公司财务管理习题

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MultipleChoiceQuestions

1.

Timhasbeenpromotedandisnowinchargeofallfixedassetpurchases.Inotherwords,Timisinchargeof:

A.

capitalstructuremanagement.

B.

assetallocation.

C.

riskmanagement.

D.

capitalbudgeting.

E.

workingcapitalmanagement.

2.

Stadford,Inc.isfinancedwith40percentdebtand60percentequity.Thismixtureofdebtandequityisreferredtoasthefirm's:

A.

capitalstructure.

B.

capitalbudget.

C.

assetallocation.

D.

workingcapital.

E.

riskstructure.

3.

Lester'sBBQhas$121,000incurrentassetsand$109,000incurrentliabilities.Thesevaluesasreferredtoasthefirm's:

A.

capitalstructure.

B.

cashequivalents.

C.

workingcapital.

D.

netassets.

E.

fixedaccounts.

4.

Margieopenedausedbookstoreandisboththe100percentownerandthestore'smanager.WhichtypeofbusinessentitydoesMargieownifsheispersonallyliableforallthestore'sdebts?

A.

Soleproprietorship

B.

Limitedpartnership

C.

Corporation

D.

Jointstockcompany

E.

Generalpartnership

5.

WillandBillbothenjoysunshine,water,andsurfboards.Thus,thetwofriendsdecidedtocreateabusinesstogetherrentingsurfboards,paddleboats,andinflatabledevicesinCalifornia.WillandBillwillequallyshareinthedecisionmakingandintheprofitsorlosses.Whichtypeofbusinessdidtheycreateiftheybothhavefullpersonalliabilityforthefirm'sdebts?

A.

Soleproprietorship

B.

Limitedpartnership

C.

Corporation

D.

Jointstockcompany

E.

Generalpartnership

6.

ToddandCathycreatedafirmthatisaseparatelegalentityandwillshareownershipofthatfirmona50/50basis.Whichtypeofentitydidtheycreateiftheyhavenopersonalliabilityforthefirm'sdebts?

A.

Limitedpartnership

B.

Corporation

C.

Soleproprietorship

D.

Generalpartnership

E.

Publiccompany

7.

Thepotentialconflictofinterestbetweenafirm'sownersanditsmanagersisreferredtoaswhichtypeofconflict?

A.

Organizational

B.

Structure

C.

Formation

D.

Agency

E.

Territorial

8.

ThefederalgovernmenthasataxclaimonthecashflowsofTheWindowStore.Thisclaimisdefinedasaclaimbyoneofthefirm's:

A.

residualowners.

B.

shareholders.

C.

financiers.

D.

provisionalpartners.

E.

stakeholders.

9.

The"SayonPay"billrequirescorporationstodowhichoneofthefollowing?

A.

Givethechairmanoftheboardthefinalsayonexecutivepay

B.

Givethefirm'screditorsanonbindingsayonexecutivepay

C.

Givethefirm'screditorsabindingsayonexecutivepay

D.

Giveshareholdersanonbindingvoteonexecutivepay

E.

Giveshareholdersabindingvoteonexecutivepay

10.

In2009,theObamaadministrationestablishedamaximumlimitonexecutivesalariesforfirmsthatreceivedbailoutfunds.Whatwastheamountofthatsalarylimit?

A.

$250,000

B.

$500,000

C.

$750,000

D.

$1,000,000

E.

$1,500,000

11.

JamieisemployedasacommercialloanofficerforaregionalbankcenteredintheMidwesternsectionoftheU.S.Herjobfallsintowhichoneofthefollowingareasoffinance?

A.

Internationalfinance

B.

Financialinstitutions

C.

Corporatefinance

D.

Capitalmanagement

E.

Investments

12.

Ifyouacceptajobasadomesticsecurityanalystforabrokeragefirm,youaremostlikelyworkinginwhichoneofthefollowingfinancialareas?

A.

internationalfinance

B.

privateplacements

C.

corporatefinance

D.

capitalmanagement

E.

investments

13.

Whichoneofthefollowingoccupationsbestfitsintotheinternationalareaoffinance?

A.

Bankteller

B.

Treasurybillanalyst

C.

Currencytrader

D.

