Question 1

The Sarbanes-Oxley Act of 2002 is a governmental response to:

Accepted Answer

A)  decreasing corporate profits.
B)  the terrorists attacks on 9/11/2001.
C)  a weakening economy.
D)  deregulation of the stock exchanges.
E)  management greed and abuses.F) B) and C)
G) None of the above

Question 2

Which type of business organization has all the respective rights and privileges of a legal person?

Accepted Answer

A)  sole proprietorship
B)  general partnership
C)  limited partnership
D)  corporation
E)  limited liability companyF) C) and D)
G) C) and E)

Question 3

Which one of the following statements is correct concerning the NYSE?

Accepted Answer

A)  The publicly traded shares of a NYSE-listed firm must be worth at least $250 million.
B)  The NYSE is the largest dealer market for listed securities in the United States.
C)  The listing requirements for the NYSE are more stringent than those of NASDAQ.
D)  Any corporation desiring to be listed on the NYSE can do so for a fee.
E)  The NYSE is an OTC market functioning as both a primary and a secondary market.F) All of the above
G) B) and C)

Question 4

Which one of the following is an agency cost?

Accepted Answer

A)  accepting an investment opportunity that will add value to the firm
B)  increasing the quarterly dividend
C)  investing in a new project that creates firm value
D)  hiring outside accountants to audit the company's financial statements
E)  closing a division of the firm that is operating at a lossF) A) and C)
G) A) and B)

Question 5

Public offerings of debt and equity must be registered with which one of the following?

Accepted Answer

A)  New York Board of Governors
B)  Federal Reserve
C)  NYSE Registration Office
D)  Securities and Exchange Commission
E)  Market Dealers ExchangeF) All of the above
G) B) and C) D

Question 6

Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange.This transaction:

Accepted Answer

A)  took place in the primary market.
B)  occurred in a dealer market.
C)  was facilitated in the secondary market.
D)  involved a proxy.
E)  was a private placement.F) All of the above
G) B) and D)

Question 7

Which one of the following statements concerning a sole proprietorship is correct?

Accepted Answer

A)  The life of a sole proprietorship is potentially unlimited.
B)  A sole proprietor can generally raise large sums of capital quite easily.
C)  Transferring ownership of a sole proprietorship is easier than transferring ownership of a corporation.
D)  A sole proprietorship is taxed the same as a C corporation.
E)  It is easy to create a sole proprietorship.F) None of the above
G) B) and D) E

Question 8

Which of the following represent cash outflows from a corporation?
I.issuance of securities
II.payment of dividends
III.new loan proceeds
IV.payment of government taxes

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I and IV only
D)  I, II, and IV only
E)  II, III, and IV onlyF) A) and E)
G) B) and D)

Question 9

Which of the following are results related to the enactment of the Sarbanes-Oxley Act of 2002?
I.increased foreign stock exchange listings of U.S.stocks
II.decreased compliance costs
III.increased privatization of public corporations
IV.increased public disclosure by all corporations

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I, II, and III only
D)  II, III, and IV only
E)  I, III, and IV onlyF) All of the above
G) A) and B)

Question 10

Which one of the following statements is correct?

Accepted Answer

A)  A general partnership is legally the same as a corporation.
B)  Both sole proprietorship and partnership income is taxed as individual income.
C)  Partnerships are the most complicated type of business to form.
D)  All business organizations have bylaws.
E)  Only firms organized as sole proprietorships have limited lives.F) C) and E)
G) B) and C) B

Question 11

List and briefly describe the three general areas of responsibility for a financial manager.

Accepted Answer

The three basic areas are:
1.capital bud...

Question 12

A stakeholder is:

Accepted Answer

A)  a person who owns shares of stock.
B)  any person who has voting rights based on stock ownership of a corporation.
C)  a person who initially founded a firm and currently has management control over that firm.
D)  a creditor to whom a firm currently owes money.
E)  any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm.F) A) and E)
G) D) and E)

Question 13

A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:

Accepted Answer

A)  corporation.
B)  sole proprietorship.
C)  general partnership.
D)  limited partnership.
E)  limited liability company.F) A) and E)
G) A) and C)

Question 14

How might agency problems arise in partnerships?

