Question 1

Cash flow from a firm's assets can be:

Accepted Answer

A)  Reinvested to other companies. 
B)  Paid out as interest. 
C)  Distributed to bondholders. 
D)  Invested in money market funds. 
E)  Reinvested back in the company. 
A)  Reinvested to other companies. 
B)  Paid out as interest. 
C)  Distributed to bondholders. 
D)  Invested in money market funds. 
E)  Reinvested back in the company. E

Question 2

To avoid the agency problem, managers should take actions:

Accepted Answer

A)  Which adds value to the firm. 
B)  Only after the president has approved them. 
C)  Only if they increase the market share of the firm. 
D)  Which add to the size of the firm's workforce. 
E)  Only if management jobs will not be jeopardized. 
A)  Which adds value to the firm. 
B)  Only after the president has approved them. 
C)  Only if they increase the market share of the firm. 
D)  Which add to the size of the firm's workforce. 
E)  Only if management jobs will not be jeopardized. A

Question 3

The best definition of regulatory dialectic is:

Accepted Answer

A)  The pressures government exerts on regulatory bodies. 
B)  The pressures financial institutions and regulatory bodies exert on each other. 
C)  The pressures regulatory bodies exert on corporations. 
D)  The pressures financial institutions exert on corporations. 
E)  The pressures regulatory bodies exert on investors. 
A)  The pressures government exerts on regulatory bodies. 
B)  The pressures financial institutions and regulatory bodies exert on each other. 
C)  The pressures regulatory bodies exert on corporations. 
D)  The pressures financial institutions exert on corporations. 
E)  The pressures regulatory bodies exert on investors. B

Question 4

What aspects of cash flows is part of the financial manager's responsibility?

Accepted Answer

The financial manager is responsible for

Question 5

The treasurer and the controller of a corporation generally report to the:

Accepted Answer

A)  Board of directors. 
B)  Chairman of the board. 
C)  Chief executive officer. 
D)  President. 
E)  Vice president of finance. 
A)  Board of directors. 
B)  Chairman of the board. 
C)  Chief executive officer. 
D)  President. 
E)  Vice president of finance.

Question 6

Managers who place the interest of the shareholders first, will tend to:

Accepted Answer

A)  Be replaced on a routine basis. 
B)  Decline all offers to buy the firm. 
C)  Realize minimal value from the stock options they are granted. 
D)  Reward employees for unethical behavior if that behavior increases the firm's net income. 
E)  Be in greater demand and receive higher compensation. 
A)  Be replaced on a routine basis. 
B)  Decline all offers to buy the firm. 
C)  Realize minimal value from the stock options they are granted. 
D)  Reward employees for unethical behavior if that behavior increases the firm's net income. 
E)  Be in greater demand and receive higher compensation.

Question 7

Trace the passage of cash from the financial markets to the firm and from the firm back to the financial markets.

Accepted Answer

A)  1. Cash flows to the firm from the financial market. 2. The firm invests the cash in current and fixed assets. 3. These assets generate cash. 4. Corporate taxes are paid. 5. Cash flow is reinvested in the firm. 6. The rest goes back to the financial markets as cash paid to creditors and shareholders. 
B)  1. The firm invests the cash in current and fixed assets. 2. Cash flows to the firm from the financial market. 3. These assets generate cash. 4. Corporate taxes are paid. 5. Cash flow is reinvested in the firm. 6. The rest goes back to the financial markets as cash paid to creditors and shareholders. 
C)  1. The firm invests the cash in current and fixed assets. 2. These assets generate cash. 3. Cash flows to the firm from the financial market. 4. Corporate taxes are paid. 5. Cash flow is reinvested in the firm. 6. The rest goes back to the financial markets as cash paid to creditors and shareholders. 
D)  1. The firm invests the cash in current and fixed assets. 2. These assets generate cash. 3. The rest goes back to the financial markets as cash paid to creditors and shareholders. 4. Cash flows to the firm from the financial market. 5. Corporate taxes are paid. 6. Cash flow is reinvested in the firm. 
E)  1. The firm invests the cash in current and fixed assets. 2. Corporate taxes are paid. 3. These assets generate cash. 4. Cash flows to the firm from the financial market. 5. Cash flow is reinvested in the firm. 6. The rest goes back to the financial markets as cash paid to creditors and shareholders. 
A)  1. Cash flows to the firm from the financial market. 2. The firm invests the cash in current and fixed assets. 3. These assets generate cash. 4. Corporate taxes are paid. 5. Cash flow is reinvested in the firm. 6. The rest goes back to the financial markets as cash paid to creditors and shareholders. 
B)  1. The firm invests the cash in current and fixed assets. 2. Cash flows to the firm from the financial market. 3. These assets generate cash. 4. Corporate taxes are paid. 5. Cash flow is reinvested in the firm. 6. The rest goes back to the financial markets as cash paid to creditors and shareholders. 
C)  1. The firm invests the cash in current and fixed assets. 2. These assets generate cash. 3. Cash flows to the firm from the financial market. 4. Corporate taxes are paid. 5. Cash flow is reinvested in the firm. 6. The rest goes back to the financial markets as cash paid to creditors and shareholders. 
D)  1. The firm invests the cash in current and fixed assets. 2. These assets generate cash. 3. The rest goes back to the financial markets as cash paid to creditors and shareholders. 4. Cash flows to the firm from the financial market. 5. Corporate taxes are paid. 6. Cash flow is reinvested in the firm. 
E)  1. The firm invests the cash in current and fixed assets. 2. Corporate taxes are paid. 3. These assets generate cash. 4. Cash flows to the firm from the financial market. 5. Cash flow is reinvested in the firm. 6. The rest goes back to the financial markets as cash paid to creditors and shareholders.