Insuranceriskmanager

E.

Localbankmanager

14.

Whichofthefollowingindividualscommonlyusefinanceinthecourseoftheirjob?

I.Chieffinancialofficers

II.Accountants

III.Securityanalysts

IV.Strategicmanagers

A.

IandIIonly

B.

IIIandIVonly

C.

IandIIIonly

D.

I,II,andIIIonly

E.

I,II,III,andIV

15.

Whichoneofthefollowingfunctionsshouldbeassignedtothetreasurerratherthanthecontroller?

A.

Dataprocessing

B.

Costaccounting

C.

Taxmanagement

D.

Cashmanagement

E.

Financialaccounting

16.

Whichoneofthefollowingcorrectlydefinesacommonchainofcommandwithinacorporation?

A.

Thecontrollerreportsdirectlytocorporatetreasurer.

B.

Thetreasurerreportsdirectlytotheboardofdirectors.

C.

Thechieffinancialofficerreportsdirectlytotheboardofdirectors.

D.

Thecreditmanagerreportsdirectlytothecontroller.

E.

Thecontrollerreportsdirectlytothechieffinancialofficer.

17.

Capitalbudgetingincludestheevaluationofwhichofthefollowing?

A.

Sizeoffuturecashflowsonly

B.

Sizeandtimingoffuturecashflowsonly

C.

Timingandriskoffuturecashflowsonly

D.

Riskandsizeoffuturecashflowsonly

E.

Size,timing,andriskoffuturecashflows

18.

Whichoneofthefollowingisaworkingcapitaldecision?

A.

Howshouldthefirmraiseadditionalcapitaltofunditsexpansion?

B.

Whatdebt-equityratioisbestsuitedtoourfirm?

C.

Whatisthecostofdebtfinancing?

D.

Whichtypeofdebtisbestsuitedtofinanceourinventory?

E.

Howmuchcashshouldthefirmkeepinreserve?

19.

Whichoneofthefollowingisacapitalstructuredecision?

A.

Determiningtheoptimalinventorylevel

B.

Establishingthepreferreddebt-equitylevel

C.

Selectingnewequipmenttopurchase

D.

Settingthetermsofsaleforcreditsales

E.

Determiningwhensuppliersshouldbepaid

20.

Workingcapitalmanagementincludeswhichoneofthefollowing?

A.

Decidingwhichnewprojectstoaccept

B.

Decidingwhethertopurchaseanewmachineorfixacurrentmachine

C.

Determiningwhichcustomerswillbegrantedcredit

D.

Determininghowmanynewsharesofstockshouldbeissued

E.

Establishingthetargetdebt-equityratio

21.

Thedailyfinancialoperationsofafirmareprimarilycontrolledbymanagingthe:

A.

totaldebtlevel.

B.

workingcapital.

C.

capitalstructure.

D.

capitalbudget.

E.

long-termliabilities.

22.

Asoleproprietorship:

A.

provideslimitedliabilityforitsowner.

B.

involvessignificantlegalcostsduringtheformationprocess.

C.

hasanunlimitedlife.

D.

hasitsprofitstaxedaspersonalincome.

E.

cangenerallyraisesignificantcapitalfromnon-ownersources.

23.

Whichoneofthefollowingformsofbusinessorganizationoffersliabilityprotectiontosomeofitsownersbutnottoallofitsowners?

A.

Soleproprietorship

B.

Generalpartnership

C.

Limitedpartnership

D.

Limitedliabilitycompany

E.

Corporation

24.

Mariaisthesoleproprietorofanantiquestorewhichshehasoperatedatthesamelocationforthepast16years.Thestorerentsthespaceinwhichitislocatedbutdoesownalloftheinventoryandfixtures.Thestorehasanoutstandingloanwiththelocalbankbutnootherdebtobligations.Therearenospecificloancovenantsorassetspledgedassecurityfortheloan.Duetoasuddenandunexpecteddownturnintheeconomy,thestoreisunabletogeneratesufficientfundstopaytheloanpaymentsduetothebank.Whichofthefollowingoptionsdoesthebankhavetocollectthemoneyitisowed?

