(Test Bank) Corporate Finance

Ross,Randolph, 12

Business

Test Bank

12th Edition

• $15.00 $50.00

---

Description

Test Bank for Corporate Finance, The downloadable file consists of 429 pages, and the total size of the file is 2.99 MB. Purchase now only for highly discounted price.

Author(s): Ross, Randolph

---

---

Study Note Preview

Chapter 01 - Introduction to Corporate Finance Chapter 01 Introduction to Corporate Finance Answer Key Multiple Choice Questions 1. Which one of the following terms is defined as the management of a firm's long-term investments? A. working capital management B. financial allocation C. agency cost analysis D. capital budgeting E. capital structure Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Capital budgeting 2. Which one of the following terms is defined as the mixture of a firm's debt and equity financing? A. working capital management B. cash management C. cost analysis D. capital budgeting E. capital structure Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Capital structure 1-1Chapter 01 - Introduction to Corporate Finance 3. Which one of the following is defined as a firm's short-term assets and its short-term liabilities? A. working capital B. debt C. investment capital D. net capital E. capital structure Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Working capital 4. A business owned by a solitary individual who has unlimited liability for its debt is called a: A. corporation. B. sole proprietorship. C. general partnership. D. limited partnership. E. limited liability company. Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: Sole proprietorship 1-2Chapter 01 - Introduction to Corporate Finance 5. A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a: A. corporation. B. sole proprietorship. C. general partnership. D. limited partnership. E. limited liability company. Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: General partnership 6. A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a: A. generally partner. B. sole proprietor. C. limited partner. D. corporate shareholder. E. zero partner. Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: Limited partner 1-3Chapter 01 - Introduction to Corporate Finance 7. A business created as a distinct legal entity and treated as a legal "person" is called a: A. corporation. B. sole proprietorship. C. general partnership. D. limited partnership. E. unlimited liability company. Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: Corporation 8. Which one of the following terms is defined as a conflict of interest between the corporate shareholders and the corporate managers? A. articles of incorporation B. corporate breakdown C. agency problem D. bylaws E. legal liability Refer to section 1.4 AACSB: EthicsDifficulty: BasicLearning Objective: 1-4Section: 1.4Topic: Agency problem 1-4Chapter 01 - Introduction to Corporate Finance 9. A stakeholder is: A. a person who owns shares of stock. B. any person who has voting rights based on stock ownership of a corporation. C. a person who initially founded a firm and currently has management control over that firm. D. a creditor to whom a firm currently owes money. E. any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm. Refer to section 1.4 AACSB: EthicsDifficulty: BasicLearning Objective: 1-4Section: 1.4Topic: Stakeholder 10. Which of the following questions are addressed by financial managers? I. How should a product be marketed? II. Should customers be given 30 or 45 days to pay for their credit purchases? III. Should the firm borrow more money? IV. Should the firm acquire new equipment? A. I and IV only B. II and III only C. I, II, and III only D. II, III, and IV only E. I, II, III, and IV Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Financial management 1-5Chapter 01 - Introduction to Corporate Finance 11. Which one of the following functions should be the responsibility of the controller rather than the treasurer? A. daily cash deposit B. income tax returns C. equipment purchase analysis D. customer credit approval E. payment to a vendor Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Financial management 12. The controller of a corporation generally reports directly to the: A. board of directors. B. chairman of the board. C. chief executive officer. D. president. E. vice president of finance. Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Corporate structure 1-6Chapter 01 - Introduction to Corporate Finance 13. Which one of the following correctly defines the upward chain of command in a typical corporate organizational structure? A. The vice president of finance reports to the chairman of the board. B. The chief executive officer reports to president. C. The controller reports to the president. D. The treasurer reports to the vice president of finance. E. The chief operations officer reports to the vice president of production. Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Corporate structure 14. Which one of the following is a capital budgeting decision? A. determining how many shares of stock to issue B. deciding whether or not to purchase a new machine for the production line C. deciding how to refinance a debt issue that is maturing D. determining how much inventory to keep on hand E. determining how much money should be kept in the checking account Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Capital budgeting 1-7Chapter 01 - Introduction to Corporate Finance 15. Which of the following should a financial manager consider when analyzing a capital budgeting project? I. project start up costs II. timing of all projected cash flows III. dependability of future cash flows IV. dollar amount of each projected cash flow A. I and IV only B. I, II, and IV only C. I, II, and III only D. II, III, and IV only E. I, II, III, and