Question 1

In a limited partnership,at least one general partner must remain in the association;the privilege of limited liability still applies to this partner.

Accepted Answer

A) True 
 B)False

Question 2

Profit maximization is not an adequate goal of the firm when making financial decisions because:

Accepted Answer

A) it does not necessarily reflect shareholder wealth maximization. 
B) it ignores the risk inherent in different projects that will generate the profits. 
C) it ignores the timing of a project's returns. 
D) all of the above are correct. 
A) it does not necessarily reflect shareholder wealth maximization. 
B) it ignores the risk inherent in different projects that will generate the profits. 
C) it ignores the timing of a project's returns. 
D) all of the above are correct.

Question 3

Owners must register and pay yearly fees to their State of residence when establishing a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 4

The agency problem arises due to the separation of ownership and control in a corporation.

Accepted Answer

A) True 
 B)False

Question 5

If one security has a greater risk than another security,how will investors respond?

Accepted Answer

A) They will require a lower rate of return for the investment that has greater risk. 
B) They would be indifferent regarding their expectation of rates of return for either investment. 
C) They will require a higher rate of return for the investment that has greater risk. 
D) None of the above. 
A) They will require a lower rate of return for the investment that has greater risk. 
B) They would be indifferent regarding their expectation of rates of return for either investment. 
C) They will require a higher rate of return for the investment that has greater risk. 
D) None of the above.

Question 6

Which one of the following categories of owners enjoys limited liability?

Accepted Answer

A) General partners in a limited partnership 
B) Shareholders (common stock)of a corporation 
C) Sole proprietors 
D) Both A and B 
A) General partners in a limited partnership 
B) Shareholders (common stock)of a corporation 
C) Sole proprietors 
D) Both A and B

Question 7

Limited partners may actively manage the business.

Accepted Answer

A) True 
 B)False

Question 8

Financial management is concerned with the maintenance and creation of wealth.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following categories of owners have limited liability?

Accepted Answer

A) General partners 
B) Sole proprietors 
C) Shareholders of a corporation 
D) Both A and B 
A) General partners 
B) Sole proprietors 
C) Shareholders of a corporation 
D) Both A and B

Question 10

IBM issuing new shares of common stock would be classified as:

Accepted Answer

A) a new seasoned issue. 
B) an initial public offering. 
C) a secondary market transaction. 
D) A and B. 
A) a new seasoned issue. 
B) an initial public offering. 
C) a secondary market transaction. 
D) A and B.

Question 11

Consider the timing of the profits of the following certain investment projects:

Accepted Answer

A) Project S is preferred to Project L. 
B) Project L is preferred to Project S. 
C) Projects S and L are equally desirable. 
D) A goal of profit maximization would favor Project S only. 
A) Project S is preferred to Project L. 
B) Project L is preferred to Project S. 
C) Projects S and L are equally desirable. 
D) A goal of profit maximization would favor Project S only.

Question 12

In a sole proprietorship,the owner is personally responsible without limitation for the liabilities incurred.

Accepted Answer

A) True 
 B)False

Question 13

Purchasing a security of a company that is issuing their stock for the first time publicly would be considered:

Accepted Answer

A) a secondary market transaction. 
B) an initial public offering. 
C) a seasoned new issue. 
D) both A and B. 
A) a secondary market transaction. 
B) an initial public offering. 
C) a seasoned new issue. 
D) both A and B.

Question 14

In order to maximize shareholder wealth,a firm must consider historical costs as an integral part of their decision-making.

Accepted Answer

A) True 
 B)False

Question 15

There is no legal distinction made between the assets of the business and the personal assets of the owners in the limited partnership.

Accepted Answer

A) True 
 B)False

Question 16

What does the agency problem refer to?

Accepted Answer

A) The conflict that exists between the board of directors and the employees of the firm. 
B) The problem associated with financial managers and Internal Revenue agents. 
C) The conflict that exists between stockbrokers and investors. 
D) The problem that results from potential conflicts of interest between the manager of a business and the stockholders. 
E) None of the above. 
A) The conflict that exists between the board of directors and the employees of the firm. 
B) The problem associated with financial managers and Internal Revenue agents. 
C) The conflict that exists between stockbrokers and investors. 
D) The problem that results from potential conflicts of interest between the manager of a business and the stockholders. 
E) None of the above.

