Exam 1: Overview of Financial Management and the Financial Environment

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's debts.

What is the main perceived attraction of income trusts?

While skillful workers and adequate capital support good businesses, outside connection and networking play no role.

Recently, Hale Corporation announced the sale of 2.5 million newly issued shares of its stock at a price of $21 per share. Hale sold the stock to an investment banker, which in turn sold it to individual and institutional investors. This is a primary market transaction.

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.

Money markets are markets for which of the following?

Which of the following statements best describes financial markets?

Which of the following financial intermediaries is not a depository institution?

Which of the following is a primary market transaction?

The best way to maximize the intrinsic value of a company and thus shareholders' wealth is to maximize its earnings per share.

Which of the following statements is INCORRECT?

With which of the following statements would most people in business agree?

An income trust essentially pays no corporate taxes.

Which of the following statements best describes firm organization?

You recently sold to your brother 200 shares of Disney stock; the transfer was made through a broker, and the trade occurred on the TSX. This is an example of which of the following?

Which of the following factors would be most likely to lead to an increase in interest rates in the economy?

Suppose the Bank of Canada announces plans to issue $50 billion of new bonds. Assuming the announcement was not expected, what effect, other things held constant, would that have on bond prices and interest rates?

Which of the following services will not be offered by insurance companies?

Which of the following statements best describes income trusts?

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.