I.Selltheinventoryandusethecashraisedtoapplytothedebt

II.Sellthestorefixturesandusethecashraisedtoapplytothedebt

III.TakefundsfromMaria'spersonalaccountatthebanktopaythestore'sdebt

IV.SellanyassetsMariapersonallyownsandapplytheproceedstothestore'sdebt

A.

Ionly

B.

IIIonly

C.

IandIIonly

D.

I,II,andIIIonly

E.

I,II,III,andIV

25.

Whichoneofthefollowingstatementscorrectlyappliestoasoleproprietorship?

A.

Thebusinessentityhasanunlimitedlife.

B.

Theownershipcaneasilybetransferredtoanotherindividual.

C.

Theownerenjoyslimitedliabilityforthefirm'sdebts.

D.

Debtfinancingiseasytoarrangeinthefirm'sname.

E.

Obtainingadditionalequityisdependentontheowner'spersonalfinances.

26.

Whichoneofthefollowingappliestoageneralpartnership?

A.

Thefirm'soperationsmustbecontrolledbyasinglepartner.

B.

Anyoneofthepartnerscanbeheldsolelyliableforallofthepartnership'sdebt.

C.

Theprofitsofthefirmaretaxedasaseparateentity.

D.

Eachpartner'sliabilityforthefirm'sdebtsislimitedtoeachpartner'sinvestmentinthefirm.

E.

Theprofitsofageneralpartnershiparetaxedthesameasthoseofacorporation.

27.

Inageneralpartnership,eachpartnerispersonallyliablefor:

A.

thepartnershipdebtsthatheorshecreated.

B.

hisorherproportionateshareofallpartnershipdebtsregardlessofwhichpartnerincurredthatdebt.

C.

thetotaldebtsofthepartnership,evenifheorshewasunawareofthosedebts.

D.

thedebtsofthepartnershipuptotheamountheorsheinvestedinthefirm.

E.

allpersonalandpartnershipdebtsincurredbyanypartner,evenifheorshewasunawareofthosedebts.

28.

Whichoneofthefollowingisanadvantageofbeingalimitedpartner?

A.

Non-taxableshareofanyprofits

B.

Controloverthedailyoperationsofthefirm

C.

Losseslimitedtocapitalinvested

D.

Unlimitedprofitswithoutriskofincurringaloss

E.

Activemarketforownershipinterest

29.

Whichoneofthefollowingstatementsaboutalimitedpartnershipiscorrect?

A.

Allpartnershavetheirlosseslimitedtotheircapitalinvestmentinthepartnership.

B.

Allpartnersaretreatedequally.

C.

Theremustbeatleastonegeneralpartner.

D.

Equityfinancingiseasytoobtainandunlimited.

E.

Anypartnercantransferhisorherownershipinterestwithoutendingthepartnership.

30.

Acorporation:

A.

isultimatelycontrolledbyitsboardofdirectors.

B.

isalegalentityseparatefromitsowners.

C.

isprohibitedfromenteringintocontractualagreements.

D.

hasitsidentitydefinedbyitsbylaws.

E.

hasitsexistenceregulatedbytherulessetforthinitscharter.

31.

Whichoneofthefollowingiscontainedinthecorporatebylaws?

A.

Proceduresforelectingcorporatedirectors

B.

Stateofincorporation

C.

Numberofauthorizedshares

D.

Intendedlifeofthecorporation

E.

Businesspurposeofthecorporation

32.

Whichofthefollowingareadvantagesofthecorporateformoforganization?

I.Abilitytoraiselargesumsofequitycapital

II.Easeofownershiptransfer

III.Profitstaxedatthecorporatelevel

IV.Limitedliabilityforallowners

A.

IandIIonly

B.

IIIandIVonly

C.

II,III,andIVonly

D.

I,II,andIVonly

E.

I,II,III,andIV

33.

Corporateshareholders:

A.

areproportionatelyliableforthefirm'sdebts.

B.

areprotectedfromalllosses.

C.

havetheabilitytochangethecorporation'sbylaws.

D.

receivetax-freedistributionssinceallprofitsaretaxedatthecorporatelevel.

E.

havebasicallynocontrolovertheactualcorporation.

34.

Alimitedliabilitycompany:

A.

isahybridbetweenasoleproprietorshipandapartnership.