Question 17

Ethical dilemmas frequently exist in finance.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is NOT an advantage of the sole proprietorship?

Accepted Answer

A) Limited liability 
B) No time limit imposed on its existence 
C) No legal requirements for starting the business 
D) None of the above 
A) Limited liability 
B) No time limit imposed on its existence 
C) No legal requirements for starting the business 
D) None of the above

Question 19

How could you compensate an investor for taking on a significant amount of risk?

Accepted Answer

A) Increase the expected rate of return 
B) Raise more debt capital 
C) Offer stock at a higher price 
D) Increase sales 
A) Increase the expected rate of return 
B) Raise more debt capital 
C) Offer stock at a higher price 
D) Increase sales

Question 20

Which of the following factors enable a public corporation to grow to a greater extent,and perhaps at a faster rate,than a partnership or a proprietorship?

Accepted Answer

A) Unlimited liability of shareholders 
B) Access to the capital markets 
C) Limited life 
D) Elimination of double taxation on corporate income 
E) All of the above 
A) Unlimited liability of shareholders 
B) Access to the capital markets 
C) Limited life 
D) Elimination of double taxation on corporate income 
E) All of the above

In a limited partnership,at least one general partner must remain in the association;the privilege of limited liability still applies to this partner.

Profit maximization is not an adequate goal of the firm when making financial decisions because:

Owners must register and pay yearly fees to their State of residence when establishing a sole proprietorship.

The agency problem arises due to the separation of ownership and control in a corporation.

If one security has a greater risk than another security,how will investors respond?

Which one of the following categories of owners enjoys limited liability?

Limited partners may actively manage the business.

Financial management is concerned with the maintenance and creation of wealth.

Which of the following categories of owners have limited liability?

IBM issuing new shares of common stock would be classified as:

Consider the timing of the profits of the following certain investment projects:

In a sole proprietorship,the owner is personally responsible without limitation for the liabilities incurred.

Purchasing a security of a company that is issuing their stock for the first time publicly would be considered:

In order to maximize shareholder wealth,a firm must consider historical costs as an integral part of their decision-making.

There is no legal distinction made between the assets of the business and the personal assets of the owners in the limited partnership.

What does the agency problem refer to?

Ethical dilemmas frequently exist in finance.

Which of the following is NOT an advantage of the sole proprietorship?

How could you compensate an investor for taking on a significant amount of risk?

Which of the following factors enable a public corporation to grow to a greater extent,and perhaps at a faster rate,than a partnership or a proprietorship?

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 1: Getting Started-Principles of Finance

In a limited partnership,at least one general partner must remain in the association;the privilege of limited liability still applies to this partner.

Profit maximization is not an adequate goal of the firm when making financial decisions because:

Owners must register and pay yearly fees to their State of residence when establishing a sole proprietorship.

The agency problem arises due to the separation of ownership and control in a corporation.

If one security has a greater risk than another security,how will investors respond?

Which one of the following categories of owners enjoys limited liability?

Limited partners may actively manage the business.

Financial management is concerned with the maintenance and creation of wealth.

Which of the following categories of owners have limited liability?

IBM issuing new shares of common stock would be classified as:

Consider the timing of the profits of the following certain investment projects:

In a sole proprietorship,the owner is personally responsible without limitation for the liabilities incurred.

Purchasing a security of a company that is issuing their stock for the first time publicly would be considered:

In order to maximize shareholder wealth,a firm must consider historical costs as an integral part of their decision-making.

There is no legal distinction made between the assets of the business and the personal assets of the owners in the limited partnership.

What does the agency problem refer to?

Ethical dilemmas frequently exist in finance.

Which of the following is NOT an advantage of the sole proprietorship?

How could you compensate an investor for taking on a significant amount of risk?

Which of the following factors enable a public corporation to grow to a greater extent,and perhaps at a faster rate,than a partnership or a proprietorship?

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters