Question 1

What is the process of double taxation for the stockholders in a C corporation?

Accepted Answer

A) Their shares are taxed when they are both bought and sold. 
B) The corporation is taxed on the profits it makes, and the owners are taxed when this profit is distributed to them. 
C) The owners of a corporation are taxed when they receive dividend payments and when they make a profit from the sale of shares. 
D) The corporation must pay taxes on any profits it makes, and the capital raised by the sale of shares is also subject to taxation. 
A) Their shares are taxed when they are both bought and sold. 
B) The corporation is taxed on the profits it makes, and the owners are taxed when this profit is distributed to them. 
C) The owners of a corporation are taxed when they receive dividend payments and when they make a profit from the sale of shares. 
D) The corporation must pay taxes on any profits it makes, and the capital raised by the sale of shares is also subject to taxation. B

Question 2

A limited liability company is essentially ________.

Accepted Answer

A) a limited partnership without limited partners 
B) a limited partnership without a general partner 
C) just another name for a limited partnership 
D) just another name for a corporation 
A) a limited partnership without limited partners 
B) a limited partnership without a general partner 
C) just another name for a limited partnership 
D) just another name for a corporation B

Question 3

Stella places a market order with her broker to buy 1,000 shares of OneWorld Corp. The broker buys 1,000 shares at $15.80 each, and sells them to Stella at $15.95 each. He also charges a commission of $12.00. What is bid-ask spread in this case?

Accepted Answer

A) $162 
B) $120 
C) $210.00 
D) $150 
A) $162 
B) $120 
C) $210.00 
D) $150 D

Question 4

A C corporation earns $8.30 per share before taxes. The corporate tax rate is 39%, the personal tax rate on dividends is 15%, and the personal tax rate on non-dividend income is 36%. What is the total amount of taxes paid if the company pays a $6.00 dividend?

Accepted Answer

A) $3.31 
B) $4.96 
C) $4.14 
D) $5.79 
A) $3.31 
B) $4.96 
C) $4.14 
D) $5.79

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

Which of the following is typically the major factor in limiting the growth of sole proprietorships?

Accepted Answer

A) The organizational structure of such firms tends to become extremely complicated over time. 
B) It is extremely difficult to transfer control of such firms to a new owner if the present owner dies or wishes to sell the firm. 
C) The amount of money that can be raised by such firms is limited by the fact that the single owner must make good on all debts. 
D) Investors have a great deal of control over the day-to-day running of such firms, leading to confusion when conflicts in direction arise. 
A) The organizational structure of such firms tends to become extremely complicated over time. 
B) It is extremely difficult to transfer control of such firms to a new owner if the present owner dies or wishes to sell the firm. 
C) The amount of money that can be raised by such firms is limited by the fact that the single owner must make good on all debts. 
D) Investors have a great deal of control over the day-to-day running of such firms, leading to confusion when conflicts in direction arise.

Question 7

Use the figure for the question(s)below.  
-Based on the information shown above, what would it cost to buy 1,000 shares of the above stock?

Accepted Answer

A) $91,110 
B) $91,300 
C) $91,320 
D) $91,650 
A) $91,110 
B) $91,300 
C) $91,320 
D) $91,650

Question 8

An S corporation earns $6.00 per share before taxes. The corporate tax rate is 35%, the personal tax rate on dividends is 20%, and the personal tax rate on non-dividend income is 39%. What is the total amount of taxes paid if the company pays a $2.00 dividend?

Accepted Answer

A) $1.87 
B) $2.81 
C) $3.28 
D) $2.34 
A) $1.87 
B) $2.81 
C) $3.28 
D) $2.34

Question 9

Which of the following types of firms does NOT have limited liability?

Accepted Answer

A) sole proprietorships 
B) limited partnerships 
C) corporations 
D) none of the above 
A) sole proprietorships 
B) limited partnerships 
C) corporations 
D) none of the above

Question 10

In which of the following relationships is an agency conflict problem LEAST likely to arise?

Accepted Answer

A) the relationship between a hire-car company and the persons who hire that company's cars regarding the treatment of those cars 
B) the relationship between high-level military officers and the soldiers who serve under them regarding the willingness of the soldiery to take risks 
C) the relationship between a restaurateur and the suppliers of produce to that restaurant regarding the freshness of the produce supplied 
D) the relationship between a driver and the passengers in a car regarding the safe driving of that car 
A) the relationship between a hire-car company and the persons who hire that company's cars regarding the treatment of those cars 
B) the relationship between high-level military officers and the soldiers who serve under them regarding the willingness of the soldiery to take risks 
C) the relationship between a restaurateur and the suppliers of produce to that restaurant regarding the freshness of the produce supplied 
D) the relationship between a driver and the passengers in a car regarding the safe driving of that car

Question 11

What is the most important duty of a firm's financial officer?

Accepted Answer

A) to ensure that the firm has enough cash on hand to meet its commitments at any given time 
B) to decide how to pay for investments 
C) to manage working capital 
D) to make investment decisions 
A) to ensure that the firm has enough cash on hand to meet its commitments at any given time 
B) to decide how to pay for investments 
C) to manage working capital 
D) to make investment decisions

Question 12

A corporate raider gains a controlling fraction of the shares of a poorly managed company and replaces the board of directors. How does the corporate raider hope to make a profit in this case?