B.

prefersitsprofitsbetaxedaspersonalincometoitsowners.

C.

thatmeetstheIRScriteriatobeanLLCwillbetaxedlikeacorporation.

D.

provideslimitedliabilityforsome,butnotall,ofitsowners.

E.

cannotbecreatedforprofessionalservicefirms,suchasaccountantsandattorneys.

35.

Limitedliabilitycompaniesareprimarilydesignedto:

A.

allowaportionofitsownerstoenjoylimitedliabilitywhilegrantingtheotherportionofitsownerscontrolovertheentity.

B.

providethebenefitsofthecorporatestructuretoforeign-basedentities.

C.

spin-offawholly-ownedsubsidiary.

D.

allowcompaniestoreorganizethemselvesthroughthebankruptcyprocess.

E.

providelimitedliabilitywhileavoidingdoubletaxation.

36.

Theprimarygoaloffinancialmanagementistomaximizewhichoneofthefollowingforacorporation?

A.

Currentprofits

B.

Marketshare

C.

Numberofsharesoutstanding

D.

Marketvalueofexistingstock

E.

Revenuegrowth

37.

Whichoneofthefollowingbestmatchestheprimarygoaloffinancialmanagement?

A.

Increasingthedollaramountofeachsale

B.

Increasingtrafficflowwithinthefirm'sstores

C.

Transformingfixedcostsintovariablecosts

D.

Increasingthefirm'sliquidity

E.

Increasingthemarketvalueoffirm

38.

Thegoaloffinancialmanagementistoincreasethe:

A.

futurevalueofthefirm'stotalequity.

B.

bookvalueofequity.

C.

dividendspaidpershare.

D.

currentmarketvaluepershare.

E.

numberofsharesoutstanding.

39.

Whatisthegoaloffinancialmanagementforasoleproprietorship?

A.

Maximizenetincomegiventhecurrentresourcesofthefirm

B.

Decreaselong-termdebttoreducetherisktotheowner

C.

Minimizethetaximpactontheproprietor

D.

Maximizethemarketvalueoftheequity

E.

Minimizetherelianceonfixedcosts

40.

TheSarbanes-OxleyActin2002waspromptedbywhichoneofthefollowingfromthe1990's?

A.

Increasedstockmarketvolatility

B.

Corporateaccountingandfinancialfraud

C.

Increasedexecutivecompensation

D.

IncreasedforeigninvestmentinU.S.stockmarkets

E.

Increaseduseoftaxloopholes

41.

TheSarbanes-OxleyActof2002has:

A.

reducedtheannualcompliancecostsofallpubliclytradedfirmsintheU.S.

B.

decreasedseniormanagement'sinvolvementinthecorporateannualreport.

C.

greatlyincreasedthenumberofU.S.firmsthataregoingpublicforthefirsttime.

D.

decreasedthenumberofU.S.firmsgoingpubliconforeignexchanges.

E.

madeofficersofpubliclytradedfirmspersonallyresponsibleforthefirm'sfinancialstatements.

42.

WhichoneofthefollowingbestdescribestheprimaryintentoftheSarbanes-OxleyActof2002?

A.

Increasethecostsofgoingpublic

B.

Increaseprotectionagainstcorporatefraud

C.

Limitsecondaryissuesofcorporatesecurities

D.

Decreasethenumberofpubliclytradedfirms

E.

Increasethenumberoffirmsthat"godark"

43.

TheSarbanes-OxleyAct:

A.

makestheofficersofapubliccorporationpersonallyresponsibleforthefirm'sfinancialstatements.

B.

requiresallcorporationstofullydiscloseitsfinancialdealingstothegeneralpublic.

C.

placestheresponsibilityforafirm'sfinancialstatementssolelyonthechieffinancialofficer.

D.

requiresthattheboardofdirectorsbesolelyresponsibleforthefirm'sfinancialdealings.

E.

placestotalresponsibilityforthefinancialstatementsofafirmontheauditorwhocertifiesthestatements.

44.

Whichoneofthefollowingsituationsismostapttocreateanagencyconflict?

A.

Compensatingamanagerbasedonhisorherdivision'snetincome

B.

