Question 1

Which of the following individuals have unlimited liability for a firm's debts based on their ownership interest?

Accepted Answer

A)   Only general partners
B)   Only sole proprietors
C)   All stockholders
D)   Both limited and general partners
E)   Both general partners and sole proprietorsF) A) and C)
G) A) and D)

Question 2

Which one of the following represents a cash outflow from a corporation?

Accepted Answer

A)   Issuance of new securities
B)   Payment of dividends
C)   New loan proceeds
D)   Receipt of tax refund
E)   Initial sale of common stockF) A) and B)
G) A) and C)

Question 3

Financial managers should strive to maximize the current value per share of the existing stock to:

Accepted Answer

A)   guarantee the company will grow in size at the maximum possible rate.
B)   increase employee salaries.
C)   best represent the interests of the current shareholders.
D)   increase the current dividends per share.
E)   provide managers with shares of stock as part of their compensation.F) C) and E)
G) A) and E)

Question 4

An example of a capital budgeting decision is deciding:

Accepted Answer

A)   how many shares of stock to issue.
B)   whether or not to purchase a new machine for the production line.
C)   how to refinance a debt issue that is maturing.
D)   how much inventory to keep on hand.
E)   how much money should be kept in the checking account.F) A) and C)
G) A) and E)

Question 5

Which one of the following terms is defined as the management of a firm's long-term investments?

Accepted Answer

A)   Working capital management
B)   Financial allocation
C)   Agency cost analysis
D)   Capital budgeting
E)   Capital structureF) D) and E)
G) A) and D)

Question 6

Which one of the following best states the primary goal of financial management?

Accepted Answer

A)   Maximize current dividends per share
B)   Maximize the current value per share
C)   Increase cash flow and avoid financial distress
D)   Minimize operational costs while maximizing firm efficiency
E)   Maintain steady growth while increasing current profitsF) A) and B)
G) C) and E)

Question 7

A limited partnership:

Accepted Answer

A)   has an unlimited life.
B)   can opt to be taxed as a corporation.
C)   terminates at the death of any one limited partner.
D)   has at least one partner who has unlimited liability for all of the partnership's debts.
E)   consists solely of limited partners.F) A) and B)
G) None of the above

Question 8

A partnership with four general partners:

Accepted Answer

A)   distributes profits based on percentage of ownership.
B)   has an unlimited partnership life.
C)   limits the active involvement in the firm to a single partner.
D)   limits each partner's personal liability to 25 percent of the partnership's total debt.
E)   must distribute 25 percent of the profits to each partner.F) All of the above
G) C) and E)

Question 9

A limited liability company:

Accepted Answer

A)   can only have a single owner.
B)   is comprised of limited partners only.
C)   is taxed similar to a partnership.
D)   is taxed similar to a C corporation.
E)   generates totally tax-free income.F) All of the above
G) C) and D)

Question 10

Public offerings of debt and equity must be registered with the:

Accepted Answer

A)   New York Board of Governors.
B)   Federal Reserve.
C)   NYSE Registration Office.
D)   Securities and Exchange Commission.
E)   Market Dealers Exchange.F) A) and E)
G) A) and D)

Question 11

The articles of incorporation:

Accepted Answer

A)   describe the purpose of the firm and set forth the number of shares of stock that can be issued.
B)   are amended periodically especially prior to corporate elections.
C)   explain how corporate directors are to be elected and the length of their terms.
D)   sets forth the procedures by which a firm regulates itself.
E)   include only the corporation's name and intended life.F) None of the above
G) B) and E)

Question 12

Which one of the following terms is defined as the mixture of a firm's debt and equity financing?

