Question 1

Define the intrinsic value of the firm's stock.

Accepted Answer

The intrinsic value is the true value, based on all available information. This includes information known only by the firm's managers (i.e., insider information) and includes any impacts the decisions have on any and all of the firm's stakeholders: customers, suppliers, employees, the community and the firm's investors.

Question 2

A business owned by two or more individuals, with some owners having different amounts of liability in the firm's debt, is called a:

Accepted Answer

A)   Corporation.
B)   S Corporation.
C)   General partnership.
D)   Limited partnership.
E)   Sole proprietorship. D

Question 3

Which of the following is a capital structure decision:

Accepted Answer

A)   How many shares of stock to issue.
B)   Whether or not to purchase a new machine for the production line.
C)   How much of a common dividend to pay.
D)   How much inventory to keep on hand.
E)   Whether or not to offer a discounted price to boost sales. A

Question 4

Name the three general areas in which financial decisions arise.

Accepted Answer

The answer of Name the three general areas in which...

Question 5

What is the main point of the Enron example used in this chapter?

Accepted Answer

The answer of What is the main point of the...

Question 6

Which of the following statements is correct?

Accepted Answer

A)   A limited partnership is legally the same as a corporation.
B)   Partnerships are the most complex type of organization to form.
C)   Earnings from sole proprietorships and partnerships are taxed at the individual level.
D)   Only sole proprietorships have limited lives.
E)   Limited partnerships are required to restate the liability to each partner annually when they file their financial reports with the SEC.

Question 7

A business owned by two or more individuals, all having equal liability in the firm's debt, is called a:

Accepted Answer

A)   Corporation.
B)   S Corporation.
C)   General partnership.
D)   Limited partnership.
E)   Sole proprietorship.

Question 8

Why is finance a strategic discipline?

Accepted Answer

The answer of Why is finance a strategic discipline?...

Question 9

Why is finance important to a business?

Accepted Answer

The answer of Why is finance important to a business?...

Question 10

Which of the following is a working capital management decision:

Accepted Answer

A)   How many shares of stock to issue.
B)   Whether or not to purchase a new machine for the production line.
C)   How much of a common dividend to pay.
D)   How much inventory to keep on hand.
E)   Whether or not to offer a discounted price to boost sales.

Exam 10: Finance Within the Firm