Question 1

The 11 sections (titles) in the Sarbanes-Oxley Act of 2002 _____.

Accepted Answer

A)  require corporations to payout all the earnings as dividend 
B)  establish standards for accountability and responsibility in reporting financial information 
C)  allow management to take actions resulting in large gains to them and losses to stockholders 
D)  allow management to use confidential information for personal gains 
E)  require stockholders to make capital structure decisions 
A)  require corporations to payout all the earnings as dividend 
B)  establish standards for accountability and responsibility in reporting financial information 
C)  allow management to take actions resulting in large gains to them and losses to stockholders 
D)  allow management to use confidential information for personal gains 
E)  require stockholders to make capital structure decisions

Question 2

Which of the following is true of financial institutions?

Accepted Answer

A)  Financial institutions are the regulators of interest rates and other returns in financial markets. 
B)  Financial institutions require an understanding of factors that cause interest rates and other returns in the financial markets to rise and fall. 
C)  Financial institutions are accountable and responsible in reporting financial information for publicly traded corporations. 
D)  Financial institutions are required by the Sarbanes-Oxley Act to disclose the environment-friendly measures taken by investment corporations. 
E)  Financial institutions require public corporations to adopt socially responsible work practices. 
A)  Financial institutions are the regulators of interest rates and other returns in financial markets. 
B)  Financial institutions require an understanding of factors that cause interest rates and other returns in the financial markets to rise and fall. 
C)  Financial institutions are accountable and responsible in reporting financial information for publicly traded corporations. 
D)  Financial institutions are required by the Sarbanes-Oxley Act to disclose the environment-friendly measures taken by investment corporations. 
E)  Financial institutions require public corporations to adopt socially responsible work practices.

Question 3

Which of the following is true of stockholders in continental Europe?

Accepted Answer

A)  The stocks of corporations are widely dispersed among a large number of different investors, both individuals and institutions. 
B)  Many stockholders assign banks their proxy votes for the directors of the companies. 
C)  Banks are major stockholders of corporations in continental Europe. 
D)  Major stockholders of closed corporations are not involved in the firms' daily operations. 
E)  Stockholders in continental Europe are often family units resulting from the universal banking relationship existing in the United States. 
A)  The stocks of corporations are widely dispersed among a large number of different investors, both individuals and institutions. 
B)  Many stockholders assign banks their proxy votes for the directors of the companies. 
C)  Banks are major stockholders of corporations in continental Europe. 
D)  Major stockholders of closed corporations are not involved in the firms' daily operations. 
E)  Stockholders in continental Europe are often family units resulting from the universal banking relationship existing in the United States.

Question 4

Which of the following is an assumption of most of the traditional models in finance?

Accepted Answer

A)  No nation can place constraints on the transfer of corporate resources. 
B)  A competitive marketplace exists in which the terms of trade are determined by the participants. 
C)  Cash flows in various parts of a multinational corporate system are always denominated in the same currencies. 
D)  The exchange rate is determined by direct negotiation between the host government and the multinational corporation. 
E)  The ability to curtail unprofitable operations is uniform in all the countries in which subsidiaries operate. 
A)  No nation can place constraints on the transfer of corporate resources. 
B)  A competitive marketplace exists in which the terms of trade are determined by the participants. 
C)  Cash flows in various parts of a multinational corporate system are always denominated in the same currencies. 
D)  The exchange rate is determined by direct negotiation between the host government and the multinational corporation. 
E)  The ability to curtail unprofitable operations is uniform in all the countries in which subsidiaries operate.

Question 5

Which of the following is true of the investment function of finance?

Accepted Answer

A)  Investment function determines the most socially responsible behavior of the corporations 
B)  Investment function determines the values, risks, and returns associated with financial assets as stocks and bonds. 
C)  Investment function determines the optimal mix of securities based on the environment friendly behavior of the corporations. 
D)  Investment function determines the regulations applicable to a public corporation. 
E)  Investment function determines additional information about the procedures used to construct and report financial statements. 
A)  Investment function determines the most socially responsible behavior of the corporations 
B)  Investment function determines the values, risks, and returns associated with financial assets as stocks and bonds. 
C)  Investment function determines the optimal mix of securities based on the environment friendly behavior of the corporations. 
D)  Investment function determines the regulations applicable to a public corporation. 
E)  Investment function determines additional information about the procedures used to construct and report financial statements.

Question 6

In a competitive marketplace, if managers deviate too far from making decisions that are consistent with stockholder wealth maximization, they risk being disciplined by the market. Part of this discipline involves the threat of being taken over by groups who are more aligned with stockholder interests.

Accepted Answer

A) True 
 B)False

Question 7

Industrial groups are _____.

