Question 1

Which of the following factors would be most likely to lead to an increase in interest rates in the economyσ

Accepted Answer

A)  households reduce their consumption and increase their savings. 
B)  the federal reserve decides to try to stimulate the economy. 
C)  there is a decrease in expected inflation. 
D)  the economy falls into a recession. 
E)  most businesses decide to modernize and expand their manufacturing capacity, and to install new equipment to reduce labor costs. 
A)  households reduce their consumption and increase their savings. 
B)  the federal reserve decides to try to stimulate the economy. 
C)  there is a decrease in expected inflation. 
D)  the economy falls into a recession. 
E)  most businesses decide to modernize and expand their manufacturing capacity, and to install new equipment to reduce labor costs. E

Question 2

Which of the following statements is CORRECTσ

Accepted Answer

A)  a good goal for a firm's management is maximization of expected eps. 
B)  most business in the u.s. is conducted by corporations, and corporations' popularity results primarily from their favorable tax treatment. 
C)  because most stock ownership is concentrated in the hands of a relatively small segment of society, firms' actions to maximize their stock prices have little benefit to society. 
D)  corporations and partnerships have an advantage over proprietorships because a sole proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited. 
E)  the potential exists for agency conflicts between stockholders and managers. 
A)  a good goal for a firm's management is maximization of expected eps. 
B)  most business in the u.s. is conducted by corporations, and corporations' popularity results primarily from their favorable tax treatment. 
C)  because most stock ownership is concentrated in the hands of a relatively small segment of society, firms' actions to maximize their stock prices have little benefit to society. 
D)  corporations and partnerships have an advantage over proprietorships because a sole proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited. 
E)  the potential exists for agency conflicts between stockholders and managers. E

Question 3

The facts that a proprietorship, as a business, pays no corporate income tax, and that it is easily and inexpensively formed, are two key advantages to that form of business.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following statements is CORRECTσ

Accepted Answer

A)  if expected inflation increases, interest rates are likely to increase. 
B)  if individuals in general increase the percentage of their income that they save, interest rates are likely to increase. 
C)  if companies have fewer good investment opportunities, interest rates are likely to increase. 
D)  interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities. 
E)  interest rates on long-term bonds are more volatile than rates on short-term debt securities like t-bills. 
A)  if expected inflation increases, interest rates are likely to increase. 
B)  if individuals in general increase the percentage of their income that they save, interest rates are likely to increase. 
C)  if companies have fewer good investment opportunities, interest rates are likely to increase. 
D)  interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities. 
E)  interest rates on long-term bonds are more volatile than rates on short-term debt securities like t-bills.

Question 5

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnershipσ

Accepted Answer

A)  corporations generally find it relatively difficult to raise large amounts of capital. 
B)  less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership. 
C)  corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization. 
D)  corporate investors are exposed to unlimited liability. 
E)  corporations generally face relatively few regulations. 
A)  corporations generally find it relatively difficult to raise large amounts of capital. 
B)  less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership. 
C)  corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization. 
D)  corporate investors are exposed to unlimited liability. 
E)  corporations generally face relatively few regulations.

Question 6

Which of the following statements is CORRECTσ

Accepted Answer

A)  corporations are at a disadvantage relative to partnerships because they have to file more reports to state and federal agencies, including the securities and exchange administration, even if they are not publicly owned. 
B)  in a regular partnership, liability for the firm's debts is limited to the amount a particular partner has invested in the business. 
C)  a fast-growth company would be more likely to set up as a partnership for its business organization than would a slow-growth company. 
D)  partnerships have difficulty attracting capital in part because of their unlimited liability, the lack of impermanence of the organization, and difficulty in transferring ownership. 
E)  a major disadvantage of a partnership relative to a corporation as a form of business organization is the high cost and practical difficulty of its formation. 
A)  corporations are at a disadvantage relative to partnerships because they have to file more reports to state and federal agencies, including the securities and exchange administration, even if they are not publicly owned. 
B)  in a regular partnership, liability for the firm's debts is limited to the amount a particular partner has invested in the business. 
C)  a fast-growth company would be more likely to set up as a partnership for its business organization than would a slow-growth company. 
D)  partnerships have difficulty attracting capital in part because of their unlimited liability, the lack of impermanence of the organization, and difficulty in transferring ownership. 
E)  a major disadvantage of a partnership relative to a corporation as a form of business organization is the high cost and practical difficulty of its formation.

