Question 1

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) C) and D)
G) A) and E)

Question 2

Which of the following are cash flows from a corporation into the financial markets?
I.repayment of long-term debt
II.payment of government taxes
III.payment of loan interest
IV.payment of quarterly dividend

Accepted Answer

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

Question 3

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 B)
G) C) and D)

Question 4

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) C) and D)
G) A) and C)

Question 5

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) A) and E)
G) A) and B)

Question 6

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) C) and D)
G) A) and E)

Question 7

A general partner:

Accepted Answer

A)  is personally responsible for all the partnership debts.
B)  has no say over a firm's daily operations.
C)  faces double taxation whereas a limited partner does not.
D)  has a maximum loss equal to his or her equity investment.
E)  receives a salary in lieu of a portion of the profits.F) B) and D)
G) C) and D)

Question 8

Which one of the following actions by a financial manager is most apt to create an agency problem?

Accepted Answer

A)  refusing to borrow money when doing so will create losses for the firm
B)  refusing to lower selling prices if doing so will reduce the net profits
C)  refusing to expand the company if doing so will lower the value of the equity
D)  agreeing to pay bonuses based on the market value of the company stock rather than on the firm's level of sales
E)  increasing current profits when doing so lowers the value of the firm's equityF) A) and B)
G) A) and C)

Question 9

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) C) and D)
G) B) and C)

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) All of the above
G) B) and E)

Question 11

How might agency problems arise in partnerships?

Accepted Answer

Agency conflicts typically arise when th...

Question 12

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) None of the above
G) C) and D)

Question 13

What concerns might a loan officer have when loaning funds to a sole proprietorship that he or she might not have when loaning funds to a corporation?

Accepted Answer

The existence and viability of a sole pr...

Question 14

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) None of the above
G) C) and E)

Question 15

A business created as a distinct legal entity and treated as a legal "person" is called a:

Accepted Answer

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

Question 16

Which one of the following statements concerning stock exchanges is correct?

Accepted Answer

A)  NASDAQ is a broker market.
B)  The NYSE is a dealer market.
C)  The exchange with the strictest listing requirements is NASDAQ.
D)  Some large companies are listed on NASDAQ.
E)  Most debt securities are traded on the NYSe.F) A) and B)
G) A) and E)

Question 17

Compare and contrast the NYSE with NSADAQ.

Accepted Answer

The NYSE is an auction market where sell...

Question 18

Which of the following apply to a partnership that consists solely of general partners?
I.double taxation of partnership profits
II.limited partnership life
III.active involvement in the firm by all the partners
IV.unlimited personal liability for all partnership debts

Accepted Answer

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

Question 19

Which one of the following statements is generally correct?

Accepted Answer

A)  Private placements must be registered with the SEC.
B)  All secondary markets are auction markets.
C)  Dealer markets have a physical trading floor.
D)  Auction markets match buy and sell orders.
E)  Dealers arrange trades but never own the securities traded.F) A) and B)
G) None of the above

Question 20

Which one of the following correctly defines the upward chain of command in a typical corporate organizational structure?

Accepted Answer

A)  The vice president of finance reports to the chairman of the board.
B)  The chief executive officer reports to president.
C)  The controller reports to the president.
D)  The treasurer reports to the vice president of finance.
E)  The chief operations officer reports to the vice president of production.F) A) and E)
G) A) and B)

Exam 1: Introduction to Corporate Finance

Which one of the following actions by a financial manager is most apt to create an agency problem?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A general partner:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following apply to a partnership that consists solely of general partners? I.double taxation of partnership profits II.limited partnership life III.active involvement in the firm by all the partners IV.unlimited personal liability for all partnership debts

Correct AnswerverifiedShow Answer

What concerns might a loan officer have when loaning funds to a sole proprietorship that he or she might not have when loaning funds to a corporation?

Correct AnswerverifiedThe existence and viability of a sole pr...View AnswerShow Answer

Which one of the following is a primary market transaction?

Correct AnswerverifiedShow Answer

Which one of the following is an agency cost?

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Which one of the following correctly defines the upward chain of command in a typical corporate organizational structure?

Correct AnswerverifiedShow Answer

Which one of the following statements concerning stock exchanges is correct?

Correct AnswerverifiedShow Answer

A business created as a distinct legal entity and treated as a legal "person" is called a:

Correct AnswerverifiedShow Answer

Which one of the following statements is generally correct?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

How might agency problems arise in partnerships?

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

Which of the following are cash flows from a corporation into the financial markets? I.repayment of long-term debt II.payment of government taxes III.payment of loan interest IV.payment of quarterly dividend

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Compare and contrast the NYSE with NSADAQ.

Correct AnswerverifiedThe NYSE is an auction market where sell...View AnswerShow Answer

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The existence and viability of a sole pr...
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Agency conflicts typically arise when th...
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The NYSE is an auction market where sell...
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