Exam 1: An Overview of Financial Management and the Financial Environment

There are three primary disadvantages of a regular partnership: (1) unlimited liability, (2) limited life of the organization, and (3) difficulty of transferring ownership.These combine to make it difficult for partnerships to attract large amounts of capital and thus to grow to a very large size.

Which of the following statements is CORRECT?

​Money markets are markets for

Debt is a less risky than equity because a debtholder's claim has priority to an equity holder's claim.

One drawback of switching from a partnership to the corporate form of organization is the following:

​You recently sold 200 shares of Apple stock to your brother.The transfer was made through a broker, and the trade occurred on the NYSE.This is an example of:

Which of the following statements is CORRECT?

If Firm A's business is to obtain savings from individuals and then invest them in financial assets issued by other firms or individuals, Firm A is a financial intermediary.

Cheers Inc.operates as a partnership.Now the partners have decided to convert the business into a regular corporation.Which of the following statements is CORRECT?

One key value of limited liability is that it lowers owners' risks and thereby enhances a firm's value.

You recently sold 100 shares of your new company, XYZ Corporation, to your brother at a family reunion.At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates.Which of the following statements best describes this transaction?

​ Which of the following statements is CORRECT?

Two disadvantages of a proprietorship are (1) the relative difficulty of raising new capital and (2) the owner's unlimited personal liability for the business' debts.

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to

Which of the following statements is CORRECT?

The major advantage of a regular partnership or a corporation as a form of business organization is the fact that both offer their owners limited liability, whereas proprietorships do not.

Which of the following statements is CORRECT?

The form of organization for a business is not an important issue, as this decision has very little effect on the income and wealth of the firm's owners.