Question 1

Which one of these terms refers to a conflict of interest between the stockholders and managers of a corporation?

Accepted Answer

A) Stakeholder claim 
B) Corporate activism 
C) Legal liability 
D) Breach of indemnity 
E) Agency problem 
A) Stakeholder claim 
B) Corporate activism 
C) Legal liability 
D) Breach of indemnity 
E) Agency problem E

Question 2

The goal of financial management focuses on the fact that

Accepted Answer

A) the company will grow in size. 
B) employee salaries should increase over time. 
C) the current stockholders are the owners of the corporation. 
D) the firm should expand faster than its competitors. 
E) the current corporate officers should be highly compensated. 
A) the company will grow in size. 
B) employee salaries should increase over time. 
C) the current stockholders are the owners of the corporation. 
D) the firm should expand faster than its competitors. 
E) the current corporate officers should be highly compensated. C

Question 3

Which form(s)of business is a treated as a distinct legal entity separate from its owners?

Accepted Answer

A) Limited partnership 
B) Sole proprietorship 
C) General partnership 
D) Corporation 
E) Both a limited partnership and a corporation 
A) Limited partnership 
B) Sole proprietorship 
C) General partnership 
D) Corporation 
E) Both a limited partnership and a corporation D

Question 4

Which one of these is an advantage of a general partnership?

Accepted Answer

A) Limited life of the firm 
B) Personal liability for firm debt 
C) Greater ability to raise capital than a sole proprietorship 
D) Ease of transferring partnership interest 
E) Limited liability 
A) Limited life of the firm 
B) Personal liability for firm debt 
C) Greater ability to raise capital than a sole proprietorship 
D) Ease of transferring partnership interest 
E) Limited liability

Question 5

Current assets include

Accepted Answer

A) inventory and cash. 
B) cash and buildings. 
C) inventory and machinery. 
D) equipment and cash. 
E) buildings and inventory. 
A) inventory and cash. 
B) cash and buildings. 
C) inventory and machinery. 
D) equipment and cash. 
E) buildings and inventory.

Question 6

Which one of the following is least apt to convince managers to work in the best interest of the current stockholders?

Accepted Answer

A) Receiving a bonus based on company profits 
B) Receiving stock options 
C) Being threatened with a proxy fight 
D) Receiving a bonus based on company size 
E) Receiving company shares based on increases in share value 
A) Receiving a bonus based on company profits 
B) Receiving stock options 
C) Being threatened with a proxy fight 
D) Receiving a bonus based on company size 
E) Receiving company shares based on increases in share value

Question 7

Which one of the following actions by a financial manager least meets the goal of financial management?

Accepted Answer

A) Increasing current costs in order to increase the market value of the stockholders' equity 
B) Agreeing to expand the company at the expense of stockholders' value 
C) Refusing to lower selling prices if doing so will reduce the net profits 
D) Agreeing to pay bonuses based on the market value of the company stock 
E) Refusing to borrow money when doing so will create losses for the firm 
A) Increasing current costs in order to increase the market value of the stockholders' equity 
B) Agreeing to expand the company at the expense of stockholders' value 
C) Refusing to lower selling prices if doing so will reduce the net profits 
D) Agreeing to pay bonuses based on the market value of the company stock 
E) Refusing to borrow money when doing so will create losses for the firm

Question 8

The division of profits and losses among the members of a partnership is formalized in the

Accepted Answer

A) indemnity clause. 
B) partnership agreement. 
C) statement of purpose. 
D) indenture contract. 
E) group charter. 
A) indemnity clause. 
B) partnership agreement. 
C) statement of purpose. 
D) indenture contract. 
E) group charter.

Question 9

The primary purpose of the Sarbanes-Oxley Act of 2002 is to

Accepted Answer

A) protect investors from corporate abuses. 
B) apply restrictions on foreign firms operating in the United States. 
C) protect financial managers from investors. 
D) decrease audit costs for U.S.firms. 
E) reduce corporate revenues. 
A) protect investors from corporate abuses. 
B) apply restrictions on foreign firms operating in the United States. 
C) protect financial managers from investors. 
D) decrease audit costs for U.S.firms. 
E) reduce corporate revenues.

Question 10

Which one of these statements is correct?

Accepted Answer

A) Firms prefer to receive cash later rather than sooner. 
B) Corporate finance focuses on sales and profits. 
C) Value creation depends solely on profits. 
D) The amount of April sales must equal the amount of cash received by the firm during April. 
E) The cash flows of a firm are generally uncertain. 
A) Firms prefer to receive cash later rather than sooner. 
B) Corporate finance focuses on sales and profits. 
C) Value creation depends solely on profits. 
D) The amount of April sales must equal the amount of cash received by the firm during April. 
E) The cash flows of a firm are generally uncertain.

Question 11

Which type of business organization has all the respective rights and privileges of a legal person?

Accepted Answer

A) Sole proprietorship 
B) Corporation 
C) General partnership 
D) Limited partnership 
E) Limited liability company 
A) Sole proprietorship 
B) Corporation 
C) General partnership 
D) Limited partnership 
E) Limited liability company

Question 12

A store receives cash when a customer

Accepted Answer

A) buys an item using store credit. 
B) exchanges one item for another at the same price. 
C) pays their bill from the store. 
D) places an item on layaway with no deposit. 
E) returns an item purchased with cash. 
A) buys an item using store credit. 
B) exchanges one item for another at the same price. 
C) pays their bill from the store. 
D) places an item on layaway with no deposit. 
E) returns an item purchased with cash.

