Question 1

Corporations receive money from investors with:

Accepted Answer

A) initial public offerings. 
B) seasoned new issues. 
C) primary market transactions. 
D) A and B. 
E) all of the above. 
A) initial public offerings. 
B) seasoned new issues. 
C) primary market transactions. 
D) A and B. 
E) all of the above.

Question 2

Maximization of shareholder wealth as a goal is superior to profit maximization because:

Accepted Answer

A) it considers the time value of the money. 
B) following the shareholder wealth maximization goal will ensure high stock prices. 
C) it considers uncertainty. 
D) A and C. 
A) it considers the time value of the money. 
B) following the shareholder wealth maximization goal will ensure high stock prices. 
C) it considers uncertainty. 
D) A and C.

Question 3

The life of a corporation is not dependent upon the status of the investors.

Accepted Answer

A) True 
 B)False

Question 4

Only a few financial decisions involve some sort of risk-return tradeoff.

Accepted Answer

A) True 
 B)False

Question 5

In a general partnership,all partners have unlimited liability for the actions of any one partner when that partner is conducting business for the firm.

Accepted Answer

A) True 
 B)False

Question 6

One of the problems associated with profit maximization is that it ignores the timing of a project's return.

Accepted Answer

A) True 
 B)False

Question 7

Diversification increases when ________ decreases.

Accepted Answer

A) variability 
B) return 
C) risk 
D) A and C 
E) all of the above 
A) variability 
B) return 
C) risk 
D) A and C 
E) all of the above

Question 8

Which of the following would be most likely to align the interests of managers and shareholders?

Accepted Answer

A) Fixed but high salaries 
B) Large bonuses 
C) Stock options 
D) All of the above 
E) None of the above 
A) Fixed but high salaries 
B) Large bonuses 
C) Stock options 
D) All of the above 
E) None of the above

Question 9

Which forms of organization are free of initial legal requirements?

Accepted Answer

A) Sole proprietorship 
B) General partnership 
C) Corporation 
D) Both A and B 
A) Sole proprietorship 
B) General partnership 
C) Corporation 
D) Both A and B

Question 10

Profit maximization does not adequately describe the goal of the firm because:

Accepted Answer

A) profit maximization does not require the consideration of risk. 
B) profit maximization ignores the timing of a project's return. 
C) maximization of dividend payout ratio is a better description of the goal of the firm. 
D) A and B. 
A) profit maximization does not require the consideration of risk. 
B) profit maximization ignores the timing of a project's return. 
C) maximization of dividend payout ratio is a better description of the goal of the firm. 
D) A and B.

Question 11

Foregoing the earning potential of a dollar today is referred to as the:

Accepted Answer

A) time value of money. 
B) opportunity cost concept. 
C) risk/return tradeoff. 
D) creation of wealth. 
A) time value of money. 
B) opportunity cost concept. 
C) risk/return tradeoff. 
D) creation of wealth.

Question 12

If an investor had a choice of receiving $1,000 today,or $1,000 in five years,which would the average investor prefer?

Accepted Answer

A) $1,000 in five years because they are not good at saving money. 
B) $1,000 today because it will be worth more than $1,000 received in five years. 
C) $1,000 in five years because it will be worth more than $1,000 received today. 
D) Investors would be indifferent to when they would receive the $1,000. 
E) None of the above. 
A) $1,000 in five years because they are not good at saving money. 
B) $1,000 today because it will be worth more than $1,000 received in five years. 
C) $1,000 in five years because it will be worth more than $1,000 received today. 
D) Investors would be indifferent to when they would receive the $1,000. 
E) None of the above.

Question 13

Even though diversification can reduce risk,it also makes it more difficult to measure a project's or an asset's risk.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is true regarding an initial public offering?

Accepted Answer

A) The corporation gets proceeds from the investor. 
B) Investors get proceeds from other investors. 
C) The security is sold for the first time to the public. 
D) Both A and C. 
E) All of the above. 
A) The corporation gets proceeds from the investor. 
B) Investors get proceeds from other investors. 
C) The security is sold for the first time to the public. 
D) Both A and C. 
E) All of the above.

