Chapter 1 HW

Security dealers: 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.

b) buy and sell from their own inventory.

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

c) There must be at least one general partner.

You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the: a) dealer market. b) over-the-counter market. c) secondary market. d) primary market. e) tertiary market.

c) secondary market.

An agency issue is most apt to develop when: 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.

c) the control of a firm is separated from the firm's ownership.

Jamie is employed as a currency trader in the Japanese yen market. Her job falls into which one of the following areas of finance? a) International finance b) Financial institutions c) Corporate finance d) Capital management e) Personal finance

a) International finance

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: a) capital structure. b) capital budget. c) asset allocation. d) working capital. e) risk structure.

a) capital structure.

Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts? a) Limited partnership b) Corporation c) Sole proprietorship d) General partnership e) Public company

b) Corporation

Working capital management includes which one of the following? a) Deciding which new projects to accept b) Deciding whether to purchase a new machine or fix a currently owned machine c) Determining which customers will be granted credit d) Determining how many new shares of stock should be issued e) Establishing the target debt-equity ratio

c) Determining which customers will be granted credit

Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners? a) Sole proprietorship b) General partnership c) Limited partnership d) Limited liability company e) Corporation

c) Limited partnership

The primary goal of financial management is to maximize: a) current profits. b) market share. c) current dividends. d) the market value of existing stock. e) revenue growth.

d) the market value of existing stock.

In a general partnership, each partner is personally liable for: a) only the partnership debts that he or she personally created. b)his or her proportionate share of all partnership debts regardless of which partner incurred that debt. c) the total debts of the partnership, even if he or she was unaware of those debts. d) the debts of the partnership up to the amount he or she invested in the firm. e) all personal and partnership debts incurred by any partner, even if he or she was unaware of those debts.

c) the total debts of the partnership, even if he or she was unaware of those debts.

One advantage of the corporate form of organization is the: a) taxation of the corporate profits. b) unlimited liability for its shareholders. c) double taxation of profits. d) ability to raise larger sums of equity capital than other organizational forms. e) ease of formation compared to other organizational forms.

d) ability to raise larger sums of equity capital than other organizational forms.

The shareholders of Weil's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of: a) a corporate takeover. b) a capital structure issue. c) a working capital decision. d) an agency conflict. e) a compensation issue.

d) an agency conflict.

If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which one of the following financial areas? a) International finance b) Private placements c) Corporate finance d) Capital management e) Investments

e) Investments

Capital budgeting includes the evaluation of which of the following? a) Size of future cash flows only b) Size and timing of future cash flows only c)Timing and risk of future cash flows only d) Risk and size of future cash flows only e) Size, timing, and risk of future cash flows

e) Size, timing, and risk of future cash flows

The issuer of a security must be involved in all _____ transactions involving that security. a) exchange-listed b) secondary market c) over-the-counter d) dealer market e) primary market

e) primary market