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WorksheetsNMQTDN - 2023 - FN
Total questions: 109
Worksheet time: 56mins
Of the three principal forms, the simplest, most flexible, and easiest to start is the sole proprietorship.
true
false
A corporation cannot acquire and hold stock in other corporations.
true
false
1. A business that is owned and controlled by one person
is a:
a. cooperative
b. partnership
c. sole proprietorship *
d. corporation
2. Individuals who invest in a corporation by buying stock are called?
a. subsidiaries
b. conglomerates
c. cooperatives
d. stockholders *
5. Business that is owned and controlled by two or more people is a:
a. cooperative
b. partnership *
c. sole proprietorship
d. corporation
8. The amount of money paid to an investor in return for his investment.
a. bonds
b. dividends *
c. stocks
d. liability
11. Owners of this type of stock can vote on how the corporation is run and share in variable dividends.
a. principal
b. interest
c. common *
d. preferred
15. The most common form of business organization is the:
a. sole proprietorship *
b. partnership
c. corporation
d. cooperative
How many owners does a Sole Proprietorship have?
2
2-3
1
Many
In a partnership, how many owners are there?
1
No Owners
Has many shareholders
2 or more owners
Which form of business has many employees and the government keeps a close eye on them?
LLC
Non-Profit
Corporation
Partnership
One of the forms of business organization owned by a manager is __________ .
Cooperative
Corporation
Partnership
Sole Proprietorship
Which of these is an advantage of a sole proprietorship?
It is recognized as a separate legal entity.
It is easy to attract qualified employees.
The owner does not have to share the profits of the business with anyone else.
The proprietor does not have to pay income taxes for the business.
Which type of business offers the best chance for quick decision-making?
Sole proprietorship
General partnership
Limited partnership
Corporation
A business which is owned by multiple shareholders is known as?
Corporation
Board of Directors
Conglomerate
1. What is the best definition of Corporate Governance?
1. The internal structure designed to allow the organisation to comply with laws and regulations
2. A commitment to economic development by working with stakeholders to improve their lives
3. A set of tools to help management run the day to day activities of the business
4. The same as Corporate social responsibility
5. A system by which the organisation is directed and controlled on behalf of its stakeholders
2.Who should have overall responsibility for Corporate Governance?
1. Risk Management
2. The Board
3. Internal Audit
4. The Strategy Department
5. The Compliance function
Which is NOT TRUE about the needs for corporate governance?
To avoid mismanagement
To enable companies operate more efficiently, to improve access to capital, mitigate risk and safeguard stakeholders
To increase the accountability of your company and to avoid massive disasters before they occur
To analyze of an organization's operations and maintenance of systems of internal controls can help detect and prevent various forms of fraud and other accounting irregularities.
Who runs the company operations for large companies?
Shareholders
Board of Directors
External auditors
Stakeholders
2.Corporate governance does not have any impact on the share price.
True
False
3.The Board of Directors (BoD)remains in effective control of the affairs of the company at all times
True
False
6.A board of directors (BoD) is an elected group of individuals that represent shareholders.
True
False
Chairman of the Board is responsible to
ensure that all relevant issues are discussed in the Board meeting
ensure that he/she also acts as the CEO of the company
ensure that only executive directors are enabled and encouraged to play their full part in their activities
ensure that the non-executive directors are looking beyond their executive function and accept their full share of responsibilities of governance
8. The role of CEO includes:
Manage overall operations & resources
Serve as public face of the company
Communicate between Board of Directors and Corporate Operations
All of the above
Directors’ responsibilities are unlikely to include
a duty of care
a duty to keep proper accounting records
a fiduciary duty
a duty to propose high dividends for shareholders
There is elements of corporate governance, except
Audit Committee
Shareholder Rights
Legal Compliance
Control environment
Risk is
an indicator of a threat
the possibility of loss, damage, or any undesirable event
not the same as uncertainty
All of the above
How many steps are there in the Risk Management Process?
1
3
5
7
Installing security cameras is an example of which technique.
Risk Avoidance
Risk Reduction
Risk Retention
Risk Transfer
Buying property insurance would be an example of which technique.
