Question 1

Cash flows and profits are synonymous; in other words,higher cash flows equal higher profits.

Accepted Answer

A) True 
 B)False

Question 2

Investors want a return that satisfies the following expectations:

Accepted Answer

A)  A return for delaying consumption 
B)  An additional return for taking on risk 
C)  An additional return for accepting dividends rather than capital gains 
D)  Both A and B. 
A)  A return for delaying consumption 
B)  An additional return for taking on risk 
C)  An additional return for accepting dividends rather than capital gains 
D)  Both A and B.

Question 3

The chief financial officer (CFO)is responsible for overseeing financial planning,corporate strategic planning,and controlling the firm's cash flow.

Accepted Answer

A) True 
 B)False

Question 4

The financial manager most directly responsible for producing the company's financial statements and directing its cost accounting functions is the

Accepted Answer

A)  chief financial officer. 
B)  controller. 
C)  treasurer. 
D)  vice president - financer. 
A)  chief financial officer. 
B)  controller. 
C)  treasurer. 
D)  vice president - financer.

Question 5

All of the following business organizations provide limited liability to their owners except:

Accepted Answer

A)  general partnership. 
B)  S-type corporation. 
C)  corporation. 
D)  limited liability company. 
A)  general partnership. 
B)  S-type corporation. 
C)  corporation. 
D)  limited liability company.

Question 6

The three basic types of issues addressed by the study of finance are

Accepted Answer

A)  capital budgeting, capital structure decisions, and working capital management. 
B)  capital budgeting, working capital management, and investment analysis. 
C)  capital structure decisions, working capital management, and sustained profitability. 
D)  capital budgeting, investment analysis, and cash management. 
A)  capital budgeting, capital structure decisions, and working capital management. 
B)  capital budgeting, working capital management, and investment analysis. 
C)  capital structure decisions, working capital management, and sustained profitability. 
D)  capital budgeting, investment analysis, and cash management.

Question 7

A limited partnership provides limited liability to

Accepted Answer

A)  all general partners. 
B)  only limited partners responsible for day to day management of the firm. 
C)  only to limited partners who do not participate in the management of the business. 
D)  all partners. 
A)  all general partners. 
B)  only limited partners responsible for day to day management of the firm. 
C)  only to limited partners who do not participate in the management of the business. 
D)  all partners.

Question 8

A financial manager is considering two projects,A and B.A is expected to add $2 million to profits this year while B is expected to add $2 million to profits this year while B is expected to add $1 million to profits this year.Which of the following statements is most correct?

Accepted Answer

A)  The manager should select project A because it maximizes profits. 
B)  The manager should select the project that maximizes long-term profits, not just one year of profits. 
C)  The manager should select project A or he is irrational. 
D)  The manager should select the project that causes the stock price to increase the most, which could be A or B. 
A)  The manager should select project A because it maximizes profits. 
B)  The manager should select the project that maximizes long-term profits, not just one year of profits. 
C)  The manager should select project A or he is irrational. 
D)  The manager should select the project that causes the stock price to increase the most, which could be A or B.

Question 9

Limited liability companies are more flexible than S-type Corporations because limited liability companies operate under state laws.

Accepted Answer

A) True 
 B)False

Question 10

The primary goal of a publicly owned corporation is to ________.

Accepted Answer

A)  maximize dividends per share 
B)  maximize shareholder wealth 
C)  maximize earnings per share after taxes 
D)  minimize shareholder risk 
A)  maximize dividends per share 
B)  maximize shareholder wealth 
C)  maximize earnings per share after taxes 
D)  minimize shareholder risk

Question 11

In which of the following cases will the agency problem between shareholders and managers be the greatest?

Accepted Answer

A)  100% of the common stock is owned by the founder of the company who decided to retire and hired a manager to run his business for him. 
B)  The Johnson family owns 50% of the common stock of the company. The other 50% is owned by 5 mutual funds. 
C)  The common stock of the company is owned by many diverse shareholders, with no shareholder owning more than 1% of the outstanding stock. 
D)  All top managers in the company own significant amounts of stock and stock options. 
A)  100% of the common stock is owned by the founder of the company who decided to retire and hired a manager to run his business for him. 
B)  The Johnson family owns 50% of the common stock of the company. The other 50% is owned by 5 mutual funds. 
C)  The common stock of the company is owned by many diverse shareholders, with no shareholder owning more than 1% of the outstanding stock. 
D)  All top managers in the company own significant amounts of stock and stock options.

Question 12

In finance,we assume that investors are generally

Accepted Answer

A)  neutral to risk. 
B)  averse to risk. 
C)  fond of risk. 
D)  none of the above 
A)  neutral to risk. 
B)  averse to risk. 
C)  fond of risk. 
D)  none of the above

Question 13

Which of the following forms of organizations have earnings that are taxed twice,once as business income and once as personal income as the earnings are distributed to the owners in the form of dividends?

Accepted Answer

A)  corporations 
B)  general partnerships 
C)  limited partnerships 
D)  both A and C 
A)  corporations 
B)  general partnerships 
C)  limited partnerships 
D)  both A and C

Question 14

Which of the following is an advantage of the sole proprietorship?

Accepted Answer

A)  limited liability for its owners 
B)  double taxation for its owners 
C)  no significant legal requirements for starting the business 
D)  easily transferred ownership 
A)  limited liability for its owners 
B)  double taxation for its owners 
C)  no significant legal requirements for starting the business 
D)  easily transferred ownership

Question 15

If two companies have the same net income and the same level of risk,they must also have the same stock price or the market is not in equilibrium.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following categories of owners have unlimited liability?

Accepted Answer

A)  general partners in a limited partnership 
B)  sole proprietors 
C)  shareholders of a corporation 
D)  both A and B 
A)  general partners in a limited partnership 
B)  sole proprietors 
C)  shareholders of a corporation 
D)  both A and B

Question 17

Managers should not be concerned with business ethics because ethical behavior is inconsistent with the primary goal of maximizing shareholder value.

Accepted Answer

A) True 
 B)False

Question 18

Investors will be indifferent between two investments if both investments have the same expected return.

Accepted Answer

A) True 
 B)False

Question 19

An investment project is acceptable if the total cash received over the life of the project exceeds the total cash spent over the life of the project.

Accepted Answer

A) True 
 B)False

Question 20

Capital budgeting is concerned with

Accepted Answer

A)  whether a company's assets should be financed with debt or equity. 
B)  managing a firms cash budgeting procedures. 
C)  what long-term investments a firm should undertake. 
D)  planning sales of a corporation's equity capital. 
A)  whether a company's assets should be financed with debt or equity. 
B)  managing a firms cash budgeting procedures. 
C)  what long-term investments a firm should undertake. 
D)  planning sales of a corporation's equity capital.

Cash flows and profits are synonymous; in other words,higher cash flows equal higher profits.

Investors want a return that satisfies the following expectations:

The chief financial officer (CFO)is responsible for overseeing financial planning,corporate strategic planning,and controlling the firm's cash flow.

The financial manager most directly responsible for producing the company's financial statements and directing its cost accounting functions is the

All of the following business organizations provide limited liability to their owners except:

The three basic types of issues addressed by the study of finance are

A limited partnership provides limited liability to

A financial manager is considering two projects,A and B.A is expected to add $2 million to profits this year while B is expected to add $2 million to profits this year while B is expected to add $1 million to profits this year.Which of the following statements is most correct?

Limited liability companies are more flexible than S-type Corporations because limited liability companies operate under state laws.

The primary goal of a publicly owned corporation is to ________.

In which of the following cases will the agency problem between shareholders and managers be the greatest?

In finance,we assume that investors are generally

Which of the following forms of organizations have earnings that are taxed twice,once as business income and once as personal income as the earnings are distributed to the owners in the form of dividends?

Which of the following is an advantage of the sole proprietorship?

If two companies have the same net income and the same level of risk,they must also have the same stock price or the market is not in equilibrium.

Which of the following categories of owners have unlimited liability?

Managers should not be concerned with business ethics because ethical behavior is inconsistent with the primary goal of maximizing shareholder value.

Investors will be indifferent between two investments if both investments have the same expected return.

An investment project is acceptable if the total cash received over the life of the project exceeds the total cash spent over the life of the project.

Capital budgeting is concerned with

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

Current Asset Management

International Business Finance

Filters

Exam 1: An Introduction to the Foundations of Financial Management

Cash flows and profits are synonymous; in other words,higher cash flows equal higher profits.

Investors want a return that satisfies the following expectations:

The chief financial officer (CFO)is responsible for overseeing financial planning,corporate strategic planning,and controlling the firm's cash flow.

The financial manager most directly responsible for producing the company's financial statements and directing its cost accounting functions is the

All of the following business organizations provide limited liability to their owners except:

The three basic types of issues addressed by the study of finance are

A limited partnership provides limited liability to

A financial manager is considering two projects,A and B.A is expected to add $2 million to profits this year while B is expected to add $2 million to profits this year while B is expected to add $1 million to profits this year.Which of the following statements is most correct?

Limited liability companies are more flexible than S-type Corporations because limited liability companies operate under state laws.

The primary goal of a publicly owned corporation is to ________.

In which of the following cases will the agency problem between shareholders and managers be the greatest?

In finance,we assume that investors are generally

Which of the following forms of organizations have earnings that are taxed twice,once as business income and once as personal income as the earnings are distributed to the owners in the form of dividends?

Which of the following is an advantage of the sole proprietorship?

If two companies have the same net income and the same level of risk,they must also have the same stock price or the market is not in equilibrium.

Which of the following categories of owners have unlimited liability?

Managers should not be concerned with business ethics because ethical behavior is inconsistent with the primary goal of maximizing shareholder value.

Investors will be indifferent between two investments if both investments have the same expected return.

An investment project is acceptable if the total cash received over the life of the project exceeds the total cash spent over the life of the project.

Capital budgeting is concerned with

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

Current Asset Management

International Business Finance

Filters