Short-term finance deals with:

B) acquiring and selling fixed assets.

C) financing long-term projects.

E) issuing additional shares of common stock

The process of planning and managing a firm's long-term assets is called:

E) capital structure management

Which one of the following statements concerning a sole proprietorship is correct?

D) The owner may be forced to sell his/her personal assets to pay company debts.

A) A sole proprietorship is difficult to form.

B) The business profits are taxed twice at the federal level.

C) The business profits are taxed separately from the personal income of the owner.

E) A sole proprietorship has an unlimited life

Which one of the following statements concerning a sole proprietorship is correct?

A) The ability to raise capital is limited by the owner's personal wealth.

B) The proprietorship pays taxes at the corporate tax rate.

C) The ownership of the firm is easy to transfer to another individual.

D) The company must pay income taxes separate from the taxes paid by the owner.

E) The legal costs to form a sole proprietorship are quite substantial.

Which one of these characteristics best describes the primary advantage of being a limited partner rather than a general partner?

E) Personal financial liability limited to the capital invested

A) Entitlement to a larger portion of the partnership's income

B) Day-to-day management control of the business

C) Profits free of any income taxation

D) Overall control of the partnership

B) can end the partnership by withdrawing.

A) has less legal liability than a limited partner.

C) faces double taxation of profits whereas a limited partner does not.

D) cannot lose more than the amount of his/her equity investment.

E) is the term applied only to corporations which invest in partnerships

C) creates an unlimited liability for all general partners for the partnership's debts.

A) is taxed the same as a corporation.

B) terminates at the death of any limited partner.

D) has the same ability as a corporation to raise capital

E) allows for easy transfer of interest from one general partner to another.

One advantage of a partnership is the:

D) relatively low formation cost.

A) personal liability for all of the firm's debts.

C) limited liability protection for all of the partners.

E) ease of transferring full ownership.

One disadvantage of the corporate form of business ownership is the:

A) limited liability protection provided for all owners.

B) firm's ability to raise cash.

D) difficulties encountered when changing ownership.

Which one of the following statements is correct?

B) Sole proprietorships and partnerships are taxed in a similar fashion.

A) Both partnerships and corporations incur double taxation.

C) Partnerships are the most complicated type of business to form.

D) Both partnerships and corporations have limited liability for general partners and shareholders.

E) All types of business formations have limited lives.

The articles of incorporation:

C) set forth the rights granted to shareholders.

A) can be used to remove the firm's management.

B) are amended annually by the firm's stockholders.

D) set forth the rules by which the corporation regulates its existence.

E) can set forth the conditions under which the firm can avoid double taxation.

D) establish the rules by which the corporation regulates its existence.

A) establish the name of the corporation.

B) establish the rights granted to its shareholders.

C) set forth the purpose of the firm.

E) set forth the number of members of the initial board of directors

Which statement concerning corporations is correct?

D) The entity can outlive all of its initial owners.

A) There are time limits placed on the transfer of ownership.

B) The ability to raise capital is limited to that of a general partnership.

C) Primary shareholders have unlimited liability for corporate debts.

E) When the last original owner dies or withdraws, the entity is terminated.

Given the corporate form of business organization, ownership:

A) must be granted with equal rights assigned to each and every shareholder.

C) can only be transferred with the approval of the board of directors.

D) is controlled by the corporate officers.

E) must be held by non-management owners.

The owners of a limited liability company generally prefer:

C) being taxed personally on all business income.

A) being taxed like a corporation.

B) having liability exposure similar to that of a sole proprietor.

D) having liability exposure similar to that of a general partner.

E) being taxed like a corporation with liability like a partnership.

A business created as a distinct legal entity is called a:

E) unlimited liability company.

In a limited partnership, each limited partner's liability for the partnership's debts is:

B) limited to the amount he or she invested into the partnership.

A) limited to his or her personal net worth.

C) limited to his or her total earnings received from the partnership.

E) limited to the total amount invested by all partners

A) are fully distributed as taxable income to the partners.

B) are distributed to general partners with interest paid to limited partners.

C) are distributed to the partners on an aftertax basis.

D) are generally reinvested in the firm rather than being distributed

E) are generally held by the partnership and later distributed as dividend payments

Financial managers primarily create firm value by:

B) investing in assets that generate cash in excess of their cost.

A) maximizing current dividends.

C) lowering the earnings per share.

D) increasing the firm's market share

Accounting profits and cash flows are generally:

C) different because of GAAP rules regarding the recognition of income.

A) the same since they reflect current laws and accounting standards.

B) the same since accounting profits reflect the timing of cash flows.

D) different because cash inflows must occur before revenue recognition.

E) the same due to the requirements of GAAP.

A firm creates value by:

B) paying more cash to its creditors and stockholders than the amount it received from them.

A) having a greater cash inflow from its stockholders than its outflow to them.

D) generating sales whether or not payment is received for all of those sales.

E) purchasing assets that create cash inflows equal to the cost of those assets.

