Question 1

Identify a true statement about a limited liability company (LLC).

Accepted Answer

A)  A limited liability company (LL
C)  has a maximum of 100 stockholders. 
B)  A limited liability company (LL
C)  offers the limited personal liability associated with a corporation. 
C)  A limited liability company (LL
C)  has only one type of stock (membership interest). 
D)  A limited liability company (LL
C)  is taxed as a partnership and the stockholders are subject to double taxation. 
E)  A limited liability company (LL
C)  is liable for the negligence, irresponsibility, or similar acts committed by any partner. 
A)  A limited liability company (LL
C)  has a maximum of 100 stockholders. 
B)  A limited liability company (LL
C)  offers the limited personal liability associated with a corporation. 
C)  A limited liability company (LL
C)  has only one type of stock (membership interest). 
D)  A limited liability company (LL
C)  is taxed as a partnership and the stockholders are subject to double taxation. 
E)  A limited liability company (LL
C)  is liable for the negligence, irresponsibility, or similar acts committed by any partner.

Question 2

Which of the following statements is true of the firms that operate in several different countries?

Accepted Answer

A)  The currency values of several different countries do not fluctuate. 
B)  Cash flows of various parts of a multinational corporate system are always denominated in the same currencies. 
C)  Institutional differences among countries can cause significant problems in coordination of subsidiaries. 
D)  No nation places constraints on the transfer of corporate resources. 
E)  Within homogeneous geographic regions, different countries have uniform cultural heritages that shape values and influence the role of business in the society. 
A)  The currency values of several different countries do not fluctuate. 
B)  Cash flows of various parts of a multinational corporate system are always denominated in the same currencies. 
C)  Institutional differences among countries can cause significant problems in coordination of subsidiaries. 
D)  No nation places constraints on the transfer of corporate resources. 
E)  Within homogeneous geographic regions, different countries have uniform cultural heritages that shape values and influence the role of business in the society.

Question 3

The controller of a company is a key subordinate of the _____.

Accepted Answer

A)  treasurer 
B)  financial vice president 
C)  chief financial officer 
D)  credit manager 
E)  director of capital budgeting 
A)  treasurer 
B)  financial vice president 
C)  chief financial officer 
D)  credit manager 
E)  director of capital budgeting

Question 4

The credit manager is supervised by the _____.

Accepted Answer

A)  treasurer 
B)  inventory manager 
C)  director of capital budgeting 
D)  vice president of finance 
E)  controller 
A)  treasurer 
B)  inventory manager 
C)  director of capital budgeting 
D)  vice president of finance 
E)  controller

Question 5

Having the manager's compensation tied to the company's performance increases the agency problem that corporations face.

Accepted Answer

A) True 
 B)False

Question 6

Everything else equal, including firm size, dollar sales, type of product sold, and so forth, the primary difference between proprietorship and partnership business forms is that _____.

Accepted Answer

A)  a partnership has more owners than a proprietorship 
B)  the combined personal liability associated with a partnership is significantly less than the combined personal liability associated with a proprietorship 
C)  a partnership is generally easier to form than a proprietorship 
D)  the annual growth rate of a proprietorship is limited by law, whereas the growth rate of a partnership is always potentially unlimited 
E)  many more businesses are formed as partnerships than proprietorships 
A)  a partnership has more owners than a proprietorship 
B)  the combined personal liability associated with a partnership is significantly less than the combined personal liability associated with a proprietorship 
C)  a partnership is generally easier to form than a proprietorship 
D)  the annual growth rate of a proprietorship is limited by law, whereas the growth rate of a partnership is always potentially unlimited 
E)  many more businesses are formed as partnerships than proprietorships

Question 7

The Sarbanes-Oxley Act of 2002 requires a publicly-traded corporation to _____.

Accepted Answer

A)  keep confidential the procedures used to construct and report financial statements. 
B)  have an internal audit team that render an unbiased (independent) opinion concerning the firm's financial statements 
C)  have a committee that consists of outside directors to oversee the firm's audits 
D)  increase the certainty of the expected cash flows 
E)  adopt the primary goal of stockholder wealth maximization 
A)  keep confidential the procedures used to construct and report financial statements. 
B)  have an internal audit team that render an unbiased (independent) opinion concerning the firm's financial statements 
C)  have a committee that consists of outside directors to oversee the firm's audits 
D)  increase the certainty of the expected cash flows 
E)  adopt the primary goal of stockholder wealth maximization

Question 8

Identify a true statement about a limited liability company (LLC).