Accepted Answer

A)   Working capital management
B)   Cash management
C)   Cost analysis
D)   Capital budgeting
E)   Capital structureF) C) and D)
G) B) and E) E

Question 13

Capital structure decisions include determining:

Accepted Answer

A)   which one of two projects to accept.
B)   how to allocate investment funds to multiple projects.
C)   the amount of funds needed to finance customer purchases of a new product.
D)   how much debt should be assumed to fund a project.
E)   how much inventory will be needed to support a project.F) A) and E)
G) A) and D)

Question 14

A firm's short-term assets and its short-term liabilities are referred to as the firm's:

Accepted Answer

A)   working capital.
B)   debt.
C)   investment capital.
D)   net capital.
E)   capital structure.F) C) and D)
G) B) and C)

Question 15

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

Accepted Answer

A)   An increase in the amount of the quarterly dividend
B)   A decrease in the per unit production costs
C)   An increase in the number of shares outstanding
D)   A decrease in the net working capital
E)   An increase in the market value per shareF) A) and C)
G) C) and D)

Question 16

Which business form is best suited to raising large amounts of capital?

Accepted Answer

A)   Sole proprietorship
B)   Limited liability company
C)   Corporation
D)   General partnership
E)   Limited partnershipF) C) and D)
G) B) and E) C

Question 17

Which one of the following grants an individual the right to vote on behalf of a shareholder?

Accepted Answer

A)   Proxy
B)   By-laws
C)   Indenture agreement
D)   Stock option
E)   Stock auditF) B) and D)
G) A) and C)

Question 18

Which one of the following questions is least likely to be addressed by financial managers?

Accepted Answer

A)   How should a product be marketed?
B)   Should customers be given 30 or 45 days to pay for their credit purchases?
C)   Should the firm borrow more money?
D)   Should the firm acquire new equipment?
E)   How much cash should the firm keep on hand?F) B) and E)
G) B) and D)

Question 19

Which one of the following is a primary market transaction?

Accepted Answer

A)   Sale of currently outstanding stock by a dealer to an individual investor
B)   Sale of a new share of stock to an individual investor
C)   Stock ownership transfer from one shareholder to another shareholder
D)   Gift of stock from one shareholder to another shareholder
E)   Gift of stock by a shareholder to a family memberF) All of the above
G) B) and E)

Question 20

Which one of the following is a means by which shareholders can replace company management?

Accepted Answer

A)   Stock options
B)   Promotion
C)   Sarbanes-Oxley Act
D)   Agency play
E)   Proxy fightF) B) and D)
G) B) and E) E

Exam 1: Introduction to Corporate Finance

Which of the following individuals have unlimited liability for a firm's debts based on their ownership interest?

Correct AnswerverifiedShow Answer

Which one of the following represents a cash outflow from a corporation?

Correct AnswerverifiedShow Answer

Financial managers should strive to maximize the current value per share of the existing stock to:

Correct AnswerverifiedShow Answer

An example of a capital budgeting decision is deciding:

Correct AnswerverifiedShow Answer

Which one of the following terms is defined as the management of a firm's long-term investments?

Correct AnswerverifiedShow Answer

Which one of the following best states the primary goal of financial management?

Correct AnswerverifiedShow Answer

A limited partnership:

Correct AnswerverifiedShow Answer

A partnership with four general partners:

Correct AnswerverifiedShow Answer

A limited liability company:

Correct AnswerverifiedShow Answer

Public offerings of debt and equity must be registered with the:

Correct AnswerverifiedShow Answer

The articles of incorporation:

Correct AnswerverifiedShow Answer

Which one of the following terms is defined as the mixture of a firm's debt and equity financing?

Correct AnswerverifiedE

Capital structure decisions include determining:

Correct AnswerverifiedShow Answer

A firm's short-term assets and its short-term liabilities are referred to as the firm's:

Correct AnswerverifiedShow Answer

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

Correct AnswerverifiedShow Answer

Which business form is best suited to raising large amounts of capital?

Correct AnswerverifiedC

Which one of the following grants an individual the right to vote on behalf of a shareholder?

Correct AnswerverifiedShow Answer

Which one of the following questions is least likely to be addressed by financial managers?

Correct AnswerverifiedShow Answer

Which one of the following is a primary market transaction?

Correct AnswerverifiedShow Answer

Which one of the following is a means by which shareholders can replace company management?

Correct AnswerverifiedE

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E

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C

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E