Question 8

The original sale of securities by governments and corporations to the general public occurs in the:

Accepted Answer

A)  Primary market. 
B)  Secondary market. 
C)  Private placement market. 
D)  Proprietary market. 
E)  Liquidation market. 
A)  Primary market. 
B)  Secondary market. 
C)  Private placement market. 
D)  Proprietary market. 
E)  Liquidation market.

Question 9

A capital expenditure project becomes desirable when the project is worth more to the firm than the cost to acquire it.

Accepted Answer

A) True 
 B)False

Question 10

In a general partnership:

Accepted Answer

A)  Each partner is personally responsible for all of the firm's debt. 
B)  Each partner is responsible only for his/her portion of the firm's debt based on ownership percentage. 
C)  Each partner is liable only for the portion of the total debt he/she agreed in writing to pay. 
D)  Only the general partner is liable for the firm's debt. 
E)  None of the partners are personally liable for the firm's debt. 
A)  Each partner is personally responsible for all of the firm's debt. 
B)  Each partner is responsible only for his/her portion of the firm's debt based on ownership percentage. 
C)  Each partner is liable only for the portion of the total debt he/she agreed in writing to pay. 
D)  Only the general partner is liable for the firm's debt. 
E)  None of the partners are personally liable for the firm's debt.

Question 11

A business formed by two or more individuals or entities is called a(n):

Accepted Answer

A)  Corporation. 
B)  Sole proprietorship. 
C)  Partnership. 
D)  Closed receivership. 
E)  Open structure. 
A)  Corporation. 
B)  Sole proprietorship. 
C)  Partnership. 
D)  Closed receivership. 
E)  Open structure.

Question 12

The controller can be defined as the person who is generally responsible for overseeing the _____ of a firm.

Accepted Answer

A)  Cash balances. 
B)  Capital expenditures. 
C)  Production functions. 
D)  Accounting functions. 
E)  Financial planning. 
A)  Cash balances. 
B)  Capital expenditures. 
C)  Production functions. 
D)  Accounting functions. 
E)  Financial planning.

Question 13

Which one of the following actions by a financial manager creates an agency problem?

Accepted Answer

A)  Refusing to borrow money when doing so will create losses for the firm. 
B)  Refusing to lower selling prices if doing so will reduce the net profits. 
C)  Agreeing to expand the company at the expense of stockholders' value. 
D)  Agreeing to pay bonuses based on the market value of the company stock. 
E)  Increasing current costs to increase the market value of the stockholders' equity. 
A)  Refusing to borrow money when doing so will create losses for the firm. 
B)  Refusing to lower selling prices if doing so will reduce the net profits. 
C)  Agreeing to expand the company at the expense of stockholders' value. 
D)  Agreeing to pay bonuses based on the market value of the company stock. 
E)  Increasing current costs to increase the market value of the stockholders' equity.

Question 14

A limited partner can lose his or her investment in the partnership.

