Question 1

Double taxation refers to which of the following scenarios?

Accepted Answer

A)   Both bondholders and shareholders must pay taxes.
B)   The corporation pays taxes on earnings, and creditors pay taxes on interest received.
C)   The corporation pays taxes on its earnings, and shareholders pay taxes on dividends.
D)   The corporation pays taxes on revenues and expenses.
E)   The corporation pays taxes on revenues and earnings.F) All of the above
G) B) and D)

Question 2

Ensuring that a firm has sufficient cash available on a daily basis is part of:

Accepted Answer

A)   Capital budgeting.
B)   Working capital management.
C)   Business organization.
D)   Capital structure.
E)   Organizational structure.F) A) and B)
G) None of the above

Question 3

Which of the following questions is not the responsibility of the financial manager?

Accepted Answer

A)   How long will it take to produce a product?
B)   What product should the firm produce?
C)   Should the firm borrow more money?
D)   Should the firm build a new factory?
E)   How long should customers be given to pay for their credit purchases?F) None of the above
G) A) and E)

Question 4

A dealer is a person who:

Accepted Answer

A)   Conducts a trade on behalf of another individual.
B)   Buys and sells but does not own the commodity being bought or sold.
C)   Buys and sells on behalf of the original issuer of the commodity being bought or sold.
D)   Buys and sells for themselves, at their own risk.
E)   Buys and sells strictly on the trading floor of an exchange.F) None of the above
G) A) and B)

Question 5

A stakeholder is:

Accepted Answer

A)   Given to each stockholder when they first purchase their stock.
B)   A proxy vote made at a shareholders' meeting.
C)   A founding stockholder of the firm.
D)   An original creditor of the firm.
E)   A person or entity including a stockholder or creditor, who potentially has a claim on the cash flows of the firm.F) A) and D)
G) None of the above

Question 6

Conflicts that arise between the interests of managers and stockholders are referred to as:

Accepted Answer

A)   Control problems.
B)   Agency problems.
C)   Management conflicts.
D)   Stockholder conflicts.
E)   Proxy fights.F) B) and D)
G) A) and B)

Question 7

Suppose you own 100 shares of IBM stock which you intend to sell today. Since you will sell it in the secondary market, IBM will receive no direct cash flows as a consequence of your sale. Why, then, should IBM's management care about the price you get for your shares?

Accepted Answer

The current market price of IBM stock re...

Question 8

The best definition of corporate governance is:

Accepted Answer

A)   The possibility of conflicts between shareholders and management in a large corporation.
B)   The process of planning and managing a firm's long-term investments.
C)   The actions that are deemed as socially responsible.
D)   The manner in which shareholders agree on corporate capital structure.
E)   The mechanisms and processes by which corporations are directed and controlled.F) A) and E)
G) B) and D)

Question 9

NASDAQ is:

Accepted Answer

A)   The largest financial market in the U.S. in terms of the total value of listed stocks.
B)   Both an OTC and an auction market.
C)   An electronic market trading solely in corporate and government bonds.
D)   An electronic market which has no physical location.
E)   A market with far fewer listings than the NYSE.F) A) and E)
G) B) and E)

Question 10

Which type of business organization has all the respective rights and privileges of a legal person?

Accepted Answer

A)   Sole proprietorship.
B)   General partnership.
C)   Limited partnership.
D)   Corporation.
E)   Limited liability company.F) C) and D)
G) B) and E)

Question 11

A business created as a distinct legal entity composed of one or more individuals or entities is called a(n) :

Accepted Answer

A)   Corporation.
B)   Sole proprietorship.
C)   Partnership.
D)   Closed receivership.
E)   Open structure.F) A) and D)
G) None of the above

Question 12

Provide several disadvantages of a partnership?

Accepted Answer

Disadvantages of partnership i...

Question 13

Research results on CSR activity and corporate performance has been mixed.