Accepted Answer

A)  A limited liability company can be taxed as a corporation only. 
B)  One of the owners of a limited liability company is designated as a general partner with unlimited personal financial liability. 
C)  A limited liability company has no more than 100 stockholders. 
D)  One of the owners of a limited liability company can participate in the management of the business. 
E)  A limited liability company can have more than one type of stock outstanding. 
A)  A limited liability company can be taxed as a corporation only. 
B)  One of the owners of a limited liability company is designated as a general partner with unlimited personal financial liability. 
C)  A limited liability company has no more than 100 stockholders. 
D)  One of the owners of a limited liability company can participate in the management of the business. 
E)  A limited liability company can have more than one type of stock outstanding.

Question 9

Which of the following is a problem when a firm tries to coordinate and control the worldwide operations of its subsidiaries?

Accepted Answer

A)  The management personnel of its subsidiaries are fluent in several languages. 
B)  The countries in which the subsidiaries are located do not place constraints on the transfer of corporate resources. 
C)  Cash flows in different subsidiaries are denominated in different currencies. 
D)  The terms of trade determined after negotiation with the host government and the multinational corporation are well aligned to the firm's policies. 
E)  All the countries in which the subsidiaries are based have homogeneous cultural heritages. 
A)  The management personnel of its subsidiaries are fluent in several languages. 
B)  The countries in which the subsidiaries are located do not place constraints on the transfer of corporate resources. 
C)  Cash flows in different subsidiaries are denominated in different currencies. 
D)  The terms of trade determined after negotiation with the host government and the multinational corporation are well aligned to the firm's policies. 
E)  All the countries in which the subsidiaries are based have homogeneous cultural heritages.

Question 10

Identify a true statement about a limited liability partnership (LLP).

Accepted Answer

A)  A general partner of a limited liability partnership is responsible for the negligence and irresponsibility of limited partners. 
B)  A limited partner of a limited liability partnership is responsible for the general management of the partnership business. 
C)  A general partner of a limited liability partnership is liable to pay tax on all the partnership income. 
D)  A general partner of a limited liability partnership is personally liable for all business debts. 
E)  A limited partner responsible for the negligence and irresponsibility of general partners. 
A)  A general partner of a limited liability partnership is responsible for the negligence and irresponsibility of limited partners. 
B)  A limited partner of a limited liability partnership is responsible for the general management of the partnership business. 
C)  A general partner of a limited liability partnership is liable to pay tax on all the partnership income. 
D)  A general partner of a limited liability partnership is personally liable for all business debts. 
E)  A limited partner responsible for the negligence and irresponsibility of general partners.

Question 11

Stock price maximization requires _____.

Accepted Answer

A)  sale of high-quality goods and services at the highest possible prices 
B)  efficient, low-cost plants that produce high-quality goods and services 
C)  the development of products that can be sold at a higher price to consumers 
D)  investment in high-cost plants to manufacture efficiently 
E)  investment in one business establishment to cut the operational cost of multiple establishments 
A)  sale of high-quality goods and services at the highest possible prices 
B)  efficient, low-cost plants that produce high-quality goods and services 
C)  the development of products that can be sold at a higher price to consumers 
D)  investment in high-cost plants to manufacture efficiently 
E)  investment in one business establishment to cut the operational cost of multiple establishments

Question 12

The decision framework of the financial managers that seek that combination of assets, liabilities, and capital which will generate the largest expected projected income over the relevant time horizon is most useful for carrying out the firm's objective.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is correct?

