Question 1

Which of the following features of a corporation is LEAST accurate?

Accepted Answer

A)  The owners' identities are separate from a corporation. 
B)  The owners of a corporation are not liable for any obligations the corporation enters into. 
C)  Changes in ownership do not result in the dissolution of the corporation. 
D)  Earnings from a corporation are taxed only once. 
A)  The owners' identities are separate from a corporation. 
B)  The owners of a corporation are not liable for any obligations the corporation enters into. 
C)  Changes in ownership do not result in the dissolution of the corporation. 
D)  Earnings from a corporation are taxed only once. D

Question 2

What is the most common type of firm in the United States and the world?

Accepted Answer

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

Question 3

The financial manager of a well-regarded book publishing firm wishes to buy a small Internet publishing company to provide an avenue for sale of its materials online. In order to raise the funds to make this purchase, the financial manager decides to sell more stock in the company. How is the financial manager raising funds in this case?

Accepted Answer

A)  by increasing the debt burden carried by the company 
B)  by raising the company's equity by encouraging new owners to take a stake in the company 
C)  by decreasing the ratio of equity to debt held by the company 
D)  by increasing the value of shares held by the existing owners of the company 
A)  by increasing the debt burden carried by the company 
B)  by raising the company's equity by encouraging new owners to take a stake in the company 
C)  by decreasing the ratio of equity to debt held by the company 
D)  by increasing the value of shares held by the existing owners of the company B

Question 4

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 5

Put the following steps of the financial cycle in the correct order. I. Money flows to companies who use it to fund growth through new products.

Accepted Answer

A)  I, II, and III 
B)  II, I, and III 
C)  III, II, and I 
D)  II, III, and I 
A)  I, II, and III 
B)  II, I, and III 
C)  III, II, and I 
D)  II, III, and I

Question 6

Use the figure for the question(s) below.  
-What is the bid-ask spread on the stock shown above?

Accepted Answer

A)  1 cent 
B)  3 cents 
C)  6 cents 
D)  12 cents 
A)  1 cent 
B)  3 cents 
C)  6 cents 
D)  12 cents

Question 7

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 8

Investments by wealthy individuals and endowments is a major source of money for each of the following EXCEPT ________.

Accepted Answer

A)  private equity funds 
B)  hedge funds 
C)  venture capital funds 
D)  mutual funds 
A)  private equity funds 
B)  hedge funds 
C)  venture capital funds 
D)  mutual funds

Question 9

Joe is a general partner in a limited partnership firm, while Jane is a limited partner in the same firm. Which of the following statements regarding their respective relationships to the firm is correct?

Accepted Answer

A)  Joe has no management authority within the partnership. 
B)  Jane is legally involved in the managerial decision making of the firm. 
C)  Jane's liability for the firm's debts consists solely of her investment in the firm. 
D)  Withdrawal of Jane from the partnership will dissolve the partnership. 
A)  Joe has no management authority within the partnership. 
B)  Jane is legally involved in the managerial decision making of the firm. 
C)  Jane's liability for the firm's debts consists solely of her investment in the firm. 
D)  Withdrawal of Jane from the partnership will dissolve the partnership.

Question 10

What are the main differences between a partnership and a sole proprietorship?

Accepted Answer

A sole proprietorship is a business owne

Question 11

What is the most common way that agency conflict problems are addressed in most corporations?

Accepted Answer

A)  by minimizing the number of decisions that a manager makes where there is a conflict between the managers interests and those of the shareholders 
B)  by terminating the employment of employees who are found to have put their own interests above those of the company 
C)  by using disinterested outside bodies to adjudicate between managers and shareholders when such conflicts arise 
D)  by prosecuting managers who have been found to have illegally used company moneys for their own benefit 
A)  by minimizing the number of decisions that a manager makes where there is a conflict between the managers interests and those of the shareholders 
B)  by terminating the employment of employees who are found to have put their own interests above those of the company 
C)  by using disinterested outside bodies to adjudicate between managers and shareholders when such conflicts arise 
D)  by prosecuting managers who have been found to have illegally used company moneys for their own benefit

Question 12

A factory owner wants his workers to produce as many widgets as they can so he pays his workers based on how many widgets they produce. However, in order to make sure that the workers do not rush and produce a large number of poorly made widgets, he checks the widgets at random during various stages of their manufacture. If a defect is found in a widget, the pay of the entire section of the factory responsible for that defect is docked. How is this factory owner seeking to solve the agency conflict problem in this case?

Accepted Answer

A)  by supplying incentives so the agents act in the way principal desires 
B)  by ensuring that all workers co-operate to maximize the gains of their section 
C)  by making the agents into principals themselves 
D)  by maximizing the information that the principal obtains about the behavior of the agents 
A)  by supplying incentives so the agents act in the way principal desires 
B)  by ensuring that all workers co-operate to maximize the gains of their section 
C)  by making the agents into principals themselves 
D)  by maximizing the information that the principal obtains about the behavior of the agents

Question 13

Why is a stock exchange like NASDAQ considered a secondary market?