Accepted Answer

A) True 
 B)False

Question 14

A firm's capital structure is defined as follows

Accepted Answer

A)   As the combination of debt and equity used to finance the firm's operations.
B)   By the types of fixed assets the firm owns.
C)   As the mix of short-term and long-term assets owned by the firm.
D)   As the amount of fixed assets needed to support every $1 in sales.
E)   By the nature of the product or service provided.F) C) and E)
G) B) and C)

Question 15

Which of the following would be considered a secondary market transaction?

Accepted Answer

A)   Buy or sell orders to a broker for shares listed on the TSX.
B)   Buy or sell orders only for corporate bonds.
C)   Buy or sell orders for corporate warrants.
D)   Buy or sell orders for shares listed on the TSX or corporate bonds.
E)   Buy or sell orders only for call or put options.F) A) and C)
G) A) and E)

Question 16

The Treasurer:

Accepted Answer

A)   Is responsible for overseeing the data processing functions within a firm.
B)   Has the responsibility for managing the cash for an organization.
C)   Must keep current on tax laws since he/she is responsible for managing the taxes for a firm.
D)   Must file quarterly financial statements in a timely manner.
E)   Reports directly to the Chief Executive Officer of a corporation.F) D) and E)
G) A) and B)

Question 17

Control of the firm ultimately rests with shareholders. They elect the board of directors, who then hire and fire management.

Accepted Answer

A) True 
 B)False

Question 18

It is easiest to raise capital for a project under which form of business organization?

Accepted Answer

A)   Corporation.
B)   General partnership.
C)   Limited partnership.
D)   Sole proprietorship.
E)   The form of business organization does NOT affect the ability to raise capital.F) A) and E)
G) C) and D)

Question 19

The primary purpose of capital budgeting is to:

Accepted Answer

A)   Determine the amount of cash and inventory to keep on hand.
B)   Estimate the initial cost of a project.
C)   Distinguish projects that have at least a five-year life from those that don't.
D)   Determine the risk level of a project.
E)   Identify projects that produce cash flows that exceed the cost of the project.F) A) and B)
G) A) and E)

Question 20

Which one of the following correctly defines the chain of command in a typical corporate organizational structure?

Accepted Answer

A)   The vice president of finance reports to the chairman of the board.
B)   The chief executive officer reports to the board of directors.
C)   The controller reports to the president.
D)   The treasurer reports to the chief executive officer.
E)   The chief operations officer reports to the vice president of production.F) C) and D)
G) B) and E)

Exam 1: Introduction to Corporate Finance

A dealer is a person who:

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Which of the following would be considered a secondary market transaction?

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The best definition of corporate governance is:

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Which one of the following correctly defines the chain of command in a typical corporate organizational structure?

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Double taxation refers to which of the following scenarios?

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The primary purpose of capital budgeting is to:

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It is easiest to raise capital for a project under which form of business organization?

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Control of the firm ultimately rests with shareholders. They elect the board of directors, who then hire and fire management.

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Ensuring that a firm has sufficient cash available on a daily basis is part of:

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A business created as a distinct legal entity composed of one or more individuals or entities is called a(n) :

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NASDAQ is:

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Which type of business organization has all the respective rights and privileges of a legal person?

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Research results on CSR activity and corporate performance has been mixed.

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Suppose you own 100 shares of IBM stock which you intend to sell today. Since you will sell it in the secondary market, IBM will receive no direct cash flows as a consequence of your sale. Why, then, should IBM's management care about the price you get for your shares?

Correct AnswerverifiedThe current market price of IBM stock re...View AnswerShow Answer

A firm's capital structure is defined as follows

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Provide several disadvantages of a partnership?

Correct AnswerverifiedDisadvantages of partnership i...View AnswerShow Answer

The Treasurer:

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Which of the following questions is not the responsibility of the financial manager?

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Conflicts that arise between the interests of managers and stockholders are referred to as:

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A stakeholder is:

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The current market price of IBM stock re...
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Disadvantages of partnership i...
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