Accepted Answer

Agency conflicts typically arise when th...

Question 15

Decisions made by financial managers should primarily focus on increasing which one of the following?

Accepted Answer

A)  size of the firm
B)  growth rate of the firm
C)  gross profit per unit produced
D)  market value per share of outstanding stock
E)  total salesF) A) and C)
G) A) and D)

Question 16

A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:

Accepted Answer

A)  generally partner.
B)  sole proprietor.
C)  limited partner.
D)  corporate shareholder.
E)  zero partner.F) A) and B)
G) None of the above

Question 17

Why should financial managers strive to maximize the current value per share of the existing stock?

Accepted Answer

A)  doing so guarantees the company will grow in size at the maximum possible rate
B)  doing so increases employee salaries
C)  because they have been hired to represent the interests of the current shareholders
D)  because this will increase the current dividends per share
E)  because managers often receive shares of stock as part of their compensationF) A) and E)
G) All of the above

Question 18

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 limited partner.
D)  has a greater ability to raise capital than a sole proprietorship.
E)  consists solely of limited partners.F) B) and D)
G) A) and B)

Question 19

Which one of the following is a working capital management decision?

Accepted Answer

A)  determining the amount of equipment needed to complete a job
B)  determining whether to pay cash for a purchase or use the credit offered by the supplier
C)  determining the amount of long-term debt required to complete a project
D)  determining the number of shares of stock to issue to fund an acquisition
E)  determining whether or not a project should be acceptedF) A) and B)
G) D) and E)

Question 20

Which one of the following statements concerning a sole proprietorship is correct?

Accepted Answer

A)  A sole proprietorship is designed to protect the personal assets of the owner.
B)  The profits of a sole proprietorship are subject to double taxation.
C)  The owner of a sole proprietorship is personally responsible for all of the company's debts.
D)  There are very few sole proprietorships remaining in the U.S.today.
E)  A sole proprietorship is structured the same as a limited liability company.F) A) and B)
G) C) and E)

Exam 1: Introduction to Corporate Finance

The Sarbanes-Oxley Act of 2002 is a governmental response to:

Correct AnswerverifiedShow Answer

Which type of business organization has all the respective rights and privileges of a legal person?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct concerning the NYSE?

Correct AnswerverifiedShow Answer

Which one of the following is an agency cost?

Correct AnswerverifiedShow Answer

Public offerings of debt and equity must be registered with which one of the following?

Correct AnswerverifiedD

Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange.This transaction:

Correct AnswerverifiedShow Answer

Which one of the following statements concerning a sole proprietorship is correct?

Correct AnswerverifiedE

Which of the following represent cash outflows from a corporation? I.issuance of securities II.payment of dividends III.new loan proceeds IV.payment of government taxes

Correct AnswerverifiedShow Answer

Which of the following are results related to the enactment of the Sarbanes-Oxley Act of 2002? I.increased foreign stock exchange listings of U.S.stocks II.decreased compliance costs III.increased privatization of public corporations IV.increased public disclosure by all corporations

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedB

List and briefly describe the three general areas of responsibility for a financial manager.

Correct AnswerverifiedThe three basic areas are:1.capital bud...View AnswerShow Answer

A stakeholder is:

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A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:

Correct AnswerverifiedShow Answer

How might agency problems arise in partnerships?

Correct AnswerverifiedAgency conflicts typically arise when th...View AnswerShow Answer

Decisions made by financial managers should primarily focus on increasing which one of the following?

Correct AnswerverifiedShow Answer

A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:

Correct AnswerverifiedShow Answer

Why should financial managers strive to maximize the current value per share of the existing stock?

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A limited partnership:

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Which one of the following is a working capital management decision?

Correct AnswerverifiedShow Answer

Which one of the following statements concerning a sole proprietorship is correct?

Correct AnswerverifiedShow Answer

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D

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E

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B

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The three basic areas are:
1.capital bud...
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Agency conflicts typically arise when th...
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