Question 1

Which of the following factors or activities can be controlled by the management of a firm?

Accepted Answer

A)  Capital budgeting. 
B)  The level of economic activity. 
C)  The level of interest rates. 
D)  Stock market conditions. 
A)  Capital budgeting. 
B)  The level of economic activity. 
C)  The level of interest rates. 
D)  Stock market conditions. A

Question 2

An agency problem can arise when the agent of the firm is the sole owner of the firm.

Accepted Answer

A) True 
 B)False  False

Question 3

The legal system and market forces impose substantial costs on individuals and institutions that engage in unethical behavior. Which of the following would not be an example of the above?

Accepted Answer

A)  Financial losses. 
B)  Legal fines. 
C)  Agency conflicts. 
D)  Jail time. 
A)  Financial losses. 
B)  Legal fines. 
C)  Agency conflicts. 
D)  Jail time. C

Question 4

The most fundamental way that a business can grow in size is from the reinvestment of cash flows or earnings.

Accepted Answer

A) True 
 B)False

Question 5

Which organizational form best enables the owners of the firm to monitor the actions of other owners of the same firm?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  private corporation 
D)  public corporation 
A)  sole proprietorship 
B)  partnership 
C)  private corporation 
D)  public corporation

Question 6

Which of the following organizational forms is subject to the most SEC regulations?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  private corporation 
D)  public corporation 
A)  sole proprietorship 
B)  partnership 
C)  private corporation 
D)  public corporation

Question 7

Capital budgeting involves

Accepted Answer

A)  how a firm's day-to-day financial matters should be managed. 
B)  how the firm should finance its assets. 
C)  which productive assets the firm should employ. 
D)  all of the above. 
A)  how a firm's day-to-day financial matters should be managed. 
B)  how the firm should finance its assets. 
C)  which productive assets the firm should employ. 
D)  all of the above.

Question 8

Which of the following is a principal within the agency relationship?

Accepted Answer

A)  a company engineer 
B)  the CEO of the firm 
C)  a shareholder 
D)  the board of directors 
A)  a company engineer 
B)  the CEO of the firm 
C)  a shareholder 
D)  the board of directors

Question 9

If a firm establishes maximizing profits at the most important goal of the firm, which of the following would not be given proper consideration?

Accepted Answer

A)  Sales revenues 
B)  Expenses 
C)  Risk 
D)  Cost of goods sold 
A)  Sales revenues 
B)  Expenses 
C)  Risk 
D)  Cost of goods sold

Question 10

General partners in a business have limited liability with regard to their firm's obligations.

Accepted Answer

A) True 
 B)False

Question 11

_____________occur(s) when one party in a business transaction has information that is unavailable to the other parties in the transaction.

Accepted Answer

A)  Profits 
B)  Information asymmetry 
C)  Information efficiency 
D)  None of the above 
A)  Profits 
B)  Information asymmetry 
C)  Information efficiency 
D)  None of the above

Question 12

Most large corporations are incorporated in New York because of its favorable tax treatment of corporate income and its statutes protecting the rights of its owners.

Accepted Answer

A) True 
 B)False

Question 13

The dollar difference between current assets and total liabilities is called working capital.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following business organizational forms is easiest to raise capital?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  a and b 
A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  a and b

Question 15

The demand for a potential business product, as well as the identification of what product or services is to be produced, are both contained in a business plan.

Accepted Answer

A) True 
 B)False

Question 16

A society's ideas about what actions are right and wrong are

Accepted Answer

A)  morals. 
B)  ethics. 
C)  laws. 
D)  unwritten laws. 
A)  morals. 
B)  ethics. 
C)  laws. 
D)  unwritten laws.

Question 17

To start a business, the owners need

Accepted Answer

A)  a market where there is demand for their product. 
B)  a clear vision of what products or services they want to produce. 
C)  the know-how to successfully market their product. 
D)  all of the above. 
A)  a market where there is demand for their product. 
B)  a clear vision of what products or services they want to produce. 
C)  the know-how to successfully market their product. 
D)  all of the above.

Question 18

Working capital management decisions involve

Accepted Answer

A)  how a firm's day-to-day financial matters should be managed. 
B)  how the firm should finance its assets. 
C)  which productive assets the firm should employ. 
D)  all of the above. 
A)  how a firm's day-to-day financial matters should be managed. 
B)  how the firm should finance its assets. 
C)  which productive assets the firm should employ. 
D)  all of the above.

Question 19

The golden rule is an example of

Accepted Answer

A)  a current law. 
B)  an historical law. 
C)  an unworkable rule in financial markets. 
D)  an ethical norm. 
A)  a current law. 
B)  an historical law. 
C)  an unworkable rule in financial markets. 
D)  an ethical norm.

Question 20

An example of an economy that had trouble establishing a stock market and attracting foreign investment is

Accepted Answer

A)  Russia. 
B)  China. 
C)  the Czech Republic. 
D)  Japan. 
A)  Russia. 
B)  China. 
C)  the Czech Republic. 
D)  Japan.

Exam 1: The Financial Manager and the Company

Which of the following factors or activities can be controlled by the management of a firm?

An agency problem can arise when the agent of the firm is the sole owner of the firm.

The legal system and market forces impose substantial costs on individuals and institutions that engage in unethical behavior. Which of the following would not be an example of the above?

The most fundamental way that a business can grow in size is from the reinvestment of cash flows or earnings.

Which organizational form best enables the owners of the firm to monitor the actions of other owners of the same firm?

Which of the following organizational forms is subject to the most SEC regulations?

Capital budgeting involves

Which of the following is a principal within the agency relationship?

If a firm establishes maximizing profits at the most important goal of the firm, which of the following would not be given proper consideration?

General partners in a business have limited liability with regard to their firm's obligations.

_____________occur(s) when one party in a business transaction has information that is unavailable to the other parties in the transaction.

Most large corporations are incorporated in New York because of its favorable tax treatment of corporate income and its statutes protecting the rights of its owners.

The dollar difference between current assets and total liabilities is called working capital.

Which of the following business organizational forms is easiest to raise capital?

The demand for a potential business product, as well as the identification of what product or services is to be produced, are both contained in a business plan.

A society's ideas about what actions are right and wrong are

To start a business, the owners need

Working capital management decisions involve

The golden rule is an example of

An example of an economy that had trouble establishing a stock market and attracting foreign investment is

The Financial System and the Level of Interest Rates

Financial Statements, Cash Flows and Tax

Analysing Financial Statements

The Time Value of Money

Discounted Cash Flows and Valuation

Risk and Return

Bond Valuation and the Structure of Interest Rates

Share Valuation

The Fundamentals of Capital Budgeting

Cash Flows and Capital Budgeting

Evaluating Project Economics and Capital Rationing

The Cost of Capital

Working Capital Management

How Companies Raise Capital

Capital Structure Policy

Dividends and Dividend Policy

Business Formation, Growth and Valuation

Strategic Financial Planning and Forecasting

Options and Corporate Finance

International Financial Management

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