Ch 1 Quiz (Intro to Corporate Finance

The decision to issue additional shares of stock is an example of which one of the followinga. Capital budgetingb. Working capital managementc. Net working capital decisionsd. Capital structure decisionse. Controller’s duties d. Capital structure decisions
A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:a. Zero partnerb. Generally partnerc. Limited partnerd. Sole proprietore. Corporate shareholder c. Limited partner
Which one of the following is a working capital management decision?a. Determining the number of shares of stock to issue to fund an acquisitionb. Determining whether or not a project should be acceptedc. Determining the amount of long-term debt required to complete a projectd. Determining whether to pay cash for a purchase or use the credit offered by the suppliere. Determining the amount of equipment needed to complete a job d. Determining whether to pay cash for a purchase or use the credit offered by the supplier
A general partner:a. Has a maximum loss equal to his or her equity investmentb. Is personally responsible for all the partnerships debtc. Faces double taxation whereas a limited partner does notd. Has no say over a firm’s daily operationse. Receives a salary in lieu of a portion of the profits b. Is personally responsible for all the partnerships debt
Which one of the following statements concerning a sole proprietorship is correct?a. A sole proprietorship is structured the same as a limited liability companyb. There are very few sole proprietorships remaining in the us todayc. The profits of a sole proprietorship are subject to double taxationd. A sole proprietorship is designed to protect the personal assets of the ownere. The owner of a sole proprietorship is personally responsible for all of the company’s debts e. The owner of a sole proprietorship is personally responsible for all of the company’s debts
Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?a. Articles of incorporationb. Agency problemc. Legal liabilityd. Corporate breakdowne. Bylaws b. Agency problem
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. Corporationb. General partnershipc. Limited liability companyd. Limited partnershipe. Sole proprietorship b. General partnership
A limited partnership:a. Consists solely of limited partnersb. Has an unlimited lifec. Terminated at the death of any limited partnerd. Has a greater ability to raise capital than a sole proprietorshipe. Can opt to be taxed as a corporation d. Has a greater ability to raise capital than a sole proprietorship
Which one of the following is a capital structure decision?a. Determining the amount of funds needed to finance customer purchases of a new productb. Determining how much debt should be assumed to fund a projectc. Determining how to allocate investment funds to multiple projectsd. Determining how much inventory will be needed to support a projecte. Determining which one of two projects to accept b. Determining how much debt should be assumed to fund a project
Which one of the following best describes the primary advantage of being a limited partner instead of a general partnera. Greater control over the business affairs of the partnershipb. Tax-free incomec. No potential financial lossd. Maximum loss limited to the capital investede. Active participation in the firm’s activities d. Maximum loss limited to the capital invested
Which one of the following statements concerning a sole proprietorship is correct?a. It is easy to create a sole proprietorship b. Transferring ownership of a sole proprietorship is easier than transferring ownership of a corporationc. The life of a sole proprietorship is potentially unlimitedd. A sole proprietorship is taxed the same as a C corporatione. A sole proprietor can generally raise large sums of capital quite easily a. It is easy to create a sole proprietorship
Corporate bylaws:a. Cannot be amended once adoptedb. Describe the intended life and purpose of the organizationc. Determine how a corporation regulates itself d. Must be amended should a firm decide to increase the number of shares authorizede. Define the name by which the firm will operate c. Determine how a corporation regulates itself
Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?a. Decrease in the per unit production costsb. Increase in the market value per sharec. Decrease in the net working capitald. Increase in the number of share outstandinge. Increase in the amount of the quarterly dividend b. Increase in the market value per share
A business owned by a solitary individual who has unlimited liability for its debt is called a:a. Corporationb. Sole proprietorship c. Limited liability companyd. Limited partnershipe. General partnership b. Sole proprietorship
A stakeholder is:a. Any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm b. A person who initially founded a firm and currently has management control over that firmc. Any person who has voting rights based on stock ownership of a corporationd. A creditor to whom a firm currently owes moneye. A person who owns shares of stock a. Any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm
A business created as a distinct legal entity and treated as a legal “person” is called a:a. Sole proprietorshipb. Unlimited liability companyc. Limited partnershipd. Corporation e. General partnership d. Corporation
Which one of the following terms is defined as the management of a firm’s long-term investments?a. Agency cost analysisb. Financial allocationc. Capital budgeting d. Capital structuree. Working capital management c. Capital budgeting
Which one of the following functions should be the responsibility of the controller rather than the treasurer?a. Payment to a vendorb. Daily cash depositc. Equipment purchase analysisd. Income tax returns d. Income tax returns
Which one of the following is defined as a firm’s short-term assets and its short-term liabilities?a. Working capital b. Debtc. Net capitald. Capital structuree. Investment capital a. Working capital
Which one of the following statements is correct?a. Corporate shareholders elect the corporate presidentb. Corporations can raise large amounts of capital generally easier than partnerships can c. The majority of firms in the U.S. are structured as corporationsd. Stockholders face no potential losses related to their corporate investmente. Corporate profits are taxable income to the shareholders when earned b. Corporations can raise large amounts of capital generally easier than partnerships can

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