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Multiple Choice
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1

Generally, a corporation is owned by its:
A)Managers
B)Board of Directors
C)Shareholders
D)All of the above
2

Limited liability is an important feature of:
A)Sole proprietorships
B)Partnerships
C)Corporations
D)All of the above
3

The following are examples of real assets except:
A)Machinery
B)Common stock
C)Office buildings
D)Patents
4

A firm's investment decision is also called the:
A)Financing decision
B)Capital budgeting decision
C)Liquidity decision
D)None of the above
5

The treasurer usually oversees the following functions of a corporation except:
A)Preparation of financial statements
B)Investor relationships
C)Cash management
D)Obtaining finances
6

The treasurer is usually responsible for the following functions of a corporation except:
A)Raising new capital
B)Cash management
C)Banking relationships
D)Internal accounting
7

The following are advantages of separation of ownership and management of corporations except:
A)Corporations can exist forever.
B)Facilitate transfer of ownership without affecting the operations of the firm.
C)Hire professional managers
D)Incur agency costs
8

The financial goal of a corporation is to:
A)Maximize sales
B)Maximize profits
C)Maximize the value of the firm
D)Maximize managers' benefits
9

Agency costs are costs incurred when:
A)Managers do not attempt to maximize firm value.
B)Shareholders incur costs to monitor the managers and influence their actions.
C)Both A and B
D)None of the above
10

Which of the following is typically not considered a financial manager in a large corporation?
A)Chief Financial Officer
B)Treasurer
C)Controller
D)Auditor
11

The difference in information held by managers, owners, and lenders is often referred to as what kind of information?
A)Asymmetric
B)Convergent
C)Private
D)Quality
12

Generally, a corporation is owned by its shareholders.
A)True
B)False
13

Shares owned and not traded on an exchange are sometimes referred to as:
A)Asymmetric
B)Closely Held
C)Private
D)Public
14

Who is "least likely" to use articles of incorporation?
A)Sole proprietorships
B)Corporations
C)LLC
D)Partnerships
15

What is the name most often used in place of financial markets?
A)Bond markets
B)Capital markets
C)Options markets
D)Stock markets
16

What is the phrase used to describe the typical relationship between capital budgeting and financing decisions?
A)Dependent
B)Linked
C)Separated
D)Tied
17

The controller typically does all of the following, expect:
A)Accounting
B)Prepare financial statements
C)Raise capital
D)Taxes
18

Which of the following is typically considered an agency cost?
A)Audit
B)Cost of goods sold
C)Consultant fees
D)Taxes
19

What function raises cash and invests in projects?
A)Firm's operations
B)Financial manager
C)Financial markets
D)Shareholders





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