

A stakeholder is any person or entity:

Accepted Answer

A) owning shares of stock of a corporation. 
B) owning bonds or other long-term debt issued by a corporation. 
C) that initially started a firm and currently has management control over that firm. 
D) to whom the firm currently owes money. 
E) other than a stockholder or creditor who potentially has a financial interest in a firm. 
A) owning shares of stock of a corporation. 
B) owning bonds or other long-term debt issued by a corporation. 
C) that initially started a firm and currently has management control over that firm. 
D) to whom the firm currently owes money. 
E) other than a stockholder or creditor who potentially has a financial interest in a firm.

Question 9

Short-term finance deals with:

Accepted Answer

A) the timing of cash flows. 
B) acquiring and selling fixed assets. 
C) financing long-term projects. 
D) capital budgeting. 
E) issuing additional shares of common stock. 
A) the timing of cash flows. 
B) acquiring and selling fixed assets. 
C) financing long-term projects. 
D) capital budgeting. 
E) issuing additional shares of common stock.

Question 10

Which form of business structure typically has the greatest potential for agency problems?

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 11

Closet Keeper is considering a new project.Which one of these estimated project values has the greatest level of certainty?

Accepted Answer

A) The amount of the cash inflow in Year 3 
B) The timing of the last cash inflow from the project 
C) The initial project cost 
D) The risk of a pessimistic scenario occurring 
E) The amount of the cash inflow in Year 1 
A) The amount of the cash inflow in Year 3 
B) The timing of the last cash inflow from the project 
C) The initial project cost 
D) The risk of a pessimistic scenario occurring 
E) The amount of the cash inflow in Year 1

Exam 1: Introduction to Corporate Finance

The Sarbanes-Oxley Act requires public corporations to:

Financial managers should primarily strive to:

The intent of the registration statement required for all new securities by the Securities Act of 1933 is to:

The understanding of the work and cash to be contributed to a partnership by each member of that partnership is formalized in the:

Why might a highly successful sole proprietor change the structure of his/her firm to the corporate form of ownership if that change results in the sharing of profits with other investors?

The articles of incorporation:

List and briefly describe the three basic areas addressed by a financial manager.

A stakeholder is any person or entity:

Short-term finance deals with:

Which form of business structure typically has the greatest potential for agency problems?

Closet Keeper is considering a new project.Which one of these estimated project values has the greatest level of certainty?

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