Question 15

Assume that you are starting a business.Further assume that the business is expected to grow very quickly and a great deal of capital will be needed soon.What type of business organization would you choose?

Accepted Answer

A) Corporation 
B) General Partnership 
C) Sole proprietorship 
D) Limited partnership 
A) Corporation 
B) General Partnership 
C) Sole proprietorship 
D) Limited partnership

Question 16

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 17

In a general partnership,each partner is liable for the partnership's obligations only up to a percentage of the obligation equal to that partner's percentage of ownership of the partnership.

Accepted Answer

A) True 
 B)False

Question 18

In an efficient market,prices will quickly adjust to new information.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is a characteristic of a limited partnership?

Accepted Answer

A) It allows one or more partners to have limited liability. 
B) It requires one or more of the partners to be a general partner to whom the privilege of limited liability does not apply. 
C) It prohibits the limited partners from participating in the management of the partnership. 
D) All of the above. 
A) It allows one or more partners to have limited liability. 
B) It requires one or more of the partners to be a general partner to whom the privilege of limited liability does not apply. 
C) It prohibits the limited partners from participating in the management of the partnership. 
D) All of the above.

Question 20

Briefly discuss why financial decision makers must focus on incremental cash flows when evaluating new projects.

Accepted Answer

Incremental cash flows describe the tota

Corporations receive money from investors with:

Maximization of shareholder wealth as a goal is superior to profit maximization because:

The life of a corporation is not dependent upon the status of the investors.

Only a few financial decisions involve some sort of risk-return tradeoff.

In a general partnership,all partners have unlimited liability for the actions of any one partner when that partner is conducting business for the firm.

One of the problems associated with profit maximization is that it ignores the timing of a project's return.

Diversification increases when ________ decreases.

Which of the following would be most likely to align the interests of managers and shareholders?

Which forms of organization are free of initial legal requirements?

Profit maximization does not adequately describe the goal of the firm because:

Foregoing the earning potential of a dollar today is referred to as the:

If an investor had a choice of receiving $1,000 today,or $1,000 in five years,which would the average investor prefer?

Even though diversification can reduce risk,it also makes it more difficult to measure a project's or an asset's risk.

Which of the following is true regarding an initial public offering?

Assume that you are starting a business.Further assume that the business is expected to grow very quickly and a great deal of capital will be needed soon.What type of business organization would you choose?

In finance,we assume that investors are generally:

In a general partnership,each partner is liable for the partnership's obligations only up to a percentage of the obligation equal to that partner's percentage of ownership of the partnership.

In an efficient market,prices will quickly adjust to new information.

Which of the following is a characteristic of a limited partnership?

Briefly discuss why financial decision makers must focus on incremental cash flows when evaluating new projects.

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 1: Getting Started-Principles of Finance

Corporations receive money from investors with:

Maximization of shareholder wealth as a goal is superior to profit maximization because:

The life of a corporation is not dependent upon the status of the investors.

Only a few financial decisions involve some sort of risk-return tradeoff.

In a general partnership,all partners have unlimited liability for the actions of any one partner when that partner is conducting business for the firm.

One of the problems associated with profit maximization is that it ignores the timing of a project's return.

Diversification increases when ________ decreases.

Which of the following would be most likely to align the interests of managers and shareholders?

Which forms of organization are free of initial legal requirements?

Profit maximization does not adequately describe the goal of the firm because:

Foregoing the earning potential of a dollar today is referred to as the:

If an investor had a choice of receiving $1,000 today,or $1,000 in five years,which would the average investor prefer?

Even though diversification can reduce risk,it also makes it more difficult to measure a project's or an asset's risk.

Which of the following is true regarding an initial public offering?

Assume that you are starting a business.Further assume that the business is expected to grow very quickly and a great deal of capital will be needed soon.What type of business organization would you choose?

In finance,we assume that investors are generally:

In a general partnership,each partner is liable for the partnership's obligations only up to a percentage of the obligation equal to that partner's percentage of ownership of the partnership.

In an efficient market,prices will quickly adjust to new information.

Which of the following is a characteristic of a limited partnership?

Briefly discuss why financial decision makers must focus on incremental cash flows when evaluating new projects.

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters