Question 1

Which of the following statements best describes income trusts?

Accepted Answer

A)  Income trust investors do not need to pay personal taxes on cash distribution received. 
B)  Income trusts face the same issue of double taxation as corporations. 
C)  Up to 2011, existing income trusts are allowed to treat their equity as debt for tax purposes. 
D)  Income trusts usually require significant capital reinvestment in the businesses. 
A)  Income trust investors do not need to pay personal taxes on cash distribution received. 
B)  Income trusts face the same issue of double taxation as corporations. 
C)  Up to 2011, existing income trusts are allowed to treat their equity as debt for tax purposes. 
D)  Income trusts usually require significant capital reinvestment in the businesses.

Question 2

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 cheque for the shares and you gave your brother the share certificates. Which of the following statements best describes this transaction?

Accepted Answer

A)  This is an example of an exchange of physical assets. 
B)  This is an example of a primary market transaction. 
C)  This is an example of a direct transfer of capital. 
D)  This is an example of a money market transaction. 
A)  This is an example of an exchange of physical assets. 
B)  This is an example of a primary market transaction. 
C)  This is an example of a direct transfer of capital. 
D)  This is an example of a money market transaction.

Question 3

Which of the following statements best describes firm organization?

Accepted Answer

A)  One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. 
B)  It is generally easier to transfer one's ownership interest in a partnership than in a corporation. 
C)  One of the advantages of the corporate form of organization is that it avoids double taxation. 
D)  One of the advantages of a corporation from a social standpoint is that every shareholder has equal voting rights, i.e., "one person, one vote." 
A)  One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. 
B)  It is generally easier to transfer one's ownership interest in a partnership than in a corporation. 
C)  One of the advantages of the corporate form of organization is that it avoids double taxation. 
D)  One of the advantages of a corporation from a social standpoint is that every shareholder has equal voting rights, i.e., "one person, one vote."

Question 4

Which of the following statements is correct?

Accepted Answer

A)  A good goal for a firm's management is maximization of expected EPS. 
B)  Like corporations, the board of directors for an income trust supervises the operating entity on behalf of unitholders. 
C)  There is legal obligation to pay cash distributions for income trusts. 
D)  Agency conflicts easily arise between shareholders and managers. 
A)  A good goal for a firm's management is maximization of expected EPS. 
B)  Like corporations, the board of directors for an income trust supervises the operating entity on behalf of unitholders. 
C)  There is legal obligation to pay cash distributions for income trusts. 
D)  Agency conflicts easily arise between shareholders and managers.

Question 5

Which of the following statements is most accurate in regarding corporations?

Accepted Answer

A)  Due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of businesses are organized as corporations. 
B)  Due to legal considerations related to ownership transfers and limited liability, most business is conducted by corporations in spite of large corporations' often less favourable tax treatment. 
C)  Large corporations are taxed more favourably than sole proprietorships. 
D)  Corporate stockholders are exposed to unlimited liability. 
A)  Due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of businesses are organized as corporations. 
B)  Due to legal considerations related to ownership transfers and limited liability, most business is conducted by corporations in spite of large corporations' often less favourable tax treatment. 
C)  Large corporations are taxed more favourably than sole proprietorships. 
D)  Corporate stockholders are exposed to unlimited liability.

Question 6

What should be done to maximize shareholder wealth and thus the value of the firm?

Accepted Answer

A)  Decrease the size of expected cash flow of the company. 
B)  Slow down the cash receipt of the organization. 
C)  Increase the risk level of the firm. 
D)  Raise the free cash flows of the business. 
A)  Decrease the size of expected cash flow of the company. 
B)  Slow down the cash receipt of the organization. 
C)  Increase the risk level of the firm. 
D)  Raise the free cash flows of the business.

Question 7

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

Accepted Answer

A)  Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership. 
B)  Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization. 
C)  Corporate investors are exposed to limited growth potential. 
D)  Corporations generally face relatively few regulations. 
A)  Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership. 
B)  Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization. 
C)  Corporate investors are exposed to limited growth potential. 
D)  Corporations generally face relatively few regulations.

Question 8

The primary operating goal of a publicly owned firm interested in serving its shareholders should be to do which of the following?

