MGT 3062 Multiple Choice

Which one of the following questions involves a capital budgeting decision? a) How many shares of stock should the firm issue? b) Should the firm purchase a new machine for the production line? c) Should the firm borrow money to acquire new equipment? d) How much inventory should the firm keep on hand? e) How much money should be kept in the checking account?

Should the firm purchase a new machine for the production line?

A business that is a legal entity separate from the owners, yet treated as a legal person, is called a(n):

corporation

If you buy at stock at t = 3 and pay P3, what dividends would you receive? a) D0 through Dinfinity b) D1 through Dinfinity c) D3 through Dinfinity d) D4 through Dinfinity

d) D4 through Dinfinity

What is the "true math" of the price of a stock at time t ? a) Pt = Dt+2/(1+r)^1 + Dt+3/(1+r)^2 + .......D∞/(1+r)^∞ b) Pt = Dt/(1+r)^0 + Dt+1/(1+r)^1 + .......D∞/(1+r)^∞ c) Pt = Dt/(1+r)^1 + Dt+1/(1+r)^1 + .......D∞/(1+r)^∞ d) Pt = Dt+1/(1+r)^1 + Dt+2/(1+r)^2 + .......D∞/(1+r)^∞

d) Pt = Dt+1/(1+r)^1 + Dt+2/(1+r)^2 + .......D∞/(1+r)^∞

The FV of an annuity due is larger than the FV of an ordinary annuity (with the same number of payments) because...

...with the annuity due, you are able to invest each cash flow one period longer than the cash flows from the ordinary annuity.

Which form of business would be the best choice if it were necessary to raise large amounts of capital? a) Sole proprietorship b) Limited liability company c) Corporation d) General partnership e) Limited partnership

Corporation

Which one of the following questions involves a capital structure decision? a) Which one of two project proposals should the firm implement? b) How should the firm allocate its limited available funds among acceptable projects? c) How much funding should be allocated to financing customer purchases of a new product? d) How much debt should the firm incur to fund a project? e) How much inventory will be needed to support a project?

How much debt should the firm incur to fund a project?

Which one of the following questions is a working capital management decision? a) Should the company issue new shares of stock or borrow money? b) Should the company refurbish its equipment or replace it? c) How much inventory should the company keep on hand? d) Should the company close one of its current stores? e) How much money should the company borrow to buy a new building?

How much inventory should the company keep on hand?

Which one of the following best states the primary goal of financial management? a) Maximize current dividends per share b) Maximize the current value per share c) Avoid financial distress d) Maximize profit e) Maintain steady growth while increasing current profits

Maximize the current value per share

Limited partners benefit from which of the primary advantages? a) They have the opportunity to earn tax-free income. b) Their responsibility for the firm's debts is prorated based on their percentage of ownership. c) They do not face any potential financial losses. d) They have control over the administrative affairs of the partnership. e) Their maximum loss cannot exceed the amount of their capital investment.

Their maximum loss cannot exceed the amount of their capital investment.

Determining the number of shares of stock to issue is an example of a ______ decision.

capital structure

A partner in a firm knows that the maximum financial loss he or she will experience is the amount he or she invested in the firm. The partner is called a ______ partner.

limited

The Sarbanes-Oxley Act of 2002 is a governmental response to: a) decreasing corporate profits. b) the terrorist attacks on 9/11/2001. c) the harm caused to stock markets by SARS, MERS, COVID-19, and other pandemics. d) deregulation of the stock exchanges. e) management greed and abuses.

management greed and abuses.

NPER (in Excel) when referring to PMT means ___, while NPER referring to PV and FV means ___.

number of payments; number of periods between 2 lump sums