Question 1

If a company uses a bond issue to raise capital, the financing is an example of:

Accepted Answer

A)  equity financing. 
B)  debt financing. 
C)  lease financing. 
D)  debt and equity financing. 
A)  equity financing. 
B)  debt financing. 
C)  lease financing. 
D)  debt and equity financing.

Question 2

Large corporations tend to be:

Accepted Answer

A)  partnerships. 
B)  T-type corporations. 
C)  C-type corporations. 
D)  sole proprietorships. 
A)  partnerships. 
B)  T-type corporations. 
C)  C-type corporations. 
D)  sole proprietorships.

Question 3

A loan backed by an asset the lender can sell to pay off the loan if the borrower defaults is called _____.

Accepted Answer

A)  amortized 
B)  collateralized 
C)  guaranteed 
D)  riskless 
A)  amortized 
B)  collateralized 
C)  guaranteed 
D)  riskless

Question 4

Which of the following best describes the financial link between stockholders and bondholders?

Accepted Answer

A)  The action of stockholders cannot affect the financial position of bondholders. 
B)  The action of stockholders can increase the risk of a business which will affect the financial position of bondholders. 
C)  The action of bondholders can increase the risk of a business which will affect the financial position of stockholders. 
D)  The actions of stockholders and bondholders are independent. 
E)  Both a. and c. are correct. 
A)  The action of stockholders cannot affect the financial position of bondholders. 
B)  The action of stockholders can increase the risk of a business which will affect the financial position of bondholders. 
C)  The action of bondholders can increase the risk of a business which will affect the financial position of stockholders. 
D)  The actions of stockholders and bondholders are independent. 
E)  Both a. and c. are correct.

Question 5

Bondholders are rewarded by receiving interest and a share of the company's profits.

Accepted Answer

A) True 
 B)False

Question 6

____ is a growing practice in which people concern themselves with the activities of the issuing business.

Accepted Answer

A)  Agency control 
B)  Morality analysis 
C)  Socially responsible investing 
D)  Wealth maximization 
A)  Agency control 
B)  Morality analysis 
C)  Socially responsible investing 
D)  Wealth maximization

Question 7

Responsibilities of the chief financial officer are similar to the responsibilities of the corporate controller when associated with the financial decision making process.

Accepted Answer

A) True 
 B)False

Question 8

Financial theory was originally a branch of economics.

Accepted Answer

A) True 
 B)False

Question 9

In firms of moderate size or larger, the finance department is typically relieved of the "watchdog" responsibility of monitoring the efficient use of money by other departments.

Accepted Answer

A) True 
 B)False

Question 10

Double taxation of earnings is the primary financial disadvantage of the corporate form of business organization.

Accepted Answer

A) True 
 B)False

Question 11

To "finance" an asset is:

Accepted Answer

A)  to lend money to buyers so they can improve their portfolios. 
B)  to sell the asset for more than market value. 
C)  to raise money in order to acquire the asset. 
D)  All of these are correct. 
A)  to lend money to buyers so they can improve their portfolios. 
B)  to sell the asset for more than market value. 
C)  to raise money in order to acquire the asset. 
D)  All of these are correct.

Question 12

A proprietor who operates his/her own business can incorporate and become the only shareholder. This action might be taken to provide the owner with the limited liability of the corporate form. Which of the following best describes the impact of incorporation in this situation on the limited liability issue?

Accepted Answer

A)  The owner has achieved the full protection of limited liability. 
B)  The owner can protect his/her personal assets unless fraud is involved in the conduct of the business. 
C)  The owner has achieved the full protection of limited liability except for default on borrowed funds. 
D)  The owner has in reality achieved very little in the way of limited liability protection. 
A)  The owner has achieved the full protection of limited liability. 
B)  The owner can protect his/her personal assets unless fraud is involved in the conduct of the business. 
C)  The owner has achieved the full protection of limited liability except for default on borrowed funds. 
D)  The owner has in reality achieved very little in the way of limited liability protection.

Question 13

Investing in stock represents partial ownership of a corporation and gives the investor the potential for future cash flows from earnings distribution and stock price appreciation if the business prospers.

Accepted Answer

A) True 
 B)False

Question 14

All of the following are characteristics of C Corporations except:

Accepted Answer

A)  unlimited life. 
B)  limited liability for the stockholders. 
C)  avoidance of double taxation. 
D)  ease of raising additional capital for expansion. 
A)  unlimited life. 
B)  limited liability for the stockholders. 
C)  avoidance of double taxation. 
D)  ease of raising additional capital for expansion.

Question 15

S-type corporations have difficulty in accumulating earnings because their profits are subject to double taxation.

Accepted Answer

A) True 
 B)False

Question 16

The following is true of financial assets:

Accepted Answer

A)  companies issue financial assets in order to raise capital (money). 
B)  investors purchase financial assets in order to earn a return on funds they don't currently need. 
C)  they differ from real assets in that they are pieces of paper as opposed to physical objects. 
D)  All of these are true. 
A)  companies issue financial assets in order to raise capital (money). 
B)  investors purchase financial assets in order to earn a return on funds they don't currently need. 
C)  they differ from real assets in that they are pieces of paper as opposed to physical objects. 
D)  All of these are true.

Question 17

Financial assets:

Accepted Answer

A)  include cars, houses, and factory equipment. 
B)  provide some kind of service. 
C)  have value because of claims to future cash flows. 
D)  are not legal documents. 
A)  include cars, houses, and factory equipment. 
B)  provide some kind of service. 
C)  have value because of claims to future cash flows. 
D)  are not legal documents.

Question 18

Because of conflicts of interest between shareholders and management, it is in the interest of shareholders to monitor management's performance through:

Accepted Answer

A)  regular management letters to shareholders. 
B)  visits to the corporate facility. 
C)  attendance at the annual shareholder meetings. 
D)  periodic financial reports reviewed by independent auditors. 
A)  regular management letters to shareholders. 
B)  visits to the corporate facility. 
C)  attendance at the annual shareholder meetings. 
D)  periodic financial reports reviewed by independent auditors.

Question 19

Which entity is most directly responsible for the accounting within the firm?

Accepted Answer

A)  Treasurer 
B)  Controller 
C)  CFO 
D)  CEO 
A)  Treasurer 
B)  Controller 
C)  CFO 
D)  CEO

Question 20

Assets pledged to guarantee a loan are collateral.

Accepted Answer

A) True 
 B)False

If a company uses a bond issue to raise capital, the financing is an example of:

Large corporations tend to be:

A loan backed by an asset the lender can sell to pay off the loan if the borrower defaults is called _____.

Which of the following best describes the financial link between stockholders and bondholders?

Bondholders are rewarded by receiving interest and a share of the company's profits.

____ is a growing practice in which people concern themselves with the activities of the issuing business.

Responsibilities of the chief financial officer are similar to the responsibilities of the corporate controller when associated with the financial decision making process.

Financial theory was originally a branch of economics.

In firms of moderate size or larger, the finance department is typically relieved of the "watchdog" responsibility of monitoring the efficient use of money by other departments.

Double taxation of earnings is the primary financial disadvantage of the corporate form of business organization.

To "finance" an asset is:

Investing in stock represents partial ownership of a corporation and gives the investor the potential for future cash flows from earnings distribution and stock price appreciation if the business prospers.

All of the following are characteristics of C Corporations except:

S-type corporations have difficulty in accumulating earnings because their profits are subject to double taxation.

The following is true of financial assets:

Financial assets:

Because of conflicts of interest between shareholders and management, it is in the interest of shareholders to monitor management's performance through:

Which entity is most directly responsible for the accounting within the firm?

Assets pledged to guarantee a loan are collateral.

Financial Background: a Review of Accounting, Financial Statements, and Taxes

Cash Flows and Financial Analysis

Financial Planning

The Financial System, Corporate Governance, and Interest

Time Value of Money

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

Risk and Return

Capital Budgeting

Cash Flow Estimation

Risk Topics and Real Options in Capital Budgeting

Cost of Capital

Capital Structure and Leverage

Dividends

The Management of Working Capital Multiple Choice Questions

The Management of Working Capital

Corporate Restructuring

International Finance

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Exam 1: Foundations

If a company uses a bond issue to raise capital, the financing is an example of:

Large corporations tend to be:

A loan backed by an asset the lender can sell to pay off the loan if the borrower defaults is called _____.

Which of the following best describes the financial link between stockholders and bondholders?

Bondholders are rewarded by receiving interest and a share of the company's profits.

____ is a growing practice in which people concern themselves with the activities of the issuing business.

Responsibilities of the chief financial officer are similar to the responsibilities of the corporate controller when associated with the financial decision making process.

Financial theory was originally a branch of economics.

In firms of moderate size or larger, the finance department is typically relieved of the "watchdog" responsibility of monitoring the efficient use of money by other departments.

Double taxation of earnings is the primary financial disadvantage of the corporate form of business organization.

To "finance" an asset is:

Investing in stock represents partial ownership of a corporation and gives the investor the potential for future cash flows from earnings distribution and stock price appreciation if the business prospers.

All of the following are characteristics of C Corporations except:

S-type corporations have difficulty in accumulating earnings because their profits are subject to double taxation.

The following is true of financial assets:

Financial assets:

Because of conflicts of interest between shareholders and management, it is in the interest of shareholders to monitor management's performance through:

Which entity is most directly responsible for the accounting within the firm?

Assets pledged to guarantee a loan are collateral.

Financial Background: a Review of Accounting, Financial Statements, and Taxes

Cash Flows and Financial Analysis

Financial Planning

The Financial System, Corporate Governance, and Interest

Time Value of Money

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

Risk and Return

Capital Budgeting

Cash Flow Estimation

Risk Topics and Real Options in Capital Budgeting

Cost of Capital

Capital Structure and Leverage

Dividends

The Management of Working Capital Multiple Choice Questions

The Management of Working Capital

Corporate Restructuring

International Finance

Filters