Question 7

With which of the following statements would most people in business agreeσ

Accepted Answer

A)  the short-run profits of a corporation will almost always increase if the firm takes actions the government has determined are in the nation's best interests. 
B)  government agencies and firms almost always agree with one another regarding the restrictions that should be placed on hiring and firing employees. 
C)  although people's moral characters are probably developed before they get into a business school, it is still useful for business schools to cover ethics, including giving students an idea about the adverse consequences of unethical behavior to themselves, their firms, and the nation. 
D)  developing a formal set of rules defining ethical and unethical behavior is not useful for a large corporation. such rules generally can't be applied in many specific instances, so it is better to deal with ethical issues on a case-by-case basis. 
E)  because of the courage it takes to blow the whistle, "whistle blowers" are generally promoted more rapidly than other employees. 
A)  the short-run profits of a corporation will almost always increase if the firm takes actions the government has determined are in the nation's best interests. 
B)  government agencies and firms almost always agree with one another regarding the restrictions that should be placed on hiring and firing employees. 
C)  although people's moral characters are probably developed before they get into a business school, it is still useful for business schools to cover ethics, including giving students an idea about the adverse consequences of unethical behavior to themselves, their firms, and the nation. 
D)  developing a formal set of rules defining ethical and unethical behavior is not useful for a large corporation. such rules generally can't be applied in many specific instances, so it is better to deal with ethical issues on a case-by-case basis. 
E)  because of the courage it takes to blow the whistle, "whistle blowers" are generally promoted more rapidly than other employees.

Question 8

Money markets are markets for

Accepted Answer

A)  foreign stocks. 
B)  consumer automobile loans. 
C)  u.s. stocks. 
D)  short-term debt securities. 
E)  long-term bonds. 
A)  foreign stocks. 
B)  consumer automobile loans. 
C)  u.s. stocks. 
D)  short-term debt securities. 
E)  long-term bonds.

Question 9

Which of the following statements is CORRECTσ

Accepted Answer

A)  in a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. 
B)  attracting large amounts of capital is more difficult for partnerships than for corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests. 
C)  a slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company. 
D)  the limited partners in a limited partnership have voting control, while the general partner has operating control over the business. also, the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy. 
E)  a major disadvantage of all partnerships compared to all corporations is the fact that federal income taxes must be paid by the partners rather than by the firm itself. 
A)  in a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. 
B)  attracting large amounts of capital is more difficult for partnerships than for corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests. 
C)  a slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company. 
D)  the limited partners in a limited partnership have voting control, while the general partner has operating control over the business. also, the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy. 
E)  a major disadvantage of all partnerships compared to all corporations is the fact that federal income taxes must be paid by the partners rather than by the firm itself.

Question 10

Which of the following statements is CORRECTσ

Accepted Answer

A)  if apple issues additional shares of common stock through an investment banker, this would be a secondary market transaction. 
B)  if you purchased 100 shares of apple stock from your sister-in-law, this would be an example of a primary market transaction. 
C)  the ipo market is a subset of the secondary market. 
D)  only institutions, and not individuals, can participate in derivatives market transactions. 
E)  as they are generally defined, money market transactions involve debt securities with maturities of less than one year. 
A)  if apple issues additional shares of common stock through an investment banker, this would be a secondary market transaction. 
B)  if you purchased 100 shares of apple stock from your sister-in-law, this would be an example of a primary market transaction. 
C)  the ipo market is a subset of the secondary market. 
D)  only institutions, and not individuals, can participate in derivatives market transactions. 
E)  as they are generally defined, money market transactions involve debt securities with maturities of less than one year.