Risk Avoidance
Risk Reduction
Risk Retention
Risk Transfer
What is risk management?
Looking both ways before crossing a 2 lane highway.
Auto Insurance
The forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact.
The ability to plan for the future.
Participating in insurance is BEST considered an example of risk __________ .
Mitigation
Transfer
Acceptance
Avoidance
The technique of assessing, minimizing, and preventing
accidental loss to a business, as through the use of insurance, safety measures, etc.
accidental loss insurance
business management
risk management
auto insurance
Insurance can help you manage ___________
Risk
Financial loss due to risk
Both of the above
Neither of the above
Which of the following is a way to manage risk?
Assume risk
Avoid Risk
Share Risk
All of the above
Traditionally, risk has been defined as
any situation in which the probability of loss is one.
any situation in which the probability of loss is zero.
uncertainty concerning the occurrence of loss.
the probability of a loss occurring.
An earthquake is an example of a(n)
moral hazard.
peril.
physical hazard.
objective risk.
Installing security cameras is an example of which technique.
Risk Avoidance
Risk Reduction
Risk Retention
Risk Transfer
What is risk management?
Looking both ways before crossing a 2 lane highway.
Auto Insurance
The forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact.
The ability to plan for the future.
A risk that affects only individuals or small groups and not the entire economy is called a
diversifiable risk.
pure risk.
speculative risk.
nondiversifiable risk.
Rather than storing all of its finished goods in a single location, Davis Company divides the finished goods between two warehouses. This simple risk control technique which is designed to limit losses should a warehouse fire occur is called
duplication.
risk transfer
separation.
loss prevention.
Frazier Electric keeps a paper copy of business records at the company’s headquarters. The company also has two back-up copies of business records stored in electronic files. The electronic files are kept in the event the paper records are damaged or destroyed. The back-up files illustrate which of the following risk control techniques?
loss prevention
loss reduction
diversification
duplication
David never stopped to consider the possible consequences of a long-term, permanent, disability. So David did not include disability income insurance in his personal risk management program. David is dealing with the risk of disability through
passive retention.
active retention.
risk control.
risk avoidance
Discount Department Stores is a national retail chain. The company had one large, central warehouse. At the suggestion of the risk manager, the company decided to build four smaller regional warehouses so that a loss at the central warehouse would not be a catastrophic blow to the company's distribution system. Splitting the inventory between four regional warehouses illustrates which risk management technique?
duplication
risk transfer
separation
risk avoidance
Brenda identified all of the pure loss exposures her family faces. Then she analyzed these loss exposures, developed a plan to treat these risks, and implemented the plan. The process Brenda conducted is called
personal insurance programming.
personal estate planning.
personal financial planning
personal risk management.
Bev lives in the suburbs and works downtown. She drives to work, and her most direct route to work would require her to pass through an area where carjackings and drive-by-shootings are common. Bev does not drive through this area. Instead, she uses a route which adds 10 minutes to her commute. Which risk management technique is Bev using with respect to the risk of injury while driving through the dangerous area?
noninsurance transfer
avoidance
passive retention
loss reduction
Barb, who is self-employed, is the main breadwinner for her family. Barb does not have disability income insurance because she has never stopped to consider the impact of a long-term disability upon her family. Barb's treatment of the risk of disability is best described as
risk transfer.
passive retention.
risk avoidance
active retention.
Every shareholder is a part owner of the firm and, as such, has a direct claim on a portion of the firm's assets.
FALSE
TRUE
There is a stronger tendency for the stock market to increase in value rather than decrease in value over time.
TRUE
FALSE
While many stocks increase in value over the long run, most of the return on stocks comes from dividends.
FALSE
TRUE
Over the long term, the capital gain on most stocks will exceed the dividend income
TRUE
FALSE
Companies typically issue new shares through an initial public offering (IPO).
TRUE
FALSE
Corporations often split their stocks when they believe that the price makes them less attractive to average investors.
TRUE
FALSE
Firms tend to repurchase shares of their outstanding stock when they view the shares as undervalued.
TRUE
FALSE
Different classes of stock generally have either different voting rights or different dividends.
