chapter 1 quiz

Which of the following are advantages of the corporate form of organization? I. ability to raise large sums of capital II. ease of ownership transfer III. corporate taxation (double taxation) IV. unlimited firm life

I, II, IV only

Which one of the following transactions occurred in the primary market? Question 21 options: Prudoe Mfg. sold shares of Plastics Tech on NASDAQ. Alpha, Inc., a publicly owned company, bought shares of New Town Press, also a publicly owned company. Valerie purchased newly issued shares of Velcro, Inc.

Valerie purchased newly issued shares of Velcro, Inc

Which one of the following correctly defines a common chain of command within a corporation? Question 6 options: The controller reports directly to chairman of the board. Both the treasurer and the vice president of finance report directly to the president. The chief financial officer reports directly to the board of directors. Both the treasurer and controller typically report to the Vice President of Finance (Chief Financial Officer)

both the treasurer and controller typically report to the vice president of finance (chief financial officer)

Which one of the following jobs best fits into the area of finance classified as financial institutions? Question 3 options: commercial loan officer security analyst stock broker accounting manager corporate treasurer

commercial loan officer

A firm created as a separate and distinct legal entity that may be owned by one or more individuals or entities is called a: Question 14 options: limited partnership. Corporation. sole proprietorship. general partnership. public company.

corporation

Which one of the following is classified as a current asset? Question 24 options: land accounts payable equipment Inventory note payable

inventory

A sole proprietorship: Question 8 options: is relatively easy to create. involves significant legal costs during the formation process. has an unlimited life. is taxed as a separate legal entity. can generally raise significant capital from non-owner sources.

is relatively easy to create

The primary goal of financial management is to maximize the: Question 4 options: current net income. net working capital. the number of shares outstanding. market value of the existing stock. revenue growth.

market value of the existing stock

Capital structure refers to the: Question 16 options: combination of short-term and long-term assets held by a firm. mixture of debt and equity a firm uses to finance its operations. types of long-term assets a firm employs in its operations. amount of cash versus other short-term assets held by a firm. average amount of cash equivalents held by a firm.

mixture of debt and equity a firm uses to finance its operations

The intent of the Sarbanes-Oxley Act of 2002 is increased: Question 18 options: dividend payouts to shareholders. disclosure of accounting information on privately held firms. protection against corporate accounting fraud. disclosure of shareholder information. disclosure of trading information for each of the U.S. stock exchanges.

protection against corporate accounting fraud

Which one of the following occupations best fits into the financial area of investments? bank teller corporate controller security analyst corporate treasurer bank trustee

security analyst

Which one of the following functions should be assigned to the controller rather than the treasurer? Question 5 options: cash management credit management tax management

tax management

A sole proprietorship is defined as a business: Question 7 options: engaged in a single operation. that produces only one product. that employs a single employee. owned by a single individual that is unincorporated.

owned by a single individual

We separate financial markets into the broad categories listed below? I. Primary Markets refer to the original sale of debt and equity securities by governments and corporations. II. Secondary Markets: those in which debt and equity securities are bought and sold after the original sale.

true

The potential conflict of interest between a firm's owners and its managers is referred to as a(n): Question 19 options: organizational problem. structure problem. agency problem. management conflict.

agency problem

Which one of the following statements about a limited partnership is correct? Question 12 options: All partners have limited liability for partnership debts. The partnership is managed on a daily basis by its limited partners. Each limited partnership must have at least one general partner. Partnership profits are taxed the same as corporate profits. The partnership has an unlimited life.

each limited partnership must have at least one general partner

The Sarbanes-Oxley Act in 2002 was prompted by which one of the following from the 1990's? Question 17 options: rate of stock market growth financial corporate scandals increased number of stock offerings increased foreign investment in U.S. stock markets

financial corporate scandals

A business organization owned by two or more individuals or entities, each of whom has unlimited liability for the firm's debts, is called a: Question 9 options: limited liability company. limited partnership. dual company. joint stock company. general partnership.

general partnership

The advantage of being a limited partner in a limited partnership is the ability to: Question 13 options: earn a guaranteed profit without risking your investment in the firm. always actively manage the firm without losing more than you invested. control the daily operations of the firm while limiting your losses to your initial investment. avoid taxes on your partnership earnings. limit your losses to the amount invested in the firm.

limit your losses to the amount invested in the firm

An income statement: Question 25 options: reveals the net cash flows of a firm over a stated period of time. reflects the financial position of a firm as of a particular date. shows the revenue and expenses based upon selected accounting methods. records revenue only when cash is received for the product or service provided. records expenses based on the recognition principle.

shows the revenue and expenses based upon selected accounting methods

Theresa sold 300 shares of MNO stock on the NYSE today. This transaction occurred in: Question 23 options: a dealer market. the over-the-counter market. the secondary market. the primary market. a private placement.

the secondary market

In a general partnership, each partner is personally liable for: Question 11 options: the partnership debts that he or she personally obtained for the firm. his or her proportionate share of all partnership debts regardless of which partner incurred that debt. the total debts of the partnership, even if he or she was unaware of those debts. the debts of the partnership up to the amount he or she invested in the firm. all personal and partnership debts incurred by any partner, even if he or she was unaware of those debts.

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

The four basic areas of finance which are listed below? I. Corporate Finance II. Investments III. Financial Institutions IV. International Finance

true

We can subdivided the Secondary markets into the subcategories: Dealer Markets and Auction Markets? I. In Dealer Markets, dealers buy and sell securities for their own account and typically there is no physical location where most of the transactions are consummated. The dealer markets in stock and long-term debt are called over-the-counter (OTC) markets. II. Auction Markets, or an exchange, has a physical location and its primary purpose is to match those who wish to sell with those who wish to buy.

true