FIN5008 - ch. 1

In a general partnership, each partner is personally liable for: - 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 partnership debts that he or she created. - 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.

A corporation: - is a legal entity separate from its owners. - has its identity defined by its bylaws. - is prohibited from entering into contractual agreements. - has its existence regulated by the rules set forth in its charter. - is ultimately controlled by its board of directors.

is a legal entity separate from its owners.

A sole proprietorship: - involves significant legal costs during the formation process. - has an unlimited life. - has its profits taxed as personal income. - provides limited liability for its owner. - can generally raise significant capital from nonowner sources.

has its profits taxed as personal income.

Lester's BBQ has $121,000 in current assets and $109,000 in current liabilities. These values as referred to as the firm's: - working capital. - net assets. - capital structure. - cash equivalents. - fixed accounts.

working capital.

Which one of the following parties can sell shares of ABC stock in the primary market? - Any of these - Institutional shareholder - Private individual shareholder - ABC company - Any corporation, other than the ABC company

ABC company

Which one of the following applies to a general partnership? - Each partner's liability for the firm's debts is limited to each partner's investment in the firm. - Any one of the partners can be held solely liable for all of the partnership's debt. - The profits of the firm are taxed as a separate entity. - The profits of a general partnership are taxed the same as those of a corporation. - The firm's operations must be controlled by a single partner.

Any one of the partners can be held solely liable for all of the partnership's debt.

Which one of the following occupations best fits into the international area of finance? - Bank teller - Local bank manager - Insurance risk manager - Treasury bill analyst - Currency trader

Currency trader

Which one of the following statements related to securities dealers is correct? - Dealers operate exclusively in auction markets. - Dealers are limited to trading nonlisted stocks. - Dealers operate on a physical trading floor. - Dealers buy and sell from their own inventory. - Dealers match buyers with sellers.

Dealers buy and sell from their own inventory.

Which one of the following is a capital structure decision? - Determining the optimal inventory level - Setting the terms of sale for credit sales - Determining when suppliers should be paid - Establishing the preferred debt-equity level - Selecting new equipment to purchase

Establishing the preferred debt-equity level

Maria is the sole proprietor of an antique store that she has operated at the same location for the past 16 years. The store rents the space in which it is located but does own all of the inventory and fixtures. The store has an outstanding loan with the local bank but no other debt obligations. There are no specific loan covenants or 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 use the cash raised to apply to the debt II. Sell the store fixtures and use the cash raised to apply to the debt III. Take 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

I, II, III, and IV

Which of the following individuals commonly use finance in the course of their job? I. Chief financial officers II. Accountants III. Security analysts IV. Strategic managers

I, II, III, and IV

Which of the following are advantages of the corporate form of organization? I. Ability to raise large sums of equity capital II. Ease of ownership transfer III. Profits taxed at the corporate level IV. Limited liability for all owners

I, II, and IV only

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? - Capital management - Corporate finance - International finance - Private placements - Investments

Investments

Jamie is employed as a commercial loan officer for a regional bank centered in the midwestern section of the U.S. Her job falls into which one of the following areas of finance? - International finance - Financial institutions - Corporate finance - Capital management - Investments

Investments

Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners? - Limited liability company - General partnership - Limited partnership - Corporation - Sole proprietorship

Limited partnership

Which one of the following is an advantage of being a limited partner? - Unlimited profits without risk of incurring a loss - Losses limited to capital invested - Nontaxable share of any profits - Active market for ownership interest - Control over the daily operations of the firm

Losses limited to capital invested

Which one of the following is contained in the corporate bylaws? - State of incorporation - Number of authorized shares - Intended life of the corporation - Procedures for electing corporate directors - Business purpose of the corporation

Procedures for electing corporate directors

Valerie bought 200 shares of Able stock today. Able stock has been trading for some time on the NYSE. Valerie's purchase occurred in which market? - Dealer market - Over-the-counter market - Tertiary market - Primary market - Secondary market

Secondary market

Which one of the following transactions occurred in the primary market? - Maria gave 100 shares of Alto stock to her best friend. - South Wind Products sold 1,000 shares of newly issued stock to Mike. - Gene purchased 300 shares of Alto stock from Ted. - Terry sold 3,000 shares of Uno stock to his brother. - The president of Trecco, Inc. sold 500 shares of Trecco stock to his son.

South Wind Products sold 1,000 shares of newly issued stock to Mike.

Which one of the following correctly defines a common chain of command within a corporation? - The chief financial officer reports directly to the board of directors. - The controller reports directly to the corporate treasurer. - The controller reports directly to the chief financial officer. - The credit manager reports directly to the controller. - The treasurer reports directly to the board of directors.

The controller reports directly to the chief financial officer.