TRUE
FALSE
Since each share of common stock represents ownership in a company, shares of common stock are often referred to as
illiquid investments.
equity securities.
fixed-income securities.
unit-cost securities.
Which category of stocks represents the highest level of risk?
large-cap
mid-cap
baby blue
small-cap
Stocks related to computers and the Internet are classified as
blue-chip stocks.
income stocks.
cyclical stocks.
tech stocks.
Which one of the following is a characteristic of blue chip stocks?
guaranteed minimum annual dividend of $2 a share
annual dividends of more than $5 per share
long and stable dividend and earnings records
relatively high risk exposure
When investors expect higher inflation, they will generally require higher rates of return.
TRUE
FALSE
A capital loss is computed by
subtracting the original cost of an investment from the proceeds received from the sale of that investment minus any income from the investment.
subtracting the original cost of an investment from the proceeds received from the sale of that investment plus any income from the investment
subtracting the proceeds received from the sale of an investment from the original cost of the investment.
subtracting the original cost of an investment from the proceeds received from the sale of that investment.
Bondholders can earn income both from interest and from capital gains.
TRUE
FALSE
Bonds are immune from most of the types of risk that affect stocks.
FALSE
TRUE
Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds?
Market interest rates decline sharply.
The company’s bonds are downgraded.
Market interest rates rise sharply.
Inflation increases significantly.
Which of the following is not a capital source component?
Long-term debt.
Common stock.
Retained earnings.
Accounts payable.
Preferred stock.
An increase in a firm’s expected growth rate would normally cause its required rate of return to
Increase.
Decrease.
Fluctuate.
Remain constant.
Possibly increase, decrease, or have no effect.
If a stock’s expected return exceeds its required return, this suggests that
The stock is experiencing supernormal growth.
The stock should be sold.
The company is probably not trying to maximize price per share.
The stock is probably a good buy.
Dividends are not being declared.
Which of the following statements is CORRECT?
One of the disadvantages of incorporating your business is that you become subject to liabilities in the event of bankruptcy.
Sole proprietorships are subject to more regulations than corporations.
In any partnership, every partner has the same rights, privileges, and liability exposure as every other partner.
Corporations of all types are subject to the corporate income tax.
Sole proprietorships and partnerships generally have a tax advantage over corporations.
Which of the following statements is CORRECT?
One of the advantages of the corporate form of organization is that it avoids double taxation.
It is easier to transfer one’s ownership interest in a partnership than in a corporation.
One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.
One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., “one person, one vote.”
Corporations of all types are subject to the corporate income tax.
The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to
Maximize its expected total corporate income
Maximize its expected EPS.
Minimize the chances of losses.
Maximize the stock price per share over the long run, which is the stock’s intrinsic value.
Maximize the stock price on a specific target date.
Acquiring long-term assets necessary to operate the business is called a(n):
financing activity.
operating activity
revenue activity
investing activity.
Which of the following mechanisms would be most likely to help motivate managers to act in the best interest of shareholders?
Decrease the use of restrictive covenants in bond agreements.
Take actions that reduce the possibility of a hostile takeover.
Have the board of directors allow managers greater freedom of action.
Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries.
Which of the following statements is CORRECT?
A good goal for a firm’s management is maximization of expected EPS.
Most business in the U.S. is conducted by corporations, and corporations’ popularity results primarily from their favorable tax treatment.
One example of an agency relationship is the one between stockholders and managers.
Corporations and partnerships have an advantage over proprietorships because a sole proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited.
Firms in highly competitive industries are more likely to consciously exercise “social responsibility” than are firms in oligopolistic industries.
Which of the following actions would be likely to reduce conflicts of interest between stockholders and managers?
Congress passes a law that severely restricts hostile takeovers.
Managerial compensation is changed so that managers receive larger cash salaries but fewer long-term options to buy shares of stock.
The company changes the way executive stock options are handled, with all options now being vested after only 2 years rather than having 20% of the options awarded be vested every 2 years over a 10-year period.
The company’s outside auditing firm is offered a lucrative consulting contract with the company.
The board of directors becomes more vigilant in its oversight of the company’s management.
All of the following are revenues, except for?
