Introduction to Financial Management Quiz

Tasks related to tax management, cost accounting, financial and data processing are the responsibility of which corporate officer?

• Treasurer

• Controller

• Chairman of the board

• Chief executive officer

The financial manager recognizes revenues and expenses utilizing

• the revenue method.

• the accrual method.

• the actual inflows and outflows of cash.

• the standardized, generally accepted, accounting principles.

Which of the following could explain why a business might choose to organise as a corporation rather than as a sole proprietorship or a partnership?

• Corporations enjoy unlimited liability.

• Corporations generally face lower taxes.

• Corporations generally face fewer regulations.

• Corporations generally find it easier to raise capital.

Which of the following are TRUE regarding limited and unlimited liabilities?

I. General partners have limited liabilities but have access to partnership's management operation.

II. One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.

III. The owners of the corporations become subject to unlimited liabilities in the event the firm goes bankrupt.

IV. If a partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business.

• I only

• II only

• I and III only

• III and IV only

Which of the statements are TRUE about sole proprietorship and partnership?

I. The sole proprietorship is dissolved when an owner dies.

II. The limited partners can participate in the management of the partnership.

III. The general partners have limited liability for the indebtedness incurred in the partnership.

IV. In a sole proprietorship, the owner is personally fully responsible for the liabilities incurred.

• I and II only

• I and IV only

• II and III only

• III and IV only

The maximization of shareholders wealth is measured by increases in __________.

• sales

• profits

• earnings

• stock price

Which of the following is a valid criticism concerning the goal of firms to maximize profits?

• Profit maximization ignores expenses.

• There are no valid criticisms of profit maximizing firms.

• Profit maximization may ignore the timing of those profits.

• Profit maximization is completely unrelated to shareholder wealth.

The first time a security is sold is in the __________ market; subsequent trading of the security is in the __________ market.

• money; capital

• capital; money

• banking; secondary

• primary; secondary

Which of the following would be categorized as a primary market transaction?

• Yusoff sells some shares that he purchased 2 years ago.

• Yoon Shin sells some of his Google stock thru online trading.

• Salmi buys some Caely Bhd shares from an institutional investor.

• Bala buys 20 shares of a new stock issue offered by Petronas Bhd.

When a company sells an entire issue of securities to a small group of individual or institutional investors like it is called _________.

• a public offering

• a private placement

• an unseasoned issue

• an initial public offering