If a firm is currently profitable, then:

B) its reported sales exceed its costs.

A) its current cash inflows must exceed its current cash outflows.

C) its cash flows are known with certainty.

D) it will always have sufficient cash to pay its bills in a timely manner.

E) the timing of the related cash flows is irrelevant

Which one of these statements is correct?

B) The value of an investment depends on the size, timing, and risk of the investment's cash flows.

A) Individuals tend to prefer later cash flows over current cash flows.

C) When selecting one of two projects, managers should select the project with the higher total expected cash flow.

D) Most investors prefer greater risk over less risk.

E) Accountants record sales and expenses after the related cash flows occur.

Closet Keeper is considering a new project. Which one of these estimated project values has the greatest level of certainty?

A) The amount of the cash inflow in Year 3

B) The timing of the last cash inflow from the project

D) The risk of a pessimistic scenario occurring

E) The amount of the cash inflow in Year 1

Financial managers should primarily strive to:

C) maximize the current value per share of existing stock.

A) minimize costs while increasing current dividends.

B) maximize the current profits of the firm.

D) maximize current dividends even if doing so adds financial distress costs to the firm

E) maximize current market share in every market in which the firm participates.

The decisions made by financial managers should all be ones which increase the:

D) market value of the existing owners' equity.

C) marketability of the managers.

Which one of the following actions by a financial manager creates an agency problem?

C) Agreeing to expand the company at the expense of stockholders' value

A) Borrowing money when doing so creates value for the firm

B) Lowering selling prices that will result in increased firm value

D) Agreeing to pay management bonuses based on the market value of the firm's stock

E) Refusing to spend current cash on an unprofitable project

The primary goal of financial management is to:

B) maximize the current value per share of the existing stock.

A) maximize current dividends per share of the existing stock.

D) minimize operational costs and maximize firm efficiency

E) maintain steady growth in both sales and net earnings.

Which one of these represents the best means of increasing current shareholder value?

B) Increasing the current value of the overall firm

A) Maximizing the capital rate of the firm

D) Minimizing the overall size of the firm

E) Decreasing the number of employees

A financial manager should make decisions based on:

C) the welfare of the current shareholders.

A) the effects those decisions will have on current profits.

B) the best interests of the current employees.

D) minimizing the firm's tax liability

E) their personal goals and ambitions

Which one of these is most apt to be an agency problem?

D) Forsaking a profitable project because it involves some risk

A) Increasing the dividend payments to shareholders

B) Paying off debt in a timely manner

C) Increasing the sales of a profitable division

E) Selling an unprofitable division of the firm

Which one of the following is least apt to help convince managers to work in the best interest of the stockholders?

C) Salary raises based on length of service

A) Threat of a takeover of the firm by unsatisfied stockholders

B) Implementation of a stock option plan

D) Management compensation tied to the market value of the firm's stock

CF Chapter 1

Authored by Dung Ngọc

Business

University

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The treasurer and the controller of a corporation generally report to the

A) board of directors.

B) chairman of the board.

C) chief executive officer.

D) president.

E) chief financial officer

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which one of the following statements correctly depicts the common chain of command in a corporation?

A) The information systems manager reports to the treasurer.

B) The credit manager reports to the treasurer.

C) The controller reports to the chief executive officer.

D) The tax manager reports to the treasurer.

E) The capital expenditures manager reports to the controller.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which one of the following is a capital budgeting decision?

A) Determining how much debt should be borrowed from a particular lender

B) Deciding whether or not a new production facility should be built

C) Deciding when to repay a long-term debt

D) Determining how much inventory to keep on hand

E) Deciding how much credit to grant to a particular customer

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which one of these is a correct definition?

A) Net working capital equals current assets plus current liabilities.

B) Current liabilities are debts that must be repaid in 18 months or less.

C) Current assets are assets with short lives, such as accounts receivable.

D) Long-term debt is defined as a residual claim on a firm's assets.

E) Tangible assets are fixed assets such as patents

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The corporate controller is generally responsible for which one of these functions?

A) Capital expenditures

B) Cash management

C) Tax reporting

D) Financial planning

E) Credit management

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The corporate treasurer oversees which one of these areas?

A) Financial planning

B) Cost accounting

C) Tax reporting

D) Information systems

E) Financial accounting

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

A firm's capital structure refers to the firm's:

A) mixture of various types of production equipment.

B) investment selections for its excess cash reserves.

C) combination of cash and cash equivalents.

D) combination of accounts appearing on the left side of its balance sheet.

E) proportions of financing from current and long-term debt and equity.

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CF Chapter 1

The treasurer and the controller of a corporation generally report to the

Which one of the following statements correctly depicts the common chain of command in a corporation?

Which one of the following is a capital budgeting decision?

Which one of these is a correct definition?

The corporate controller is generally responsible for which one of these functions?

The corporate treasurer oversees which one of these areas?

A firm's capital structure refers to the firm's:

Short-term finance deals with:

Which one of these accounts is included in net working capital?

The process of planning and managing a firm's long-term assets is called:

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