Givingallemployeesabonusifacertainlevelofefficiencyismaintained

C.

Hiringanindependentconsultanttostudytheoperatingefficiencyofthefirm

D.

Rejectingaprofitableprojecttoprotectemployeejobs

E.

Sellinganunderproducingsegmentofthefirm

45.

Whichoneofthefollowingismostapttocreateasituationwhereanagencyconflictcouldarise?

A.

Increasingthesizeofafirm'soperations

B.

Downsizingafirm

C.

Separatingmanagementfromownership

D.

Decreasingemployeeturnover

E.

Reducingbothmanagementandnon-managementsalaries

46.

Whichoneofthefollowingismostapttoalignmanagement'sprioritieswithshareholders'interests?

A.

Increasingemployeeretirementbenefits

B.

Compensatingmanagerswithsharesofstockthatmustbeheldfor3yearsbeforethesharescanbesold

C.

Allowingamanagertodecoratehisorherownofficeonceheorshehasbeeninthatofficeforaperiodof3yearsormore

D.

Increasingthenumberofpaidholidaysthatlong-termemployeesareentitledtoreceive

E.

Allowingemployeestoretireearlywithfullretirementbenefits

47.

Whichofthefollowingareeffectivemeansofaligningmanagementgoalswithshareholderinterests?

I.Employeestockoptions

II.Threatofatakeover

III.Managementbonusestiedtoperformancegoals

IV.Threatofaproxyfight

A.

IandIIIonly

B.

IIandIVonly

C.

I,II,andIIIonly

D.

I,III,andIVonly

E.

I,II,III,andIV

48.

MartihadanunexpectedsurprisewhensheateherLotsaGoodcerealthismorning.Shefoundapieceofmetalmixedinhercereal.ThepotentialclaimwhichMartihasagainstthisfirmisthatofa(n):

A.

generalcreditor.

B.

debtholder.

C.

shareholder.

D.

stakeholder.

E.

agent.

49.

Whichoneofthefollowingtransactionsoccurredintheprimarymarket?

A.

Mariagave100sharesofAltostocktoherbestfriend.

B.

Genepurchased300sharesofAltostockfromTed.

C.

SouthWindProductssold1,000sharesofnewlyissuedstocktoMike.

D.

Terrysold3,000sharesofUnostocktohisbrother.

E.

ThepresidentofTrecco,Inc.sold500sharesofTreccostocktohisson.

50.

Valeriebought200sharesofAblestocktoday.AblestockhasbeentradingforsometimeontheNYSE.Valerie'spurchaseoccurredinwhichmarket?

A.

Dealermarket

B.

Over-the-countermarket

C.

Secondarymarket

D.

Primarymarket

E.

Tertiarymarket

51.

Whichoneofthefollowingstatementsiscorrect?

A.

Allsecondarymarketsaredealermarkets.

B.

Allsecondarymarketsarebrokermarkets.

C.

Allstocktradesbetweenexistingshareholdersaresecondarymarkettransactions.

D.

Allstocktransactionsaresecondarymarkettransactions.

E.

AllDutchauctionsalesaresecondarymarkettransactions.

52.

Tedcurrentlyowns100sharesofapubliclytradedstockwhichhewouldliketosell.WhichoneofthefollowingprovidesthemostefficientmeansforTedtosellhisshares?

A.

IssuersponsoredDutchauction

B.

Proxystatement

C.

Privateplacementtransaction

D.

Stakeholderpurchase

E.

Secondarymarkettransaction

53.

WhichoneofthefollowingpartiescansellsharesofABCstockintheprimarymarket?

A.

ABCcompany

B.

Anycorporation,otherthantheABCcompany

C.

Institutionalshareholder

D.

Privateindividualshareholder

E.

Anyoftheabove

54.

Whichoneofthefollowingstatementsrelatedtosecuritiesdealersiscorrect?

A.

Dealersmatchbuyerswithsellers.

B.

Dealersbuyandsellfromtheirowninventory.

C.

Dealersoperateonaphysicaltradingfloor.

D.

Dealersoperateexclusivelyinauctionmarkets.

E.

Dealersarelimitedtotradingnon-listedstocks.

55.

