Question 1

The daily financial operations of a firm are primarily controlled by managing the:

Accepted Answer

A)  total debt level.
B)  working capital.
C)  capital structure.
D)  capital budget.
E)  long-term liabilities.F) C) and E)
G) B) and C)

Question 2

Which one of the following parties can sell shares of ABC stock in the primary market?

Accepted Answer

A)  ABC company
B)  Any corporation, other than the ABC company
C)  Any institutional shareholder
D)  Any private individual shareholder
E)  Only officers and directors of ABC companyF) A) and C)
G) A) and E)

Question 3

Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?

Accepted Answer

A)  Decrease the number of corporations that can be publicly traded
B)  Increase the protections against corporate fraud
C)  Limit secondary issues of corporate securities
D)  Increase the dividends paid to shareholders
E)  Increase the number of firms that "go dark"F) C) and D)
G) A) and E)

Question 4

Which one of the following statements is correct?

Accepted Answer

A)  All secondary markets are dealer markets.
B)  All secondary markets are broker markets.
C)  All stock trades between existing shareholders are primary market transactions.
D)  All stock transactions are secondary market transactions.
E)  All over-the-counter sales occur in dealer markets.F) B) and E)
G) All of the above

Question 5

Which one of the following functions is generally a responsibility assigned to the corporate treasurer?

Accepted Answer

A)  Cost accounting
B)  Data processing
C)  Corporate taxes
D)  Financial accounting
E)  Capital expendituresF) A) and B)
G) A) and E)

Question 6

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

Accepted Answer

A)  Organizational
B)  Structural
C)  Formative
D)  Agency
E)  TerritorialF) All of the above
G) A) and E)

Question 7

Uptown Markets is financed with 45 percent debt and 55 percent equity.This mixture of debt and equity is referred to as the firm's:

Accepted Answer

A)  capital structure.
B)  capital budget.
C)  asset allocation.
D)  working capital.
E)  risk structure.F) D) and E)
G) A) and B)

Question 8

Which one of the following functions should be assigned to the corporate treasurer rather than to the controller?

Accepted Answer

A)  Data processing
B)  Cost accounting
C)  Tax management
D)  Cash management
E)  Financial accountingF) A) and B)
G) D) and E)

Question 9

Which one of the following correctly defines a common chain of command within a corporation?

Accepted Answer

A)  The controller reports directly to the corporate treasurer.
B)  The treasurer reports directly to the board of directors.
C)  The chief financial officer reports directly to the board of directors.
D)  The credit manager reports directly to the controller.
E)  The controller reports directly to the chief financial officer.F) D) and E)
G) A) and E)

Question 10

A limited liability company (LLC) :

Accepted Answer

A)  is a hybrid between a sole proprietorship and a partnership.
B)  prefers its profits be taxed as personal income to its owners.
C)  that meets the IRS criteria to be an LLC will be taxed like a corporation.
D)  provides limited liability for some, but not all, of its owners.
E)  cannot be created for professional service firms, such as accountants and attorneys.F) A) and B)
G) A) and C)

Question 11

Which one of the following statements correctly applies to a sole proprietorship?

Accepted Answer

A)  The business entity has an unlimited life.
B)  The ownership can easily be transferred to another individual.
C)  The owner enjoys limited liability for the firm's debts.
D)  Debt financing is easy to arrange in the firm's name.
E)  Obtaining additional equity is dependent on the owner's personal finances.F) B) and E)
G) C) and D)

Question 12

Which one of the following statements about a limited partnership is correct?

Accepted Answer

A)  All partners have their losses limited to their capital investment in the partnership.
B)  All partners are treated equally.
C)  There must be at least one general partner.
D)  Equity financing is easy to obtain and unlimited.
E)  Any partner can transfer his or her ownership interest without ending the partnership.F) A) and B)
G) A) and C)

Question 13

Which one of the following applies to a general partnership?

Accepted Answer

A)  The firm's operations must be controlled by a single partner.
B)  Any one of the partners can be held solely liable for all of the partnership's debt.
C)  The profits of the firm are taxed as a separate entity.
D)  Each partner's liability for the firm's debts is limited to each partner's investment in the firm.
E)  The profits of a general partnership are taxed the same as those of a corporation.F) A) and D)
G) D) and E)

Question 14

The issuer of a security must be involved in all _____ transactions involving that security.

Accepted Answer

A)  exchange-listed
B)  secondary market
C)  over-the-counter
D)  dealer market
E)  primary marketF) C) and E)
G) All of the above

Question 15

Margie opened a used bookstore and is both the 100 percent owner and the store's manager.Which type of business entity does Margie own if she is personally liable for all the store's debts?