Accepted Answer

A)  It trades the second largest volume of shares in the world. 
B)  Shares sold on it are exchanged between investors without any involvement of the issuing corporation. 
C)  The exchange has rules that attempt to ensure that bid and ask prices do not get too far apart. 
D)  NASDAQ is called a secondary market because NYSE is considered a primary market. 
A)  It trades the second largest volume of shares in the world. 
B)  Shares sold on it are exchanged between investors without any involvement of the issuing corporation. 
C)  The exchange has rules that attempt to ensure that bid and ask prices do not get too far apart. 
D)  NASDAQ is called a secondary market because NYSE is considered a primary market.

Question 14

In most corporations, to whom does the chief financial officer report?

Accepted Answer

A)  shareholders 
B)  the board of directors 
C)  the chief executive officer 
D)  the controller 
A)  shareholders 
B)  the board of directors 
C)  the chief executive officer 
D)  the controller

Question 15

The principal goal of a financial manager is to maximize the wealth of the stockholders.

Accepted Answer

A) True 
 B)False

Question 16

A sole proprietorship is owned by ________.

Accepted Answer

A)  one person 
B)  two or more persons 
C)  shareholders 
D)  bankers 
A)  one person 
B)  two or more persons 
C)  shareholders 
D)  bankers

Question 17

A typical company has many types of shareholders, from individuals holding a few shares, to large institutions that hold very large numbers of shares. How does a financial manager ensure that the priorities and concerns of such disparate stockholders are met?

Accepted Answer

A)  The financial manager should seek to make investments that do not harm the interests of the stockholders. 
B)  The decisions taken by the financial manager should be solely influenced by the benefit to the company since, by maximizing its fitness, he or she will also maximize the benefits of that company to the shareholders. 
C)  The financial manager should consider the interests and concerns of large shareholders a priority so the needs of those who hold a controlling interest in the company are met. 
D)  In general, all shareholders will agree that they are better off if the financial manager works to maximize the value of their investment. 
A)  The financial manager should seek to make investments that do not harm the interests of the stockholders. 
B)  The decisions taken by the financial manager should be solely influenced by the benefit to the company since, by maximizing its fitness, he or she will also maximize the benefits of that company to the shareholders. 
C)  The financial manager should consider the interests and concerns of large shareholders a priority so the needs of those who hold a controlling interest in the company are met. 
D)  In general, all shareholders will agree that they are better off if the financial manager works to maximize the value of their investment.

Question 18

Use the figure for the question(s) below.  
-How much money would a stock exchange make from buying and selling 500 shares of the stock under the conditions shown above?

Accepted Answer

A)  $250 
B)  $3,000 
C)  $5,875 
D)  $210,375 
A)  $250 
B)  $3,000 
C)  $5,875 
D)  $210,375

Question 19

The shares of private corporations are traded on a stock market.

Accepted Answer

A) True 
 B)False

Question 20

How do the shareholders of most corporations exercise their control of that corporation?

Accepted Answer

A)  by voting on issues that concern them 
B)  by electing members of a board of directors 
C)  by vetting the decisions of the board of directors 
D)  by providing oversight of the day-to-day running of the corporation 
A)  by voting on issues that concern them 
B)  by electing members of a board of directors 
C)  by vetting the decisions of the board of directors 
D)  by providing oversight of the day-to-day running of the corporation

Exam 1: Corporate Finance and the Financial Manager

Which of the following features of a corporation is LEAST accurate?

What is the most common type of firm in the United States and the world?

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

Put the following steps of the financial cycle in the correct order. I. Money flows to companies who use it to fund growth through new products.

Use the figure for the question(s) below. -What is the bid-ask spread on the stock shown above?

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

Investments by wealthy individuals and endowments is a major source of money for each of the following EXCEPT ________.

Joe is a general partner in a limited partnership firm, while Jane is a limited partner in the same firm. Which of the following statements regarding their respective relationships to the firm is correct?

What are the main differences between a partnership and a sole proprietorship?

What is the most common way that agency conflict problems are addressed in most corporations?

Why is a stock exchange like NASDAQ considered a secondary market?

In most corporations, to whom does the chief financial officer report?

The principal goal of a financial manager is to maximize the wealth of the stockholders.

A sole proprietorship is owned by ________.

A typical company has many types of shareholders, from individuals holding a few shares, to large institutions that hold very large numbers of shares. How does a financial manager ensure that the priorities and concerns of such disparate stockholders are met?

Use the figure for the question(s) below. -How much money would a stock exchange make from buying and selling 500 shares of the stock under the conditions shown above?

The shares of private corporations are traded on a stock market.

How do the shareholders of most corporations exercise their control of that corporation?

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