Anauctionmarket:

A.

isanelectronicmeansofexchangingsecurities.

B.

hasaphysicaltradingfloor.

C.

handlesprimarymarkettransactionsexclusively.

D.

isalsoreferredtoasanOTCmarket.

E.

isdealerbased.

56.

Whichoneofthefollowingstatementsiscorrect?

A.

NASDAQhasmorelistedstocksthandoestheNYSE.

B.

TheNYSEisadealermarket.

C.

NASDAQisanauctionmarket.

D.

NASDAQhasthemoststringentlistingrequirementsofanyU.S.exchange.

E.

ThetradingfloorforNASDAQislocatedinChicago.

57.

Whichoneofthefollowingisageneralcharacteristicofasecuritiesbroker?

A.

Tradesfromhisorherowninventory

B.

Tradesonlyforeignsecurities

C.

Tradeslistedsecuritiesinanauctionmarket

D.

Tradeselectronicallyfromanygeographiclocation

E.

Istheprincipaltraderofdebtsecurities

58.

Whichoneofthefollowingstatementsiscorrect?

A.

AllofthemajorstockexchangesareU.S.based.

B.

TheNYSEwascreatedbytheNationalAssociationofSecuritiesDealersintheearly1970's.

C.

TheAmericanStockExchangeisadealermarket.

D.

OTCmarketshaveaphysicaltradingfloorgenerallylocatedineitherNewYorkCityorChicago.

E.

TheprimarypurposeoftheNYSEistomatchbuyerswithsellers.

EssayQuestions

59.

Giveanexampleofasituationwherethemanagementofafirmisactinginamannerthatiscontrarytotheprincipalgoaloffinancialmanagement.

60.

Listthreedecisionsthatafinancialmanagermakesthatwouldfallunderthecategoryofworkingcapitalmanagement.

61.

ExplaintheprimarygoaloftheSarbanes-OxleyActin2002anddiscusswhetherornotthisactappearstobeeffectivelymeetingthatgoal.

62.

Explainwhatcapitalstructuremanagementisandgivethreeexamplesofcapitalstructuredecisions.

63.

Toddwantstostarthisownbusinessandisdebatingbetweenorganizingthebusinessasasoleproprietorshiporacorporation.Explaintheprosandconsofbothformsofbusinessorganization.

64.

Giveanexampleofapotentialagencyproblemforacorporationandidentifymeansbywhichthefirmcanhelpreduceoreliminatethatproblem.

65.

Whichtypeoffinancialmarket,dealerorauction,isbestsuitedtoexpandinginternationallyandwhy?

66.

Assumeafirmhasbothacontrollerandatreasurer.Identifythetypesofresponsibilitieseachshouldhaveandexplainwhytheirdutiesshouldbeseparatedasyousuggest.

Chapter01IntroductiontoFinancialManagementAnswerKey

MultipleChoiceQuestions

1.

Timhasbeenpromotedandisnowinchargeofallfixedassetpurchases.Inotherwords,Timisinchargeof:

A.

capitalstructuremanagement.

B.

assetallocation.

C.

riskmanagement.

D.

capitalbudgeting.

E.

workingcapitalmanagement.Refertosection1.2

Bloom's:Knowledge

Difficulty:Basic

LearningObjective:01-01Discussthebasictypesoffinancialmanagementdecisionsandtheroleofthefinancialmanager.

Section:1.2

Topic:Capitalbudgeting

2.

Stadford,Inc.isfinancedwith40percentdebtand60percentequity.Thismixtureofdebtandequityisreferredtoasthefirm's:

A.

capitalstructure.

B.

capitalbudget.

C.

assetallocation.

D.

workingcapital.

E.

riskstructure.Refertosection1.2.

Bloom's:Knowledge

Difficulty:Basic

LearningObjective:01-01Discussthebasictypesoffinancialmanagementdecisionsandtheroleofthefinancialmanager.

Section:1.2

Topic:Capitalstructure

3.

Lester'sBBQhas$121,000incurrentassetsand$109,000incurrentliabilities.Thesevaluesasreferredtoasthefirm's:

A.

capitalstructure.

B.

cashequivalents.

C.

workingcapital.

D.

netassets.