Question 11

You recently sold 200 shares of Apple stock to your brother. The transfer was made through a broker, and the trade occurred on the NYSE. This is an example of:

Accepted Answer

A)  a futures market transaction. 
B)  a primary market transaction. 
C)  a secondary market transaction. 
D)  a money market transaction. 
E)  an over-the-counter market transaction. 
A)  a futures market transaction. 
B)  a primary market transaction. 
C)  a secondary market transaction. 
D)  a money market transaction. 
E)  an over-the-counter market transaction.

Question 12

One key value of limited liability is that it lowers owners' risks and thereby enhances a firm's value.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is CORRECTσ

Accepted Answer

A)  it is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required. 
B)  corporations face fewer regulations than sole proprietorships. 
C)  one disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level. 
D)  one advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership. 
E)  if a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business. 
A)  it is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required. 
B)  corporations face fewer regulations than sole proprietorships. 
C)  one disadvantage of operating a business as a sole proprietorship is that the firm is subject to double taxation, at both the firm level and the owner level. 
D)  one advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership. 
E)  if a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.

Question 14

You recently sold 100 shares of your new company, XYZ Corporation, to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following statements best describes this transactionσ

Accepted Answer

A)  this is an example of an exchange of physical assets. 
B)  this is an example of a primary market transaction. 
C)  this is an example of a direct transfer of capital. 
D)  this is an example of a money market transaction. 
E)  this is an example of a derivatives market transaction 
A)  this is an example of an exchange of physical assets. 
B)  this is an example of a primary market transaction. 
C)  this is an example of a direct transfer of capital. 
D)  this is an example of a money market transaction. 
E)  this is an example of a derivatives market transaction

Question 15

Which of the following statements is CORRECTσ

Accepted Answer

A)  it is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. 
B)  corporate shareholders are exposed to unlimited liability. 
C)  corporations generally face fewer regulations than sole proprietorships. 
D)  corporate shareholders are exposed to unlimited liability, and this factor may be compounded by the tax disadvantages of incorporation. 
E)  shareholders in a regular corporation (not an s corporation) pay higher taxes than owners of an otherwise identical proprietorship. 
A)  it is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. 
B)  corporate shareholders are exposed to unlimited liability. 
C)  corporations generally face fewer regulations than sole proprietorships. 
D)  corporate shareholders are exposed to unlimited liability, and this factor may be compounded by the tax disadvantages of incorporation. 
E)  shareholders in a regular corporation (not an s corporation) pay higher taxes than owners of an otherwise identical proprietorship.

Question 16

Which of the following would be most likely to lead to higher interest rates on all debt securities in the economyσ

Accepted Answer

A)  households start saving a larger percentage of their income. 
B)  the economy moves from a boom to a recession. 
C)  the level of inflation begins to decline. 
D)  corporations step up their expansion plans and thus increase their demand for capital. 
E)  the federal reserve uses monetary policy in an attempt to stimulate the economy. 
A)  households start saving a larger percentage of their income. 
B)  the economy moves from a boom to a recession. 
C)  the level of inflation begins to decline. 
D)  corporations step up their expansion plans and thus increase their demand for capital. 
E)  the federal reserve uses monetary policy in an attempt to stimulate the economy.

Question 17

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

Accepted Answer

A)  maximize the stock price per share over the long run, which is the stock's intrinsic value. 
B)  maximize the firm's expected eps. 
C)  minimize the chances of losses. 
D)  maximize the firm's expected total income. 
E)  maximize the stock price on a specific target date. 
A)  maximize the stock price per share over the long run, which is the stock's intrinsic value. 
B)  maximize the firm's expected eps. 
C)  minimize the chances of losses. 
D)  maximize the firm's expected total income. 
E)  maximize the stock price on a specific target date.

