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| 1 | |
Business finance includes determining which long-term assets a firm should purchase. |
| | A) | True |
| | B) | False |
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| 2 | |
The board of directors has the power to act on behalf of the shareholders to hire and fire the operating managers of the firm. In a legal sense, the directors are "principals" and the shareholders are "agents." |
| | A) | True |
| | B) | False |
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| 3 | |
In capital budgeting, the financial manager tries to identify investment opportunities that will increase the value of the firm. |
| | A) | True |
| | B) | False |
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| 4 | |
Three advantages of the corporate form of organization are the ease of transfer of ownership, limited liability for the shareholders and an unlimited life for the business entity. |
| | A) | True |
| | B) | False |
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| 5 | |
The intent of the Sarbanes-Oxley Act of 2002 is to protect the public from accounting fraud and financial malpractice. |
| | A) | True |
| | B) | False |
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| 6 | |
Financial managers are responsible for determining:
I. how suppliers will be paid.
II. the appropriate level of debt for a firm.
III. which projects a firm should undertake.
IV. how to invest the firm's cash. |
| | A) | I and II only |
| | B) | II and III only |
| | C) | I, II and III only |
| | D) | II, III and IV only |
| | E) | I, II, III and IV |
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| 7 | |
Ann is interested in purchasing Ted's factory. Since Ann is a poor negotiator, she hires Mary to negotiate a purchase price. Identify the parties to this transaction. |
| | A) | Mary is the principal and Ann is the agent. |
| | B) | Ted is the principal and Ann is the agent. |
| | C) | Ted is the agent and Ann is the principal. |
| | D) | Ann is the principal and Mary is the agent. |
| | E) | Mary is the principal and Ted is the agent. |
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| 8 | |
Which of the following apply to dealer markets?
I. over-the-counter trading
II. individuals buying and selling for themselves, at their own risk
III. a market with a physical location
IV. the matching of buyers with sellers |
| | A) | I and II only |
| | B) | II and III only |
| | C) | III and IV only |
| | D) | I, II and IV only |
| | E) | I and IV only |
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| 9 | |
At least one of the owners has unlimited liability under which of the following forms of business organization?
I. sole proprietorship
II. general partnership
III. limited partnership
IV. limited liability company |
| | A) | I and II only |
| | B) | II and III only |
| | C) | I, II and IV only |
| | D) | I, II and III only |
| | E) | I, II, III and IV |
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| 10 | |
Tasks related to tax management, cost accounting, financial accounting, and data processing are the responsibility of which corporate officer? |
| | A) | treasurer |
| | B) | chief executive officer |
| | C) | controller |
| | D) | chairman of the board |
| | E) | chief operations officer |
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| 11 | |
All stocks that trade on the New York Stock Exchange are: |
| | A) | over-the-counter securities. |
| | B) | primary market securities. |
| | C) | AMEX securities. |
| | D) | listed securities. |
| | E) | privately placed securities. |
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| 12 | |
Which of the following statements regarding agency problems and costs are correct?
I. An agency problem exists when there is a conflict of interest between the stockholders and the management of a firm.
II. An agency problem exists when there is a conflict of interest between a principal and an agent.
III. An agency cost occurs when firm management avoids risky projects that would favorably affect the stock price because the managers are worried about keeping their jobs.
IV. An agency cost occurs when management chooses an action that benefits the shareholders but reduces management compensation. |
| | A) | I and II only |
| | B) | II and III only |
| | C) | I, III and IV only |
| | D) | I, II and III only |
| | E) | II, III and IV only |
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| 13 | |
Which of the following are stakeholders in a firm?
I. employees
II. customers
III. stockholders
IV. government |
| | A) | I and II only |
| | B) | III only |
| | C) | I and III only |
| | D) | II and IV only |
| | E) | I, II and IV only |
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| 14 | |
Which one of the following statements concerning the financial markets is correct? |
| | A) | There are about three times as many companies listed on NASDAQ as on the NYSE. |
| | B) | The NYSE lists about 85 percent of all firms that trade publicly. |
| | C) | In general, stocks listed on NASDAQ trade more actively than those listed on the NYSE. |
| | D) | All large firms, such as General Electric and Microsoft, trade on the NYSE. |
| | E) | The trading floor for NASDAQ is located in Chicago. |
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| 15 | |
Under which of the following forms of business organization are the losses to an owner limited to the amount which he or she has invested in the organization?
I. common stockholder
II. limited partner
III. general partner
IV. sole proprietor |
| | A) | I only |
| | B) | I and II only |
| | C) | I, II and IV only |
| | D) | II, III and IV only |
| | E) | II and III only |
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