Question 13

Which one of the following is a capital budgeting decision?

Accepted Answer

A) Deciding whether or not to open a new store 
B) Determining how much inventory to keep on hand 
C) Determining how much debt should be borrowed from a particular lender 
D) Deciding if stock shares should be repurchased 
E) Determining how much cash to keep on hand 
A) Deciding whether or not to open a new store 
B) Determining how much inventory to keep on hand 
C) Determining how much debt should be borrowed from a particular lender 
D) Deciding if stock shares should be repurchased 
E) Determining how much cash to keep on hand

Question 14

Sole proprietorships

Accepted Answer

A) are expensive to set up. 
B) create unlimited liability for their owners. 
C) are faced with double taxation of profits. 
D) can have multiple owners. 
E) provide limited liability to owners. 
A) are expensive to set up. 
B) create unlimited liability for their owners. 
C) are faced with double taxation of profits. 
D) can have multiple owners. 
E) provide limited liability to owners.

Question 15

Which one of the following statements concerning a sole proprietorship is correct?

Accepted Answer

A) The life of the firm is limited to the life span of the owner. 
B) The owner can generally raise large sums of capital quite easily. 
C) A formal charter is required to form a new proprietorship. 
D) The company must pay separate taxes from those paid by the owner. 
E) The legal costs to form a sole proprietorship are quite substantial. 
A) The life of the firm is limited to the life span of the owner. 
B) The owner can generally raise large sums of capital quite easily. 
C) A formal charter is required to form a new proprietorship. 
D) The company must pay separate taxes from those paid by the owner. 
E) The legal costs to form a sole proprietorship are quite substantial.

Question 16

Capital structure refers to the

Accepted Answer

A) determination of the ideal mix of current versus long-term assets. 
B) methods by which fixed assets are used to produce a tangible product. 
C) mix of current assets and current liabilities. 
D) acquisition or disposition of a building or other long-term asset. 
E) decisions related to long-term debt and equity financing. 
A) determination of the ideal mix of current versus long-term assets. 
B) methods by which fixed assets are used to produce a tangible product. 
C) mix of current assets and current liabilities. 
D) acquisition or disposition of a building or other long-term asset. 
E) decisions related to long-term debt and equity financing.

Question 17

Which one of these parties cannot be a stakeholder of a firm?

Accepted Answer

A) Newly hired company employee 
B) Government 
C) Firm's creditors 
D) Business located next door to the firm 
E) Firm's customers 
A) Newly hired company employee 
B) Government 
C) Firm's creditors 
D) Business located next door to the firm 
E) Firm's customers

Question 18

A business entity formed by two or more individuals who each have unlimited liability for business debts is called a

Accepted Answer

A) corporation. 
B) sole proprietorship. 
C) general partnership. 
D) limited partnership. 
E) limited liability company. 
A) corporation. 
B) sole proprietorship. 
C) general partnership. 
D) limited partnership. 
E) limited liability company.

Question 19

Which one of the following statements concerning a sole proprietorship is correct?

Accepted Answer

A) A sole proprietorship is often structured as a limited liability company. 
B) The owner of a sole proprietorship may be forced to sell personal assets to pay company debts. 
C) The owners of a sole proprietorship share profits as established by the partnership agreement. 
D) The profits of a sole proprietorship are taxed twice. 
E) A sole proprietorship is difficult to create. 
A) A sole proprietorship is often structured as a limited liability company. 
B) The owner of a sole proprietorship may be forced to sell personal assets to pay company debts. 
C) The owners of a sole proprietorship share profits as established by the partnership agreement. 
D) The profits of a sole proprietorship are taxed twice. 
E) A sole proprietorship is difficult to create.

Question 20

Which one of the following statements is correct?

Accepted Answer

A) All types of business formations have limited lives. 
B) Partnerships are the most complicated type of business to form. 
C) Sole proprietorships and partnerships are taxed in a similar fashion. 
D) General partnerships and corporations provide limited liability for all owners. 
E) Both partnerships and corporations incur double taxation. 
A) All types of business formations have limited lives. 
B) Partnerships are the most complicated type of business to form. 
C) Sole proprietorships and partnerships are taxed in a similar fashion. 
D) General partnerships and corporations provide limited liability for all owners. 
E) Both partnerships and corporations incur double taxation.

Exam 1: Introduction to Corporate Finance

Which one of these terms refers to a conflict of interest between the stockholders and managers of a corporation?

The goal of financial management focuses on the fact that

Which form(s)of business is a treated as a distinct legal entity separate from its owners?

Which one of these is an advantage of a general partnership?

Current assets include

Which one of the following is least apt to convince managers to work in the best interest of the current stockholders?

Which one of the following actions by a financial manager least meets the goal of financial management?

The division of profits and losses among the members of a partnership is formalized in the

The primary purpose of the Sarbanes-Oxley Act of 2002 is to

Which one of these statements is correct?

Which type of business organization has all the respective rights and privileges of a legal person?

A store receives cash when a customer

Which one of the following is a capital budgeting decision?

Sole proprietorships

Which one of the following statements concerning a sole proprietorship is correct?

Capital structure refers to the

Which one of these parties cannot be a stakeholder of a firm?

A business entity formed by two or more individuals who each have unlimited liability for business debts is called a

Which one of the following statements concerning a sole proprietorship is correct?

Which one of the following statements is correct?

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters