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Fundamentals of Corporate Finance, 4/c/e

Fundamentals of Corporate Finance, 4/e

Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Bradford D. Jordan, University of Kentucky
Gordon S. Roberts, York University

Introduction to Corporate Finance

Quick Quiz 1

After taking this quiz, click 'Submit Answers' for graded results. You'll also have the option of emailing the results to your instructor and/or yourself.


1	The purchase and sale of securities after the original issuance occurs in the:
		A)	primary market.
		B)	auction market.
		C)	dealer market.
		D)	secondary market.
		E)	liquidation market.


2	Which of the following is an advantage of ownership of a corporation over that of a sole proprietorship?
		A)	The owners of the corporation have unlimited liability for the firm's debts
		B)	It is the simplest to start
		C)	The corporation has an unlimited life
		D)	Dividends received by the corporation's shareholders are tax-exempt
		E)	It is more difficult to transfer ownership in a corporation


3	Which of the following is/are considered a benefit of the corporate form of organization? I. Ease of the transfer of ownership II. Limited life III. Double taxation
		A)	II only
		B)	I only
		C)	I and II only
		D)	I and III only
		E)	I, II, and III


4	Which of the following is a type of agency cost?
		A)	The cost buying insurance on the firm's assets
		B)	The cost of a corporate jet needed to keep tabs on foreign operations
		C)	Salaries paid to the firm's managers
		D)	The costs of financing the firm
		E)	The cost of an audit of the firm's financial statements


5	A financial manager of a corporation is considering different operating strategies for the coming year. From a financial management standpoint, which of the following would be her optimal strategy?
		A)	To undertake the plan that would maximize the current stock price
		B)	To undertake the plan that would reduce the overall riskiness of the firm
		C)	To undertake the plan that would result in the largest profits for the year
		D)	To undertake the plan that would maximize her personal wealth
		E)	To undertake the plan that would lead to the most stable stock price for the year


6	You are interested in purchasing 100 shares of stock in one of the largest corporations in Canada. You would most likely purchase the shares in
		A)	a secondary market operated as a dealer market
		B)	a primary market operated as an auction market
		C)	a secondary market operated as an auction market
		D)	a primary market operated as a dealer market
		E)	a secondary market operated as a money market


7	Which of the following is/are considered a "primary market" transaction? I. You buy shares in the public offering by the latest start-up company in the computer industry II. Your mother sells you the shares she purchased in your uncle's latest business venture III. You buy shares in Bombardier from your closest friend.
		A)	II only
		B)	I only
		C)	I and III only
		D)	I and II only
		E)	I, II, and III


8	Which of the following is NOT a general criteria that must be met in order for a firm to be listed on the TSE?
		A)	The firm must have a minimum number of shareholders owning at least 100 shares
		B)	The firm must have a minimum number of shares outstanding
		C)	The firm must have a minimum market value
		D)	The firm must have a minimum number of directors
		E)	The firm must have a minimum amount of assets


9	Which of the following is NOT considered one of the basic questions of corporate finance?
		A)	Where will the firm get the long-term financing to pay for its investments
		B)	At what rate of interest should a firm borrow
		C)	What long-term investments should the firm take
		D)	What mixture of debt and equity should the firm use to fund its operations
		E)	How should the firm manage its working capital, i.e., its everyday financial activities


10	A business owned by a single individual is called a(n):
		A)	corporation.
		B)	open structure.
		C)	partnership.
		D)	closed receivership
		E)	sole proprietorship.

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