Accounts receivable
Dividends received
Rent Revenue
Commission Revenue
All of the following are assets, except for?
Goodwill
Patents
Loans to other businesses
Loans from other businesses
The financial statement that reports the assets, liabilities, and shareholders equity at a specific date is the:
Balance sheet
Income Statement
Trial Balance
General Ledger
Cash at bank is an example of a
Current asset
Non-current asset
Equity
A balance sheet shows:
how much gross profit it has
how much net profit it has
how much a business owns and owes
Identify the three sections of a Balance Sheet
(Choose more than 1 answer)
Revenue
Assets
Equity
Expenses
Liabilities
The Income Statement has the following sections (Choose more than 1 answer)
Assets
Expenses
Liabilities
Revenue
Equity
The costs incurred in the day-to-day operations of an organization.
Bookeeper
Profit
Revenue
Expenses
The total amount of money received from the sale of goods or services.
Bookeeper
Profit
Revenue
Expenses
The difference between what it costs to make and sell a product and what a customer pays for it.
Bookeeper
Profit
Revenue
Expenses
A firm’s financial obligations to short-term creditors, which must be repaid within one year.
Current Assets
Current Liabilities
Accounts Receivable
Accounts Payable
The amount a company owes to suppliers for goods and services purchased with credit.
Current Assets
Account Receivable
Current Liabilities
Account Payable
Which of the following are Financial Statements for business? (Choose more than 1 answer)
Trial Balance Account
Ledger
Income Statement
Balance Sheet
Which of the following included in Income Statement? (Choose more than 1 answer)
Sales
Assets
Taxes
Rental cost
Liability
Which of the following included in the Balance Sheet? (Choose more than 1 answer)
Sales
Assets
Taxes
Rental cost
Liability
The income statement consists of Operating Activities, Financing Activities, and Investment activities. (Choose more than 1 answer)
True
False
Operating Income is also known as
EBT
EAT
EBIT
Revenue
Which of the following does not belong to current asset
marketable securities
machine and equipment
inventory
prepaid expenses
Which of the following are not Current Liabilities
Account payable
Mortgages
Short-term notes
Accrued expenses
NPV stands for:
Net profitability value
Net present value
Net purchase value
If the net present value (NPV) is less than 0, the project should be
accepted
rejected
If net present value (NPV) is greater than 0, the the project should be
accepted
rejected
Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers?
articles of incorporation
corporate breakdown
agency problem
bylaws
A firm has the cost of capital of 13.5%. Project 1's IRR = 12%, Project 2's IRR = 15%, Project 3's IRR = 13%, so:
The firm should accept Project 1 and 2, and reject Project 3
The firm should accept Project 2, and reject Projects 1 and 3
The firm should accept Project 1, and reject Projects 2 and 3
The firm should accept Project 3, and reject Projects 1 and 2
A project has an initial cost of $27,400 and a market value of $32,600. What is the difference between these two values called?
net present value
internal return
payback period
profitability index
discounted payback
The length of time a firm must wait to recoup the money it has invested in a project is called the:
internal return period.
payback period.
profitability period.
discounted cash period.
valuation period.
The length of time a firm must wait to recoup, in present value terms, the money it has in invested in a project is referred to as the:
net present value period.
internal return period.
payback period.
discounted profitability period.
discounted payback period.
The internal rate of return is defined as the:
maximum rate of return a firm expects to earn on a project.
rate of return a project will generate if the project in financed solely with internal funds.
discount rate that equates the net cash inflows of a project to zero.
discount rate which causes the net present value of a project to equal zero.
discount rate that causes the profitability index for a project to equal zero.
A project has a net present value of zero. Which one of the following best describes this project?
The project has a zero percent rate of return.
The project requires no initial cash investment.
The project has no cash flows.
The summation of all of the project's cash flows is zero.
The project's cash inflows equal its cash outflows in current dollar terms.
Net present value:
is the best method of analyzing mutually exclusive projects.
is less useful than the internal rate of return when comparing different sized projects.
is the easiest method of evaluation for non-financial managers to use.
is less useful than the profitability index when comparing mutually exclusive projects.
is very similar in its methodology to the average accounting return.