Accepted Answer

A) by the sale of the assets held by the company that hold most of its value 
B) by the rise in the value of the stock held by the raider when the new board of directors is judged to be superior to the ousted board of directors 
C) by motivating the board of directors and other stakeholders in the company to make difficult short-term decisions that will increase the long-term viability of the company 
D) by removing the employees expectations of the continued poor performance of the company 
A) by the sale of the assets held by the company that hold most of its value 
B) by the rise in the value of the stock held by the raider when the new board of directors is judged to be superior to the ousted board of directors 
C) by motivating the board of directors and other stakeholders in the company to make difficult short-term decisions that will increase the long-term viability of the company 
D) by removing the employees expectations of the continued poor performance of the company

Question 13

On August 19, 2004 Google IPO offered 19,605,052 shares at a price of U.S. $85 per share, which were sold in an online auction in a bid to make the shares more widely available. Which of the following statements best describes why these are considered a primary market transaction?

Accepted Answer

A) The transaction was between the corporation and investors. 
B) Shares of Google from this time onward could be traded between investors on a stock exchange. 
C) The shares were the first to be privately issued by Google. 
D) Google was at the time a recently founded company seeking capital with which to expand. 
A) The transaction was between the corporation and investors. 
B) Shares of Google from this time onward could be traded between investors on a stock exchange. 
C) The shares were the first to be privately issued by Google. 
D) Google was at the time a recently founded company seeking capital with which to expand.

Question 14

What are the main differences between a limited partnership and a limited liability corporation?

Accepted Answer

A limited partnership is requi

Question 15

Which of the following is NOT a reason why a firm's financial managers must take great care when making investment decisions?

Accepted Answer

A) These investment decisions determine whether the firm will add value for its owners. 
B) These investments determine the long-term directions in which the company may move. 
C) These investment decisions determine the corporation's mix of debt and equity. 
D) These investment decisions typically involve substantial costs which must be carefully weighed against their potential benefits. 
A) These investment decisions determine whether the firm will add value for its owners. 
B) These investments determine the long-term directions in which the company may move. 
C) These investment decisions determine the corporation's mix of debt and equity. 
D) These investment decisions typically involve substantial costs which must be carefully weighed against their potential benefits.

Question 16

Over four-fifths of all U.S. business revenue is generated by which type of firms?

Accepted Answer

A) sole proprietorships 
B) partnerships 
C) limited partnerships 
D) corporations 
A) sole proprietorships 
B) partnerships 
C) limited partnerships 
D) corporations

Question 17

Which of the following is a measure of the aggregate price level of collections of pre-selected stocks?

Accepted Answer

A) NASDAQ 
B) S&P 500 
C) NYSE 
D) Euronext 
A) NASDAQ 
B) S&P 500 
C) NYSE 
D) Euronext

Question 18

Which of the following organization forms has 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

Question 19

Which of the stock markets listed below is the smallest, as judged by trading volume?

Accepted Answer

A) Deutsche Börse 
B) London Stock Exchange 
C) NASDAQ 
D) NYSE Euronext (US) 
A) Deutsche Börse 
B) London Stock Exchange 
C) NASDAQ 
D) NYSE Euronext (US)

Question 20

Financial decisions require that you weigh alternatives in strictly monetary terms.

Accepted Answer

A) True 
 B)False

Exam 1: Corporate Finance and the Financial Manager

What is the process of double taxation for the stockholders in a C corporation?

A limited liability company is essentially ________.

Stella places a market order with her broker to buy 1,000 shares of OneWorld Corp. The broker buys 1,000 shares at $15.80 each, and sells them to Stella at $15.95 each. He also charges a commission of $12.00. What is bid-ask spread in this case?

A C corporation earns $8.30 per share before taxes. The corporate tax rate is 39%, the personal tax rate on dividends is 15%, and the personal tax rate on non-dividend income is 36%. What is the total amount of taxes paid if the company pays a $6.00 dividend?

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.

Which of the following is typically the major factor in limiting the growth of sole proprietorships?

Use the figure for the question(s)below. -Based on the information shown above, what would it cost to buy 1,000 shares of the above stock?

An S corporation earns $6.00 per share before taxes. The corporate tax rate is 35%, the personal tax rate on dividends is 20%, and the personal tax rate on non-dividend income is 39%. What is the total amount of taxes paid if the company pays a $2.00 dividend?

Which of the following types of firms does NOT have limited liability?

In which of the following relationships is an agency conflict problem LEAST likely to arise?

What is the most important duty of a firm's financial officer?

A corporate raider gains a controlling fraction of the shares of a poorly managed company and replaces the board of directors. How does the corporate raider hope to make a profit in this case?

On August 19, 2004 Google IPO offered 19,605,052 shares at a price of U.S. $85 per share, which were sold in an online auction in a bid to make the shares more widely available. Which of the following statements best describes why these are considered a primary market transaction?

What are the main differences between a limited partnership and a limited liability corporation?

Which of the following is NOT a reason why a firm's financial managers must take great care when making investment decisions?

Over four-fifths of all U.S. business revenue is generated by which type of firms?

Which of the following is a measure of the aggregate price level of collections of pre-selected stocks?

Which of the following organization forms has the most revenue?

Which of the stock markets listed below is the smallest, as judged by trading volume?

Financial decisions require that you weigh alternatives in strictly monetary terms.

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters