Question 1

The true owners of the corporation are the

Accepted Answer

A) holders of debt issues of the firm. 
B) preferred stockholders. 
C) board of directors of the firm. 
D) common stockholders.

Question 2

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 3

In terms of organizational costs,which of the following sequences is generally correct,moving from lowest to highest cost?

Accepted Answer

A) General partnership,sole proprietorship,limited partnership,corporation 
B) Sole proprietorship,general partnership,limited partnership,corporation 
C) Corporation,limited partnership,general partnership,sole proprietorship 
D) Sole proprietorship,general partnership,corporation,limited partnership

Question 4

Why do investors prefer receiving cash sooner rather than later,according to finance theory?

Accepted Answer

A) Incremental profits are greater than accounting profits. 
B) Money received earlier can be reinvested and returns can be increased. 
C) Tax considerations are important when investing. 
D) Diversification leads to increased value.

Question 5

How could you compensate an investor for taking on a significant amount of risk?

Accepted Answer

A) Increase the expected rate of return 
B) Raise more debt capital 
C) Offer stock at a higher price 
D) Increase sales

Question 6

For the risk-return principle implies that the more risky a given course of action,the higher the expected return must be.

Accepted Answer

A) True 
 B)False

Question 7

The term stockholder is equivalent to

Accepted Answer

A) general partner. 
B) creditor. 
C) shareholder. 
D) stakeholder.

Question 8

The personal decision to obtain a college degree in business is primarily a(n)________ decision.

Accepted Answer

A) social 
B) investment 
C) ethical 
D) financing

Question 9

Which of the following is a significant disadvantage of a general partnership?

Accepted Answer

A) The cost of forming it is high. 
B) Each partner is fully responsible for the liabilities incurred by the partnership. 
C) There is a risk associated with the industry in which it operates. 
D) Forming the business is very complex.

Question 10

Discuss the risk/return tradeoff and how it relates to finance.

Accepted Answer

The answer of Discuss the risk/return tradeoff and how it...

Question 11

Which of the following is most likely to motivate executives to maximize shareholder wealth?

Accepted Answer

A) Tying bonuses to cost reductions and meeting budget goals 
B) Offering them relatively high salaries 
C) Tying annual bonuses to increases in annual profits 
D) Compensating them with stock options that can only be exercised after five years

Question 12

Which of the following is NOT true for limited partnerships?

Accepted Answer

A) Limited partners can only manage the business. 
B) One general partner must exist who has unlimited liability. 
C) Only the name of general partners can appear in the name of the firm. 
D) Limited partners may sell their interest in the company.

Question 13

Consider the timing of the profits of the following certain investment projects:
Profit
L S
Year 1 $ 0 $ 3000
Year 2 $ 3000 $ 0

Accepted Answer

A) Project S is preferred to Project L. 
B) Project L is preferred to Project S. 
C) Projects S and L are equally desirable. 
D) A goal of profit maximization would favor Project S only.

Question 14

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.

Question 15

Owners must register and pay yearly fees to their State of residence when establishing a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 16

Ultimate control in a corporation is vested in the board of directors.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following factors is most important in investment decisions?

Accepted Answer

A) The change in earnings before taxes. 
B) The change in gross sales revenue. 
C) The change in net income. 
D) The change in after-tax cash flow.

Question 18

Which of the following statements best represents what finance is about?

Accepted Answer

A) How political,social,and economic forces affect corporations 
B) Maximizing profits 
C) The study of how people and businesses make investment decisions and how to finance those decisions 
D) Reducing risk

Question 19

Serious ethical violations by corporations such as Enron led to the passage of

Accepted Answer

A) the Dodd-Frank Act. 
B) the Insider Trading Act of 1988. 
C) the Sarbanes-Oxley Act. 
D) All of the above.

Question 20

Business financial decisions are fundamentally different from personal financial decisions.

Accepted Answer

A) True 
 B)False

Exam 1: Getting Started-Principles of Finance

The true owners of the corporation are the

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.

In terms of organizational costs,which of the following sequences is generally correct,moving from lowest to highest cost?

Why do investors prefer receiving cash sooner rather than later,according to finance theory?

How could you compensate an investor for taking on a significant amount of risk?

For the risk-return principle implies that the more risky a given course of action,the higher the expected return must be.

The term stockholder is equivalent to

The personal decision to obtain a college degree in business is primarily a(n) ________ decision.

Which of the following is a significant disadvantage of a general partnership?

Discuss the risk/return tradeoff and how it relates to finance.

Which of the following is most likely to motivate executives to maximize shareholder wealth?

Which of the following is NOT true for limited partnerships?

Consider the timing of the profits of the following certain investment projects: Profit L S Year 1 $ 0 $ 3000 Year 2 $ 3000 $ 0

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

Owners must register and pay yearly fees to their State of residence when establishing a sole proprietorship.

Ultimate control in a corporation is vested in the board of directors.

Which of the following factors is most important in investment decisions?

Which of the following statements best represents what finance is about?

Serious ethical violations by corporations such as Enron led to the passage of

Business financial decisions are fundamentally different from personal financial decisions.