Accepted Answer

A)  A major disadvantage of a regular partnership or a corporation as a form of business is the fact that they do not offer their owners limited liability, whereas proprietorships do. 
B)  An advantage of the corporate form for many businesses is the fact that the corporate tax rate always exceeds the personal tax rate, which is the rate at which proprietorships and partnerships are taxed. 
C)  There are more partnerships and sole proprietorships than corporations in the U.S., but corporations produce more goods and services than do other forms of business. 
D)  Because corporations enjoy the benefits of limited liability, easy transferability of ownership interest, unlimited life, and favorable tax status relative to the situation for partnerships and proprietorships, most large businesses choose to incorporate. 
E)  Because lawyers have the incorporation process so automated (e.g., word processors for drawing up the necessary papers), it is less expensive to form a corporation than to form a proprietorship or partnership. 
A)  A major disadvantage of a regular partnership or a corporation as a form of business is the fact that they do not offer their owners limited liability, whereas proprietorships do. 
B)  An advantage of the corporate form for many businesses is the fact that the corporate tax rate always exceeds the personal tax rate, which is the rate at which proprietorships and partnerships are taxed. 
C)  There are more partnerships and sole proprietorships than corporations in the U.S., but corporations produce more goods and services than do other forms of business. 
D)  Because corporations enjoy the benefits of limited liability, easy transferability of ownership interest, unlimited life, and favorable tax status relative to the situation for partnerships and proprietorships, most large businesses choose to incorporate. 
E)  Because lawyers have the incorporation process so automated (e.g., word processors for drawing up the necessary papers), it is less expensive to form a corporation than to form a proprietorship or partnership.

Question 14

In general, the role of the financial manager is to plan for the acquisition and use of funds so as to maximize the value of the firm.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is a reason for a company to go international?

Accepted Answer

A)  The company manufactures products that have saturated foreign markets. 
B)  The company holds a patent for the best production technology for its products. 
C)  The company is manufacturing the finished product in their country at a very high production cost. 
D)  The company has the best access to the basic resources in their country needed to sustain their primary business. 
E)  The company faces political and regulatory hurdles in other countries. 
A)  The company manufactures products that have saturated foreign markets. 
B)  The company holds a patent for the best production technology for its products. 
C)  The company is manufacturing the finished product in their country at a very high production cost. 
D)  The company has the best access to the basic resources in their country needed to sustain their primary business. 
E)  The company faces political and regulatory hurdles in other countries.

Question 16

Exchange rate risk is the risk that the cash flows from a foreign project will be worth less than those same cash flows denominated in the parent company's home currency.

Accepted Answer

A) True 
 B)False

Question 17

Managers of firms using accounting manipulations to inflate current earnings are likely to generate long-term benefits to the shareholders of the firm.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is correct?

Accepted Answer

A)  In a partnership, liability for other partners' misdeeds includes but is limited to the amount a particular partner has invested in the business. 
B)  Partnerships must be formed according to specific rules, which include the filing of a formal written agreement with state authorities where the partnership does business. 
C)  A fast growth company would be more likely to set up a partnership for its business organization than would a slow-growth company. 
D)  Under partnership law, if any partner is unable to meet his or her pro rata claim in the event the partnership goes bankrupt, the remaining partners must make good on the unsatisfied claims. 
E)  A major disadvantage of a partnership as a form of business organization is the high cost and practical difficulty of its formation. 
A)  In a partnership, liability for other partners' misdeeds includes but is limited to the amount a particular partner has invested in the business. 
B)  Partnerships must be formed according to specific rules, which include the filing of a formal written agreement with state authorities where the partnership does business. 
C)  A fast growth company would be more likely to set up a partnership for its business organization than would a slow-growth company. 
D)  Under partnership law, if any partner is unable to meet his or her pro rata claim in the event the partnership goes bankrupt, the remaining partners must make good on the unsatisfied claims. 
E)  A major disadvantage of a partnership as a form of business organization is the high cost and practical difficulty of its formation.

Question 19

Which of the following is an example of ethical behavior of the management of a corporation?

Accepted Answer

A)  Executives of the corporation are pursuing their personal interest. 
B)  Payment of bribe by the management of the corporation to foreign governments to obtain business. 
C)  The management of the corporation uses confidential information for personal gain. 
D)  The management actions are often resulting in large gains for themselves and large losses for stockholders. 
E)  The management takes steps to adhere to laws and regulations relating to product safety. 
A)  Executives of the corporation are pursuing their personal interest. 
B)  Payment of bribe by the management of the corporation to foreign governments to obtain business. 
C)  The management of the corporation uses confidential information for personal gain. 
D)  The management actions are often resulting in large gains for themselves and large losses for stockholders. 
E)  The management takes steps to adhere to laws and regulations relating to product safety.

Question 20

The success of financial institutions depends on _____.