Accepted Answer

A) True 
 B)False

Question 15

A market where trading takes place directly between buyers and sellers is called a(n):

Accepted Answer

A)  Primary market. 
B)  OTC market. 
C)  Dealer market. 
D)  Auction market. 
E)  Liquidation market. 
A)  Primary market. 
B)  OTC market. 
C)  Dealer market. 
D)  Auction market. 
E)  Liquidation market.

Question 16

The primary market is defined as the market:

Accepted Answer

A)  Wherein the original sale of securities by the issuer to the general public occurs. 
B)  Where stocks and bonds are exchanged between dealers. 
C)  Mechanism by which a sale of a financial instrument between two shareholders is conducted. 
D)  Operated by brokers for the benefit of shareholders. 
E)  Commonly known as the over-the-counter market. 
A)  Wherein the original sale of securities by the issuer to the general public occurs. 
B)  Where stocks and bonds are exchanged between dealers. 
C)  Mechanism by which a sale of a financial instrument between two shareholders is conducted. 
D)  Operated by brokers for the benefit of shareholders. 
E)  Commonly known as the over-the-counter market.

Question 17

Which of the following is a type of agency cost?

Accepted Answer

A)  The cost of an audit of the firm's financial statements. 
B)  The cost of a corporate jet needed to keep tabs on foreign operations. 
C)  Salaries paid to the firm's managers. 
D)  The costs of financing the firm. 
E)  The cost of buying insurance on the firm's assets. 
A)  The cost of an audit of the firm's financial statements. 
B)  The cost of a corporate jet needed to keep tabs on foreign operations. 
C)  Salaries paid to the firm's managers. 
D)  The costs of financing the firm. 
E)  The cost of buying insurance on the firm's assets.

Question 18

The Corporate Treasurer is in charge of:

Accepted Answer

A)  Cost accounting. 
B)  Credit management. 
C)  Data processing. 
D)  Tax management. 
E)  Financial accounting. 
A)  Cost accounting. 
B)  Credit management. 
C)  Data processing. 
D)  Tax management. 
E)  Financial accounting.

Question 19

The articles of incorporation:

Accepted Answer

A)  Can be used to remove company management. 
B)  Are amended annually by the company stockholders. 
C)  Set forth the number of shares of stock that can be issued. 
D)  Set forth the rules by which the corporation regulates its existence. 
E)  Can set forth the conditions under which the firm can avoid double taxation. 
A)  Can be used to remove company management. 
B)  Are amended annually by the company stockholders. 
C)  Set forth the number of shares of stock that can be issued. 
D)  Set forth the rules by which the corporation regulates its existence. 
E)  Can set forth the conditions under which the firm can avoid double taxation.

Question 20

When one shareholder sells stock directly to another, the transaction is said to occur in the:

Accepted Answer

A)  Dealer market. 
B)  Primary market. 
C)  Secondary market. 
D)  OTC market. 
E)  TSX market. 
A)  Dealer market. 
B)  Primary market. 
C)  Secondary market. 
D)  OTC market. 
E)  TSX market.

Exam 1: Introduction to Corporate Finance

Cash flow from a firm's assets can be:

To avoid the agency problem, managers should take actions:

The best definition of regulatory dialectic is:

What aspects of cash flows is part of the financial manager's responsibility?

The treasurer and the controller of a corporation generally report to the:

Managers who place the interest of the shareholders first, will tend to:

Trace the passage of cash from the financial markets to the firm and from the firm back to the financial markets.

The original sale of securities by governments and corporations to the general public occurs in the:

A capital expenditure project becomes desirable when the project is worth more to the firm than the cost to acquire it.

In a general partnership:

A business formed by two or more individuals or entities is called a(n):

The controller can be defined as the person who is generally responsible for overseeing the _____ of a firm.

Which one of the following actions by a financial manager creates an agency problem?

A limited partner can lose his or her investment in the partnership.

A market where trading takes place directly between buyers and sellers is called a(n):

The primary market is defined as the market:

Which of the following is a type of agency cost?

The Corporate Treasurer is in charge of:

The articles of incorporation:

When one shareholder sells stock directly to another, the transaction is said to occur in the:

Financial Statements, Cash Flow, and Taxes

Working With Financial Statements

Long-Term Financial Planning and Corporate Growth

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Dividend Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Enterprise Risk Management

Options and Corporate Securities

Behavioural Finance: Implications for Financial Management

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