Question 18

The form of organization for a business is not an important issue, as this decision has very little effect on the income and wealth of the firm's owners.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is CORRECTσ

Accepted Answer

A)  one of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. 
B)  it is generally easier to transfer one's ownership interest in a partnership than in a corporation. 
C)  one of the advantages of the corporate form of organization is that it avoids double taxation. 
D)  one of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., "one person, one vote." 
E)  corporations of all types are subject to the corporate income tax. 
A)  one of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability. 
B)  it is generally easier to transfer one's ownership interest in a partnership than in a corporation. 
C)  one of the advantages of the corporate form of organization is that it avoids double taxation. 
D)  one of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., "one person, one vote." 
E)  corporations of all types are subject to the corporate income tax.

Question 20

One drawback of switching from a partnership to the corporate form of organization is the following:

Accepted Answer

A)  it subjects the firm to additional regulations. 
B)  it cannot affect the amount of the firm's operating income that goes to taxes. 
C)  it makes it more difficult for the firm to raise additional capital. 
D)  it makes the firm's investors subject to greater potential personal liabilities. 
E)  it makes it more difficult for the firm's investors to transfer their ownership interests. 
A)  it subjects the firm to additional regulations. 
B)  it cannot affect the amount of the firm's operating income that goes to taxes. 
C)  it makes it more difficult for the firm to raise additional capital. 
D)  it makes the firm's investors subject to greater potential personal liabilities. 
E)  it makes it more difficult for the firm's investors to transfer their ownership interests.

Exam 1: An Overview of Financial Management and the Financial Environment

Which of the following factors would be most likely to lead to an increase in interest rates in the economyσ

Which of the following statements is CORRECTσ

The facts that a proprietorship, as a business, pays no corporate income tax, and that it is easily and inexpensively formed, are two key advantages to that form of business.

Which of the following statements is CORRECTσ

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnershipσ

Which of the following statements is CORRECTσ

With which of the following statements would most people in business agreeσ

Money markets are markets for

Which of the following statements is CORRECTσ

Which of the following statements is CORRECTσ

You recently sold 200 shares of Apple stock to your brother. The transfer was made through a broker, and the trade occurred on the NYSE. This is an example of:

One key value of limited liability is that it lowers owners' risks and thereby enhances a firm's value.

Which of the following statements is CORRECTσ

You recently sold 100 shares of your new company, XYZ Corporation, to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following statements best describes this transactionσ

Which of the following statements is CORRECTσ

Which of the following would be most likely to lead to higher interest rates on all debt securities in the economyσ

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

The form of organization for a business is not an important issue, as this decision has very little effect on the income and wealth of the firm's owners.

Which of the following statements is CORRECTσ

One drawback of switching from a partnership to the corporate form of organization is the following:

Risk and Return-Part I

Risk and Return-Part II

Bond Valuation

Financial Options

Accounting for Financial Management

Analysis of Financial Statements

Basic Stock Valuation

Corporate Valuation and Financial Planning

Corporate Governance

Determining the Cost of Capital

Capital Budgeting: Decision Criteria

Capital Budgeting-Estimating Cash Flows and Analyzing Risk

Real Options

Distributions to Shareholders-Dividends and Repurchases

Capital Structure Decisions

Dynamic Capital Structures and Corporate Valuation

Initial Public Offerings-Investment Banking: and Financial Restructuring

Lease Financing

Hybrid Financing Preferred Stock-Warrants and Convertibles

Supply Chains and Working Capital Management

Providing and Obtaining Credit

Other Topics in Working Capital Management

Enterprise Risk Management

Bankruptcy-Reorganization and Liquidation

Mergers and Corporate Control

Multinational Financial Management

Time Value of Money

Basic Financial Tools: A review

Pension Plan Management

Financial Management in Not for Profit Businesses

Filters