E.

fixedaccounts.Refertosection1.2.

Bloom's:Knowledge

Difficulty:Basic

LearningObjective:01-01Discussthebasictypesoffinancialmanagementdecisionsandtheroleofthefinancialmanager.

Section:1.2

Topic:Workingcapital

4.

Margieopenedausedbookstoreandisboththe100percentownerandthestore'smanager.WhichtypeofbusinessentitydoesMargieownifsheispersonallyliableforallthestore'sdebts?

A.

Soleproprietorship

B.

Limitedpartnership

C.

Corporation

D.

Jointstockcompany

E.

GeneralpartnershipRefertosection1.3.

Bloom's:Knowledge

Difficulty:Basic

LearningObjective:01-03Comparethefinancialimplicationsofthedifferentformsofbusinessorganizations

Section:1.3

Topic:Soleproprietorship

5.

WillandBillbothenjoysunshine,water,andsurfboards.Thus,thetwofriendsdecidedtocreateabusinesstogetherrentingsurfboards,paddleboats,andinflatabledevicesinCalifornia.WillandBillwillequallyshareinthedecisionmakingandintheprofitsorlosses.Whichtypeofbusinessdidtheycreateiftheybothhavefullpersonalliabilityforthefirm'sdebts?

A.

Soleproprietorship

B.

Limitedpartnership

C.

Corporation

D.

Jointstockcompany

E.

GeneralpartnershipRefertosection1.3.

Bloom's:Knowledge

Difficulty:Basic

LearningObjective:01-03Comparethefinancialimplicationsofthedifferentformsofbusinessorganizations

Section:1.3

Topic:Generalpartnership

6.

ToddandCathycreatedafirmthatisaseparatelegalentityandwillshareownershipofthatfirmona50/50basis.Whichtypeofentitydidtheycreateiftheyhavenopersonalliabilityforthefirm'sdebts?

A.

Limitedpartnership

B.

Corporation

C.

Soleproprietorship

D.

Generalpartnership

E.

PubliccompanyRefertosection1.3.

Bloom's:Knowledge

Difficulty:Basic

LearningObjective:01-03Comparethefinancialimplicationsofthedifferentformsofbusinessorganizations

Section:1.3

Topic:Corporation

7.

Thepotentialconflictofinterestbetweenafirm'sownersanditsmanagersisreferredtoaswhichtypeofconflict?

A.

Organizational

B.

Structure

C.

Formation

D.

Agency

E.

TerritorialRefertosection1.5.

AACSB:Ethics

Bloom's:Knowledge

Difficulty:Basic

LearningObjective:01-04Describetheconflictsofinterestthatcanarisebetweenmanagersandowners

Section:1.5

Topic:Agencyconflict

8.

ThefederalgovernmenthasataxclaimonthecashflowsofTheWindowStore.Thisclaimisdefinedasaclaimbyoneofthefirm's:

A.

residualowners.

B.

shareholders.

C.

financiers.

D.

provisionalpartners.

E.

stakeholders.Refertosection1.5.

Bloom's:Knowledge

Difficulty:Basic

LearningObjective:01-04Describetheconflictsofinterestthatcanarisebetweenmanagersandowners

Section:1.5

Topic:Stakeholder

9.

The"SayonPay"billrequirescorporationstodowhichoneofthefollowing?

A.

Givethechairmanoftheboardthefinalsayonexecutivepay

B.

Givethefirm'screditorsanonbindingsayonexecutivepay

C.

Givethefirm'screditorsabindingsayonexecutivepay

D.

Giveshareholdersanonbindingvoteonexecutivepay

E.

GiveshareholdersabindingvoteonexecutivepayRefertotheopeningsectionofChapter1.

Bloom's:Knowledge

Difficulty:Basic

LearningObjective:01-04Describetheconflictsofinterestthatcanarisebetweenmanagersandowners

Section:Chapter1Opener

Topic:"SayonPay"

10.

In2009,theObamaadministrationestablishedamaximumlimitonexecutivesalariesforfirmsthatreceivedbailoutfunds.Whatwastheamountofthatsalarylimit?

A.

$250,000

B.

$500,000

C.

$750,000

D.

$1,000,000

E.

$1,500,000Referto