Accepted Answer

A)  Sole proprietorship
B)  Limited partnership
C)  Corporation
D)  Joint stock company
E)  General partnershipF) B) and C)
G) D) and E)

Question 16

Security dealers:

Accepted Answer

A)  match buyers with sellers.
B)  buy and sell from their own inventory.
C)  operate on a physical trading floor.
D)  operate exclusively in auction markets.
E)  are limited to trading non-listed stocks.F) A) and E)
G) None of the above

Question 17

Probably the least effective means of aligning management goals with shareholder interests is:

Accepted Answer

A)  the potential for a proxy fight by an unhappy segment of shareholders.
B)  basing all management bonuses on performance goals.
C)  holding management salaries steady while increasing stock option grants.
D)  the threat of a takeover of the firm.
E)  automatically increasing management salaries on an annual basis.F) B) and C)
G) C) and D)

Question 18

Jenna has been promoted and is now in charge of all external financing.In other words,she is in charge of:

Accepted Answer

A)  capital structure management.
B)  asset allocation.
C)  risk management.
D)  capital budgeting.
E)  working capital management.F) A) and B)
G) C) and D)

Question 19

Maria is the sole proprietor of an antique store that is located in a rented warehouse.The store has an outstanding loan with the local bank but no other debt obligations.There are no specific assets pledged as security for the loan.Due to a sudden and unexpected downturn in the economy,the store is unable to generate sufficient funds to pay the loan payments due to the bank.Which of the following options does the bank have to collect the money it is owed?
I.Sell the inventory and apply the proceeds to the debt
II.Sell the lighting fixtures from the building and apply the proceeds to the debt
III.Withdraw funds from Maria's personal account at the bank to pay the store's debt
IV.Sell any assets Maria personally owns and apply the proceeds to the store's debt

Accepted Answer

A)  I only
B)  III only
C)  I and II only
D)  I, II, and III only
E)  I, III, and IV onlyF) A) and E)
G) B) and E)

Question 20

An agency issue is most apt to develop when:

Accepted Answer

A)  a firm encounters a period of stagnant growth.
B)  a firm downsizes.
C)  the control of a firm is separated from the firm's ownership.
D)  the firm's owner is also its key manager.
E)  a firm is structured as a general partnership.F) A) and B)
G) A) and D)

Exam 1: Introduction to Financial Management

Jenna has been promoted and is now in charge of all external financing.In other words,she is in charge of:

Correct Answer
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The issuer of a security must be involved in all _____ transactions involving that security.

Correct Answer
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Security dealers:

Correct Answer
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Uptown Markets is financed with 45 percent debt and 55 percent equity.This mixture of debt and equity is referred to as the firm's:

Correct Answer
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Which one of the following parties can sell shares of ABC stock in the primary market?

Correct Answer
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The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

Correct Answer
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An agency issue is most apt to develop when:

Correct Answer
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Probably the least effective means of aligning management goals with shareholder interests is:

Correct Answer
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Which one of the following correctly defines a common chain of command within a corporation?

Correct Answer
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Which one of the following statements is correct?

Correct Answer
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Margie opened a used bookstore and is both the 100 percent owner and the store's manager.Which type of business entity does Margie own if she is personally liable for all the store's debts?

Correct Answer
verified

Which one of the following functions should be assigned to the corporate treasurer rather than to the controller?

Correct Answer
verified

Correct Answer
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Which one of the following statements correctly applies to a sole proprietorship?

Correct Answer
verified

The daily financial operations of a firm are primarily controlled by managing the:

Correct Answer
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Which one of the following statements about a limited partnership is correct?

Correct Answer
verified

Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?

Correct Answer
verified

Which one of the following functions is generally a responsibility assigned to the corporate treasurer?

Correct Answer
verified

Which one of the following applies to a general partnership?

Correct Answer
verified

A limited liability company (LLC) :

Correct Answer
verified

Exam 1: Introduction to Financial Management

Jenna has been promoted and is now in charge of all external financing.In other words,she is in charge of:

Correct AnswerverifiedShow Answer

The issuer of a security must be involved in all _____ transactions involving that security.

Correct AnswerverifiedShow Answer

Security dealers:

Correct AnswerverifiedShow Answer

Uptown Markets is financed with 45 percent debt and 55 percent equity.This mixture of debt and equity is referred to as the firm's:

Correct AnswerverifiedShow Answer

Which one of the following parties can sell shares of ABC stock in the primary market?

Correct AnswerverifiedShow Answer

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

Correct AnswerverifiedShow Answer

An agency issue is most apt to develop when:

Correct AnswerverifiedShow Answer

Probably the least effective means of aligning management goals with shareholder interests is:

Correct AnswerverifiedShow Answer

Which one of the following correctly defines a common chain of command within a corporation?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Margie opened a used bookstore and is both the 100 percent owner and the store's manager.Which type of business entity does Margie own if she is personally liable for all the store's debts?

Correct AnswerverifiedShow Answer

Which one of the following functions should be assigned to the corporate treasurer rather than to the controller?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following statements correctly applies to a sole proprietorship?

Correct AnswerverifiedShow Answer

The daily financial operations of a firm are primarily controlled by managing the:

Correct AnswerverifiedShow Answer

Which one of the following statements about a limited partnership is correct?

Correct AnswerverifiedShow Answer

Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?

Correct AnswerverifiedShow Answer

Which one of the following functions is generally a responsibility assigned to the corporate treasurer?

Correct AnswerverifiedShow Answer

Which one of the following applies to a general partnership?

Correct AnswerverifiedShow Answer

A limited liability company (LLC) :

Correct AnswerverifiedShow Answer

Correct Answer
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