Corporate Finance (Chp 1)

b A business owned by a solitary individual who has unlimited liability for its debt is called a:a) Corporation.b) Sole proprietorship.c) General partnership.d) Limited partnership.e) Limited liability company.
a Which one of the following is defined as a firm’s short-term assets and its short-term liabilities?a) Working capital.b) Debt.c) Investment capital.d) Net capital.e) Capital structure.
c Which one of the following statements concerning a sole proprietorship is correct?a) A sole proprietorship is designed to protect the personal assets of the owner.b) The profits of a sole proprietorship are subject to double taxation.c) The owner of a sole proprietorship is personally responsible for all of the company’s debts.d) There are very few sole proprietorships remaining in the U.S. today.e) A sole proprietorship is structured the same as a limited liability company.
e The controller of a corporation generally reports directly to the:a) Board of directors.b) Chairman of the board.c) Chief executive officer.d) President.e) Vice president of finance.
d Which form of business structure is most associated with agency problems?a) Sole proprietorship.b) General partnership.c) Limited partnership.d) Corporation.e) Limited liability company.
e Corporate dividends are:a) Tax-free income because they represent a repayment of the cost to purchase corporate shares.b) Not taxed as shareholders pay taxes on corporate income when it is earned.c) Tax-free since the corporation pays tax on that income when it is earned.d) Taxed at both the corporate and the personal level when the dividends are paid.e) Taxable as personal income when received by shareholders even though that income was taxed at the corporate level.
a Which of the following are results related to the enactment of the Sarbanes-Oxley Act of 2002? I. Increased foreign stock exchange listings of U.S. stocks.II. Decreased compliance costs.III. Increased privatization of public corporations.IV. Increased public disclosure by all corporations.a) I and III only.b) II and IV only.c) I, II, and III only.d) II, III, and IV only.e) I, III, and IV only.
e Which of the following help convince managers to work in the best interest of the stockholders? Assume there are no golden parachutes. I. Compensation based on the value of the stock.II. Stock option plans.III. Threat of a company takeover.IV. Threat of a proxy fight.a) I and II only.b) III and IV only.c) I, II, and III only.d) I, III, and IV only.e) I, II, III, and IV.
a The articles of incorporation: I. Describe the purpose of the firm.II. Are amended periodically.III. Set forth the number of shares of stock that can be issued.IV. Detail the method that will be used to elect corporate directors.a) I and III only.b) I and IV only.c) II and III only.d) II and IV only.e) I, III, and IV only.
d A limited partnership:a) Has an unlimited life.b) Can opt to be taxed as a corporation.c) Terminates at the death of any limited partner.d) Has a greater ability to raise capital than a sole proprietorship.e) Consists solely of limited partners.
d 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.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 only.
b Which of the following represent cash outflows from a corporation? I. Issuance of securities.II. Payment of dividends.III. New loan proceeds.IV. Payment of government taxes.a) I and III only.b) II and IV only.c) I and IV only.d) I, II, and IV only.e) II, III, and IV only.
b Which one of the following statements is correct?a) A general partnership is legally the same as a corporation.b) Income from both sole proprietorships and partnerships 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.
c A business formed by two or more individuals who each have unlimited liability for all of the firm’s business debts is called a:a) Corporation.b) Sole proprietorship.c) General partnership.d) Limited partnership.e) Limited liability company.
c Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction: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.
a Which one of these is a working capital management decision?a) Determining the minimum level of cash to be kept in a checking account.b) Determining the best method of producing a product.c) Determining the number of employees needed to work during a particular shift.d) Determining when to replace obsolete equipment.e) Determining if a competitor should be acquired.
e Which of the following should a financial manager consider when analyzing a capital budgeting project? I. Project start-up costs.II. Timing of all projected cash flows.III. Dependability of future cash flows.IV. Dollar amount of each projected cash flow.a) I and IV only.b) I, II, and IV only.c) I, II, and III only.d) II, III, and IV only.e) I, II, III, and IV.
c Which one of the following is an unintended result of the Sarbanes-Oxley Act?a) More detailed and accurate financial reporting.b) Increased management awareness of internal controls.c) Corporations delisting from major exchanges.d) Increased responsibility for corporate officers.e) Identification of internal control weaknesses.
d Which one of the following terms is defined as the management of a firm’s long-term investments?a) Working capital management.b) Financial allocation.c) Agency cost analysis.d) Capital budgeting.e) Capital structure.
b Which one of the following functions should be the responsibility of the controller rather than the treasurer?a) Daily cash deposit.b) Income tax returns.c) Equipment purchase analysis.d) Customer credit approval.e) Payment to a vendor.

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