Question 1

What is the general relation of the two types of prices quoted for a stock on a exchange?

Accepted Answer

The two prices are bid price and ask pri

Question 2

The fact that corporations' shares are easily traded within the market has a net effect of acting as a disincentive for managers to favor the interests of shareholders over their own interests.

Accepted Answer

A) True 
 B)False

Question 3

Corporations have come to dominate the business world through their ability to raise large amounts of capital by sale of ownership shares to anonymous outside investors.

Accepted Answer

A) True 
 B)False

Question 4

Briefly discuss the issues in the agency conflict problem.

Accepted Answer

The agency conflict problem arises out o

Question 5

A C corporation earns $8.30 per share before taxes and the company pays a dividend of $4.00 per share. 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 after-tax amount an individual would receive from the dividend?

Accepted Answer

A)  $2.72 
B)  $4.08 
C)  $4.76 
D)  $3.40 
A)  $2.72 
B)  $4.08 
C)  $4.76 
D)  $3.40

Question 6

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 7

Stock markets provide liquidity for a firm's shares.

Accepted Answer

A) True 
 B)False

Question 8

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 9

What are the main differences between the NYSE and NASDAQ stock markets?

Accepted Answer

The NYSE has a physical location, a geog

Question 10

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.

Question 11

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

Accepted Answer

A limited partnership is required to hav

Question 12

What is the term for the applicable price that the seller gets when he sells a stock on the exchange?

Accepted Answer

The seller gets the

Question 13

In most corporations, the owners exercise direct control of a corporation.

Accepted Answer

A) True 
 B)False

Question 14

Valiant Corp. is a C corporation that earned $3.4 per share before it paid any taxes. Valiant Corp. retained $1 of after-tax earnings for reinvestment and distributed what remained in dividend payments. If the corporate tax rate was 35% and dividend earnings were taxed at 12.5%, what was the value of the dividend earnings received after-tax by a holder of 100,000 shares of Valiant Corp.?

Accepted Answer

A)  $105,875 
B)  $127,050 
C)  $148,225 
D)  $84,700 
A)  $105,875 
B)  $127,050 
C)  $148,225 
D)  $84,700

Question 15

Which of the following types of firms generate the most revenue in the United States?

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 16

Which of the following is unique for an S corporation?

Accepted Answer

A)  The profits and losses of an S corporation are not taxed at the corporate level, but shareholders must include these profits and losses on their individual tax returns. 
B)  The shareholders of an S corporation must include the firm's profit and losses in their individual income taxes even if no money is distributed to them. 
C)  There is a maximum limit on the number of shareholders for an S corporation. 
D)  None of the above statements is unique. 
A)  The profits and losses of an S corporation are not taxed at the corporate level, but shareholders must include these profits and losses on their individual tax returns. 
B)  The shareholders of an S corporation must include the firm's profit and losses in their individual income taxes even if no money is distributed to them. 
C)  There is a maximum limit on the number of shareholders for an S corporation. 
D)  None of the above statements is unique.

Question 17

A C corporation earns $4.30 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 $3.00 dividend?

Accepted Answer

A)  $1.68 
B)  $2.53 
C)  $2.11 
D)  $2.95 
A)  $1.68 
B)  $2.53 
C)  $2.11 
D)  $2.95

Question 18

Which of the following would be more typically the responsibility of a controller rather than a treasurer?

Accepted Answer

A)  overseeing accounting and tax functions 
B)  capital budgeting 
C)  managing credit 
D)  making investment decisions 
A)  overseeing accounting and tax functions 
B)  capital budgeting 
C)  managing credit 
D)  making investment decisions

Question 19

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 20

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

Exam 1: Corporate Finance and the Financial Manager

What is the general relation of the two types of prices quoted for a stock on a exchange?

The fact that corporations' shares are easily traded within the market has a net effect of acting as a disincentive for managers to favor the interests of shareholders over their own interests.

Corporations have come to dominate the business world through their ability to raise large amounts of capital by sale of ownership shares to anonymous outside investors.

Briefly discuss the issues in the agency conflict problem.

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?

Stock markets provide liquidity for a firm's shares.

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

What are the main differences between the NYSE and NASDAQ stock markets?

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

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

What is the term for the applicable price that the seller gets when he sells a stock on the exchange?

In most corporations, the owners exercise direct control of a corporation.

Which of the following types of firms generate the most revenue in the United States?

Which of the following is unique for an S corporation?

A C corporation earns $4.30 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 $3.00 dividend?

Which of the following would be more typically the responsibility of a controller rather than a treasurer?

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

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

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