Question 1

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. B

Question 2

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 3

Dividends are a cash flow from

Accepted Answer

A) a firm to the financial markets. 
B) a shareholder to a firm. 
C) the government to a shareholder. 
D) the financial markets to a firm. 
E) a firm to the government. 
A) a firm to the financial markets. 
B) a shareholder to a firm. 
C) the government to a shareholder. 
D) the financial markets to a firm. 
E) a firm to the government. A

Question 4

Who ultimately controls a corporation?

Accepted Answer

A) Stakeholders 
B) Chairman of the board 
C) Stockholders 
D) Chief executive officer 
E) Board of directors 
A) Stakeholders 
B) Chairman of the board 
C) Stockholders 
D) Chief executive officer 
E) Board of directors

Question 5

The rules by which corporations govern themselves are called

Accepted Answer

A) indenture provisions. 
B) indemnity provisions. 
C) bylaws. 
D) charter agreements. 
E) articles of incorporation. 
A) indenture provisions. 
B) indemnity provisions. 
C) bylaws. 
D) charter agreements. 
E) articles of incorporation.

Question 6

A proxy fight occurs whenever

Accepted Answer

A) any board member is up for re-election. 
B) a firm files for bankruptcy. 
C) a shareholder sells shares in the open market. 
D) a group solicits votes to replace the current board of directors. 
E) a firm is declared insolvent. 
A) any board member is up for re-election. 
B) a firm files for bankruptcy. 
C) a shareholder sells shares in the open market. 
D) a group solicits votes to replace the current board of directors. 
E) a firm is declared insolvent.

Question 7

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 8

Which type of business is the easiest and cheapest to form?

Accepted Answer

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

Question 9

The process of planning and managing a firm's long-term investments is referred to as

Accepted Answer

A) capital budgeting. 
B) agency cost analysis. 
C) financial depreciation. 
D) working capital management. 
E) capital structure. 
A) capital budgeting. 
B) agency cost analysis. 
C) financial depreciation. 
D) working capital management. 
E) capital structure.

Question 10

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 11

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

Question 12

The treasurer and the controller of a corporation generally report to the

Accepted Answer

A) president. 
B) board of directors. 
C) chief executive officer. 
D) chief financial officer. 
E) chairman of the board. 
A) president. 
B) board of directors. 
C) chief executive officer. 
D) chief financial officer. 
E) chairman of the board.

Question 13

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 14

Net working capital is best defined as

Accepted Answer

A) excess cash on hand. 
B) a firm's current assets. 
C) current assets minus current liabilities. 
D) total assets minus total liabilities. 
E) cash and near-cash assets. 
A) excess cash on hand. 
B) a firm's current assets. 
C) current assets minus current liabilities. 
D) total assets minus total liabilities. 
E) cash and near-cash assets.

Question 15

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 16

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 17

The basic regulatory framework for public trading of securities within the United States is provided by:

Accepted Answer

A) the Securities Act of 1933 and the Securities Exchange Act of 1934. 
B) state governments. 
C) the Federal Reserve Bank. 
D) the Sarbanes-Oxley Act of 2002. 
E) NASDAQ. 
A) the Securities Act of 1933 and the Securities Exchange Act of 1934. 
B) state governments. 
C) the Federal Reserve Bank. 
D) the Sarbanes-Oxley Act of 2002. 
E) NASDAQ.

Question 18

Since the implementation of Sarbanes-Oxley,the cost of corporate audits in the United States

Accepted Answer

A) has steadily increased. 
B) has steadily decreased. 
C) has remained about the same. 
D) increased substantially,but over time has been decreasing. 
E) decreased substantially,but over time has been increasing. 
A) has steadily increased. 
B) has steadily decreased. 
C) has remained about the same. 
D) increased substantially,but over time has been decreasing. 
E) decreased substantially,but over time has been increasing.

Question 19

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 20

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.

Exam 1: Introduction to Corporate Finance

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

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

Dividends are a cash flow from

Who ultimately controls a corporation?

The rules by which corporations govern themselves are called

A proxy fight occurs whenever

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

Which type of business is the easiest and cheapest to form?

The process of planning and managing a firm's long-term investments is referred to as

Sole proprietorships

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

The treasurer and the controller of a corporation generally report to the

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

Net working capital is best defined as

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

Which one of these statements is correct?

The basic regulatory framework for public trading of securities within the United States is provided by:

Since the implementation of Sarbanes-Oxley,the cost of corporate audits in the United States

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

Current assets include

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Mergers and Acquisitions Web Only

Filters