Accepted Answer

A)  owned and managed by the Securities and Exchange Commission 
B)  organizations that tie together all the functions of production and sales from start to finish 
C)  organizations that encompass firms involved in financing and marketing only 
D)  privately held companies and the stock of such firms are not traded publicly 
E)  led by the firm involved with manufacturing and distribution of products 
A)  owned and managed by the Securities and Exchange Commission 
B)  organizations that tie together all the functions of production and sales from start to finish 
C)  organizations that encompass firms involved in financing and marketing only 
D)  privately held companies and the stock of such firms are not traded publicly 
E)  led by the firm involved with manufacturing and distribution of products

Question 8

Nations do not have the sovereignty to expropriate the assets of a firm without compensation.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is true of a general partner of a limited liability partnership (LLP)?

Accepted Answer

A)  A general partner of a limited liability partnership (LLP) is fully personally liable for all business debts. 
B)  A general partner of a limited liability partnership (LLP) is liable for the negligence, irresponsibility, or similar acts committed by any other partner. 
C)  A general partner of a limited liability partnership (LLP) is considered as an investor only. 
D)  A general partner of a limited liability partnership (LLP) is liable only to the extent of his/her investment in the partnership. 
E)  A general partner of a limited liability partnership (LLP) is taxed for the limited partners' share of the partnership's income. 
A)  A general partner of a limited liability partnership (LLP) is fully personally liable for all business debts. 
B)  A general partner of a limited liability partnership (LLP) is liable for the negligence, irresponsibility, or similar acts committed by any other partner. 
C)  A general partner of a limited liability partnership (LLP) is considered as an investor only. 
D)  A general partner of a limited liability partnership (LLP) is liable only to the extent of his/her investment in the partnership. 
E)  A general partner of a limited liability partnership (LLP) is taxed for the limited partners' share of the partnership's income.

Question 10

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

Accepted Answer

A)  minimize the debt used by a firm 
B)  maximize expected EPS 
C)  minimize the chances of losses 
D)  maximize the stock price per share 
E)  maximize expected net income 
A)  minimize the debt used by a firm 
B)  maximize expected EPS 
C)  minimize the chances of losses 
D)  maximize the stock price per share 
E)  maximize expected net income

Question 11

If a firm's managers want to maximize stock price, it is in their best interests to operate efficient, low-cost plants, develop new and safe products that consumers want, and maintain good relationships with customers, suppliers, creditors, and the communities in which they operate.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is correct?

Accepted Answer

A)  Other things held constant, it is generally safer to invest money in a proprietorship than in a corporation. 
B)  There really is no difference between a general partnership and a corporation, because both have multiple owners and both offer limited liability to the owners. 
C)  If you are planning to start a business, which you will run as the sole employee, and if you expect the business to earn $1,000,000 per year before taxes, you always can minimize the total taxes you pay by setting up the business as a corporation. 
D)  According to the text, "agency problems" tend to increase when managers own larger relative amounts of the company's stock. 
E)  Maximizing the income statement item "net income" might not be the best goal for a corporation if the managers are interested in maximizing the economic welfare of the firm's stockholders (that is, the firm's stock price). 
A)  Other things held constant, it is generally safer to invest money in a proprietorship than in a corporation. 
B)  There really is no difference between a general partnership and a corporation, because both have multiple owners and both offer limited liability to the owners. 
C)  If you are planning to start a business, which you will run as the sole employee, and if you expect the business to earn $1,000,000 per year before taxes, you always can minimize the total taxes you pay by setting up the business as a corporation. 
D)  According to the text, "agency problems" tend to increase when managers own larger relative amounts of the company's stock. 
E)  Maximizing the income statement item "net income" might not be the best goal for a corporation if the managers are interested in maximizing the economic welfare of the firm's stockholders (that is, the firm's stock price).

Question 13

Compared to corporations, what is the primary disadvantage of partnerships as forms of business organizations?

Accepted Answer

A)  The tax rates applied to partnerships are higher than the tax rates applied to corporations. 
B)  Any dividends paid to the owners of a partnership business are taxed twice, once at the partnership level and once at the personal, or individual level. 
C)  Partnerships generally are more complex to form (start up) than corporations. 
D)  Partnerships have unlimited lives whereas corporations do not. 
E)  The owners of a partnership, that is, the partners, have unlimited liability when it comes to business obligations whereas the owners of a corporation have limited liability. 
A)  The tax rates applied to partnerships are higher than the tax rates applied to corporations. 
B)  Any dividends paid to the owners of a partnership business are taxed twice, once at the partnership level and once at the personal, or individual level. 
C)  Partnerships generally are more complex to form (start up) than corporations. 
D)  Partnerships have unlimited lives whereas corporations do not. 
E)  The owners of a partnership, that is, the partners, have unlimited liability when it comes to business obligations whereas the owners of a corporation have limited liability.

Question 14

Which of the following statements is correct?

Accepted Answer

A)  The optimal dividend policy is the one that satisfies the shareholders because they supply the firm's capital. 
B)  The use of debt financing has no effect on earnings per share (EPS) or stock price. 
C)  The riskiness of projected EPS can impact the firm's value. 
D)  Stock price is dependent on the projected EPS and the use of debt but not on the timing of the earnings stream. 
E)  Dividend policy is one aspect of the firm's financial policy that is determined directly by the shareholders. 
A)  The optimal dividend policy is the one that satisfies the shareholders because they supply the firm's capital. 
B)  The use of debt financing has no effect on earnings per share (EPS) or stock price. 
C)  The riskiness of projected EPS can impact the firm's value. 
D)  Stock price is dependent on the projected EPS and the use of debt but not on the timing of the earnings stream. 
E)  Dividend policy is one aspect of the firm's financial policy that is determined directly by the shareholders.

Question 15

The disadvantages associated with a proprietorship are similar to those under a partnership. One exception to this is the formal nature of the partnership agreement and the commitment of the partners' personal assets. As a result, partnerships do not have difficulty raising large amounts of capital.

Accepted Answer

A) True 
 B)False

Question 16

The finance function is relatively independent of most other corporate functions. Marketing decisions, for example, might affect the firm's need for funds but are not affected by conditions in financial markets or other financing issues.

Accepted Answer

A) True 
 B)False

Question 17

Identify a true statement about business ethics.

Accepted Answer

A)  Business ethics decrease shareholders' trust in the company. 
B)  Business ethics result in recurring fines and legal expenses. 
C)  Business ethics attract business from customers who appreciate and support political parties. 
D)  Business ethics reduce the economic viability of the communities where these firms operate. 
E)  Business ethics attract and keep employees of the highest caliber. 
A)  Business ethics decrease shareholders' trust in the company. 
B)  Business ethics result in recurring fines and legal expenses. 
C)  Business ethics attract business from customers who appreciate and support political parties. 
D)  Business ethics reduce the economic viability of the communities where these firms operate. 
E)  Business ethics attract and keep employees of the highest caliber.

Question 18

The prices at which the currency of one country can be converted into the currencies of other countries are known as _____.

Accepted Answer

A)  procurement prices 
B)  political risk costs 
C)  exchange rates 
D)  conversion costs 
E)  transfer prices 
A)  procurement prices 
B)  political risk costs 
C)  exchange rates 
D)  conversion costs 
E)  transfer prices

The 11 sections (titles) in the Sarbanes-Oxley Act of 2002 _____.

Which of the following is true of financial institutions?

Which of the following is true of stockholders in continental Europe?

Which of the following is an assumption of most of the traditional models in finance?

Which of the following is true of the investment function of finance?

Industrial groups are _____.

Nations do not have the sovereignty to expropriate the assets of a firm without compensation.

Which of the following is true of a general partner of a limited liability partnership (LLP)?

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

If a firm's managers want to maximize stock price, it is in their best interests to operate efficient, low-cost plants, develop new and safe products that consumers want, and maintain good relationships with customers, suppliers, creditors, and the communities in which they operate.

Which of the following statements is correct?

Compared to corporations, what is the primary disadvantage of partnerships as forms of business organizations?

Which of the following statements is correct?

The disadvantages associated with a proprietorship are similar to those under a partnership. One exception to this is the formal nature of the partnership agreement and the commitment of the partners' personal assets. As a result, partnerships do not have difficulty raising large amounts of capital.

The finance function is relatively independent of most other corporate functions. Marketing decisions, for example, might affect the firm's need for funds but are not affected by conditions in financial markets or other financing issues.

Identify a true statement about business ethics.

The prices at which the currency of one country can be converted into the currencies of other countries are known as _____.

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

The 11 sections (titles) in the Sarbanes-Oxley Act of 2002 _____.

Which of the following is true of financial institutions?

Which of the following is true of stockholders in continental Europe?

Which of the following is an assumption of most of the traditional models in finance?

Which of the following is true of the investment function of finance?

Industrial groups are _____.

Nations do not have the sovereignty to expropriate the assets of a firm without compensation.

Which of the following is true of a general partner of a limited liability partnership (LLP)?

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

If a firm's managers want to maximize stock price, it is in their best interests to operate efficient, low-cost plants, develop new and safe products that consumers want, and maintain good relationships with customers, suppliers, creditors, and the communities in which they operate.

Which of the following statements is correct?

Compared to corporations, what is the primary disadvantage of partnerships as forms of business organizations?

Which of the following statements is correct?

The finance function is relatively independent of most other corporate functions. Marketing decisions, for example, might affect the firm's need for funds but are not affected by conditions in financial markets or other financing issues.

Identify a true statement about business ethics.

The prices at which the currency of one country can be converted into the currencies of other countries are known as _____.

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