Accepted Answer

A)  the understanding of the factors that cause interest rates and other returns in the financial markets to rise and fall 
B)  the environmentally responsible behavior of the shareholders of corporations 
C)  the expectations of long-term investors in the company 
D)  the awareness of the shareholders regarding the regulations that affect public corporations 
E)  the prior knowledge of the decisions that public corporations make concerning their cash flows 
A)  the understanding of the factors that cause interest rates and other returns in the financial markets to rise and fall 
B)  the environmentally responsible behavior of the shareholders of corporations 
C)  the expectations of long-term investors in the company 
D)  the awareness of the shareholders regarding the regulations that affect public corporations 
E)  the prior knowledge of the decisions that public corporations make concerning their cash flows

Identify a true statement about a limited liability company (LLC).

Which of the following statements is true of the firms that operate in several different countries?

The controller of a company is a key subordinate of the _____.

The credit manager is supervised by the _____.

Having the manager's compensation tied to the company's performance increases the agency problem that corporations face.

Everything else equal, including firm size, dollar sales, type of product sold, and so forth, the primary difference between proprietorship and partnership business forms is that _____.

The Sarbanes-Oxley Act of 2002 requires a publicly-traded corporation to _____.

Identify a true statement about a limited liability company (LLC).

Which of the following is a problem when a firm tries to coordinate and control the worldwide operations of its subsidiaries?

Identify a true statement about a limited liability partnership (LLP).

Stock price maximization requires _____.

The decision framework of the financial managers that seek that combination of assets, liabilities, and capital which will generate the largest expected projected income over the relevant time horizon is most useful for carrying out the firm's objective.

Which of the following statements is correct?

In general, the role of the financial manager is to plan for the acquisition and use of funds so as to maximize the value of the firm.

Which of the following is a reason for a company to go international?

Exchange rate risk is the risk that the cash flows from a foreign project will be worth less than those same cash flows denominated in the parent company's home currency.

Managers of firms using accounting manipulations to inflate current earnings are likely to generate long-term benefits to the shareholders of the firm.

Which of the following statements is correct?

Which of the following is an example of ethical behavior of the management of a corporation?

The success of financial institutions depends on _____.

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debtcharacteristics and Valuation

Stocks Equity Characteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Managing Short-Term Assets

Financial Planning and Control

Filters

Exam 1: An Overview of Managerial Finance

Identify a true statement about a limited liability company (LLC).

Which of the following statements is true of the firms that operate in several different countries?

The controller of a company is a key subordinate of the _____.

The credit manager is supervised by the _____.

Having the manager's compensation tied to the company's performance increases the agency problem that corporations face.

Everything else equal, including firm size, dollar sales, type of product sold, and so forth, the primary difference between proprietorship and partnership business forms is that _____.

The Sarbanes-Oxley Act of 2002 requires a publicly-traded corporation to _____.

Identify a true statement about a limited liability company (LLC).

Which of the following is a problem when a firm tries to coordinate and control the worldwide operations of its subsidiaries?

Identify a true statement about a limited liability partnership (LLP).

Stock price maximization requires _____.

The decision framework of the financial managers that seek that combination of assets, liabilities, and capital which will generate the largest expected projected income over the relevant time horizon is most useful for carrying out the firm's objective.

Which of the following statements is correct?

In general, the role of the financial manager is to plan for the acquisition and use of funds so as to maximize the value of the firm.

Which of the following is a reason for a company to go international?

Exchange rate risk is the risk that the cash flows from a foreign project will be worth less than those same cash flows denominated in the parent company's home currency.

Managers of firms using accounting manipulations to inflate current earnings are likely to generate long-term benefits to the shareholders of the firm.

Which of the following statements is correct?

Which of the following is an example of ethical behavior of the management of a corporation?

The success of financial institutions depends on _____.

Analysis of Financial Statements

The Financial Environment: Markets, Institutions, and Investment Banking

Time Value of Money

The Cost of Money Interest Rates

Bonds Debtcharacteristics and Valuation

Stocks Equity Characteristics and Valuation

Risk and Rates of Return

Capital Budgeting Techniques

Project Cash Flows and Risk

The Cost of Capital

Capital Structure

Distribution of Retained Earnings: Dividends and Stock Repurchases

Managing Short-Term Financing Liabilities

Managing Short-Term Assets

Financial Planning and Control

Filters