Financial Management Quiz

Which of the following statements best represents what finance is about?

• How political, social, and economic forces affect corporations

• Maximizing profits

• Creation and maintenance of economic wealth

• Reducing risk

The goal of the firm should be:

• maximization of profits.

• maximization of shareholder wealth.

• maximization of consumer satisfaction.

• maximization of sales.

Which of the following factors enable a public corporation to grow to a greater extent, and perhaps at a faster rate, than a partnership or a proprietorship?

• Unlimited liability of shareholders

• Access to the capital markets

• Limited life

• Elimination of double taxation on corporate income

• All of the above

Which of the following reasons is most responsible for corporations being the most important form of business organization in the United States?

• Corporations have limited life.

• Stockholders have unlimited liability.

• Corporations are subject to less government regulation than the other forms of business organization.

• Corporations have the ability to raise larger sums of capital than the other forms of business organization.

• Corporations are subjected to less taxation than the other forms of business organization.

Difficulty in finding profitable projects is due to:

• social responsibility.

• competitive markets.

• ethical dilemmas.

• opportunity costs.

Which of the following is NOT a principle of basic financial management?

• Risk/return tradeoff

• Incremental cash flow counts

• Efficient capital markets

• Profit is king

Which of the following is NOT an advantage of the sole proprietorship?

• Limited liability

• No time limit imposed on its existence

• No legal requirements for starting the business

• None of the above

What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form?

• Sole proprietorships are subject to double taxation of profits.

• The cost of formation.

• Inadequate profit sharing.

• Owners have unlimited liability.

Which of the following is NOT true for limited partnerships?

• Limited partners can only manage the business.

• One general partner must exist who has unlimited liability.

• Only the name of general partners can appear in the name of the firm.

• Limited partners may sell their interest in the company.

The true owners of the corporation are the:

• holders of debt issues of the firm.

• preferred stockholders.

• board of directors of the firm.

• common stockholders.