Quiz: Chapter 1 Finance

This subarea of finance is important for adapting to the global economy. Financial management International finance Financial institutions and markets
Which of the following is the firm’s highest-level financial manager? Chief executive officer Chief financial officer Board of directors Corporate governance CFO
Not all cash a company generates will be returned to the investors. Which of the following will NOT reduce the amount of capital returned to the investors? Retained earnings Taxes Dividends None of these will reduce the amount of capital returned to the investors. Dividends
Which of the following is defined as a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations? Investments Asset classes Market instruments Financial markets Asset classes
Which of the following statements is correct? Accountants are focused on what happened in the past. Financial managers are focused on what happened in the past. Both accountants and financial managers use total quality management systems to standardize data. Financial managers double-check the accountant’s statements. Accountants are focused on what happened in the past.
The overall goal of the financial manager is to: minimize total costs. maximize net income. maximize earnings per share. maximize shareholder wealth. maximize shareholder wealth.
As individual legal entities, corporations assume liability for their own debts, so the shareholders hold: only limited liability. unlimited liability. shared liability. joint liability only limited liability.
When determining a form of business organization, all of the following are considered EXCEPT: who owns the firm. the owners’ risks. the tax ramifications. the physical location of the business. the physical location of the business.
Which of the following can create ethical dilemmas between corporate managers and stockholders? Agency relationship Auditors Boards of directors Venture capitalist Agency relationship
Which of the following statements is incorrect? Sole proprietorships are subject to less regulation. Both angel investors and venture capitalists exchange capital for ownership. Shareholders are responsible for paying off the corporate bonds in the event of a bankruptcy. All of these statements are correct. Shareholders are responsible for paying off the corporate bonds in the event of a bankruptcy.
An angel investor differs from a venture capitalist because of the: type of investment. investment time frame. size of investment. voting rights. size of investment
From a taxation perspective, the form of business organization with the highest business level taxes is the: sole proprietorship. corporation. partnership. S corporation. corporation
These individuals examine a firm’s financial strength for its debt holders. Auditors Investment analysts Credit analysts
Which of these are NOT basic approaches to minimizing the agency problem? Ignore the conflict of interest Monitor managers’ actions Align managers’ personal interest with those of the owners by making the managers owners All of these are basic approaches to minimizing the agency problem. All of these are basic approaches to minimizing the agency problem.
Methods to minimize agency problem include all EXCEPT: offer the managers an equity stake in the firm. award the CEO stock options. allow the CEO to purchase stock via an employee stock option plan. allow the CEO to purchase bonds via an employee bond option plan. allow the CEO to purchase bonds via an employee bond option plan.
These individuals follow a firm, conduct their own evaluations of the company’s business activities, and report to the investment community. Auditors Investment analysts Investment bankers Credit analysts Investment analysts
Outside parties that monitor the firm include all of the following EXCEPT: credit agencies. the New York Stock Exchange. analysts. bankers. the New York Stock Exchange.
Which of the following is legal duty between two parties where one party must act in the interest of the other party? Agency theory Angel investor Fiduciary Investment banker Fiduciary
The board of directors: are hired by the CEO. are elected by shareholders. have unlimited liability since they oversee the day-to-day operations of the firm. are employed by the Securities Exchange Commission to ensure its rules and regulations have been met. are elected by shareholders.
Restricted stock is:a special type of stock that is not transferable from the current holder to others until specific conditions are satisfied. a special type of stock that can be converted into corporate bonds after a specific amount of time has elapsed. a special type of stock that is a result of offering an employee stock ownership plan. None of these answers is correct. a special type of stock that is not transferable from the current holder to others until specific conditions are satisfied.

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