Accepted Answer

A)  maximize the stock price per share over the long run, which is the stock's intrinsic value 
B)  maximize the firm's expected EPS 
C)  maximize the firm's expected total income 
D)  maximize the stock price on a specific target date 
A)  maximize the stock price per share over the long run, which is the stock's intrinsic value 
B)  maximize the firm's expected EPS 
C)  maximize the firm's expected total income 
D)  maximize the stock price on a specific target date

Question 9

Today, trustee services can be arranged only with trust companies.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements best describes partnerships?

Accepted Answer

A)  In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. 
B)  Partnerships have trouble attracting large capital due to such facts as unlimited liability, and the illiquidity of partnership interests. 
C)  A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster-growing company. 
D)  A major disadvantage of all partnerships relative to all corporations is the fact that taxes must be paid by the partners rather than by the firm itself. 
A)  In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. 
B)  Partnerships have trouble attracting large capital due to such facts as unlimited liability, and the illiquidity of partnership interests. 
C)  A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster-growing company. 
D)  A major disadvantage of all partnerships relative to all corporations is the fact that taxes must be paid by the partners rather than by the firm itself.

Question 11

Two key advantages to proprietorship are that, as a business, it pays no corporate income tax and is easily and inexpensively formed.

Accepted Answer

A) True 
 B)False

Which of the following statements best describes income trusts?

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 cheque for the shares and you gave your brother the share certificates. Which of the following statements best describes this transaction?

Which of the following statements best describes firm organization?

Which of the following statements is correct?

Which of the following statements is most accurate in regarding corporations?

What should be done to maximize shareholder wealth and thus the value of the firm?

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

The primary operating goal of a publicly owned firm interested in serving its shareholders should be to do which of the following?

Today, trustee services can be arranged only with trust companies.

Which of the following statements best describes partnerships?

Two key advantages to proprietorship are that, as a business, it pays no corporate income tax and is easily and inexpensively formed.

Financial Statements, Cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Financial Planning and Forecasting Financial Statements

Bonds, Bond Valuation, and Interest Rates

Risk, Return, and the Capital Asset Pricing Model

Stocks, Stock Valuation, and Stock Market Equilibrium

The Cost of Capital

The Basics of Capital Budgeting: Evaluating Cash Flows

Cash Flow Estimation and Risk Analysis

Capital Structure Decisions

Distributions to Shareholders: Dividends and Repurchases

Initial Public Offerings, Investment Banking, and Financial Restructuring

Lease Financing

Capital Market Financing: Hybrid and Other Securities

Working Capital Management and Short-Term Financing

Current Asset Management

Financial Options and Applications in Corporate Finance

Decision Trees, Real Options, and Other Capital Budgeting Techniques

Derivatives and Risk Management

International Financial Management

Corporate Valuation, Value-Based Management, and Corporate Governance

Mergers, Acquisitions, and Restructuring

Filters

Exam 1: Overview of Financial Management and the Financial Environment

Which of the following statements best describes income trusts?

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 cheque for the shares and you gave your brother the share certificates. Which of the following statements best describes this transaction?

Which of the following statements best describes firm organization?

Which of the following statements is correct?

Which of the following statements is most accurate in regarding corporations?

What should be done to maximize shareholder wealth and thus the value of the firm?

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

The primary operating goal of a publicly owned firm interested in serving its shareholders should be to do which of the following?

Today, trustee services can be arranged only with trust companies.

Which of the following statements best describes partnerships?

Two key advantages to proprietorship are that, as a business, it pays no corporate income tax and is easily and inexpensively formed.

Financial Statements, Cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Financial Planning and Forecasting Financial Statements

Bonds, Bond Valuation, and Interest Rates

Risk, Return, and the Capital Asset Pricing Model

Stocks, Stock Valuation, and Stock Market Equilibrium

The Cost of Capital

The Basics of Capital Budgeting: Evaluating Cash Flows

Cash Flow Estimation and Risk Analysis

Capital Structure Decisions

Distributions to Shareholders: Dividends and Repurchases

Initial Public Offerings, Investment Banking, and Financial Restructuring

Lease Financing

Capital Market Financing: Hybrid and Other Securities

Working Capital Management and Short-Term Financing

Current Asset Management

Financial Options and Applications in Corporate Finance

Decision Trees, Real Options, and Other Capital Budgeting Techniques

Derivatives and Risk Management

International Financial Management

Corporate Valuation, Value-Based Management, and Corporate Governance

Mergers, Acquisitions, and Restructuring

Filters