IV Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Capital budgeting 16. Which one of the following is a capital structure decision? A. determining which one of two projects to accept B. determining how to allocate investment funds to multiple projects C. determining the amount of funds needed to finance customer purchases of a new product D. determining how much debt should be assumed to fund a project E. determining how much inventory will be needed to support a project Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Capital structure 1-8Chapter 01 - Introduction to Corporate Finance 17. The decision to issue additional shares of stock is an example of which one of the following? A. working capital management B. net working capital decision C. capital budgeting D. controller's duties E. capital structure decision Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Capital structure 18. Which of the following accounts are included in working capital management? I. accounts payable II. accounts receivable III. fixed assets IV. inventory A. I and II only B. I and III only C. II and IV only D. I, II, and IV only E. II, III, and IV only Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Working capital management 1-9Chapter 01 - Introduction to Corporate Finance 19. Which one of the following is a working capital management decision? A. determining the amount of equipment needed to complete a job B. determining whether to pay cash for a purchase or use the credit offered by the supplier C. determining the amount of long-term debt required to complete a project D. determining the number of shares of stock to issue to fund an acquisition E. determining whether or not a project should be accepted Refer to section 1.1 AACSB: N/ADifficulty: BasicLearning Objective: 1-1Section: 1.1Topic: Working capital management 20. Which one of the following statements concerning a sole proprietorship is correct? A. A sole proprietorship is designed to protect the personal assets of the owner. B. The profits of a sole proprietorship are subject to double taxation. C. The owner of a sole proprietorship is personally responsible for all of the company's debts. D. There are very few sole proprietorships remaining in the U.S. today. E. A sole proprietorship is structured the same as a limited liability company. Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: Sole proprietorship 1-10Chapter 01 - Introduction to Corporate Finance 21. Which one of the following statements concerning a sole proprietorship is correct? A. The life of a sole proprietorship is potentially unlimited. B. A sole proprietor can generally raise large sums of capital quite easily. C. Transferring ownership of a sole proprietorship is easier than transferring ownership of a corporation. D. A sole proprietorship is taxed the same as a C corporation. E. It is easy to create a sole proprietorship. Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: Sole proprietorship 22. Which of the following individuals have unlimited liability based on their ownership interest? I. general partner II. sole proprietor III. stockholder IV. limited partner A. II only B. I and II only C. II and IV only D. I, II, and III only E. I, II, and IV only Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: Unlimited liability 1-11Chapter 01 - Introduction to Corporate Finance 23. Which one of the following best describes the primary advantage of being a limited partner instead of a general partner? A. tax-free income B. active participation in the firm's activities C. no potential financial loss D. greater control over the business affairs of the partnership E. maximum loss limited to the capital invested Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: Limited partner 24. A general partner: A. is solely responsible for all the partnership debts. B. has no say over a firm's daily operations. C. faces double taxation whereas a limited partner does not. D. has a maximum loss equal to his or her equity investment. E. receives a salary in lieu of a portion of the profits. Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: General partner 1-12Chapter 01 - Introduction to Corporate Finance 25. A limited partnership: A. has an unlimited life. B. can opt to be taxed as a corporation. C. terminates at the death of any limited partner. D. has a greater ability to raise capital than a sole proprietorship. E. consists solely of limited partners. Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: Partnership 26. Which of the following apply to a partnership that consists solely of general partners? I. double taxation of partnership profits II. limited partnership life III. active involvement in the firm by all the partners IV. unlimited personal liability for all partnership debts A. II only B. I and II only C. II and III only D. I, II, and IV only E. II, III, and IV only Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: Partnership 1-13Chapter 01 - Introduction to Corporate Finance 27. Which of the following are advantages of the corporate form of business ownership? I. limited liability for firm debt II. double taxation III. ability to raise capital IV. unlimited firm life A. I and II only B. III and IV only C. I, III, and IV only D. II, III, and IV only E. I, II, III, and IV Refer to section 1.2 AACSB: N/ADifficulty: BasicLearning Objective: 1-3Section: 1.2Topic: Corporation 28. Which one of the following statements is correct? A. The majority of firms in the U.S. are structured as corporations. B. Corporate profits are taxable income to the shareholders when earned. C. Corporations can raise large amounts of capital generally easier than partnerships can. D. Stockholders face no potential losses related to their corporate investment. E. Corporate shareholders elect the corporate president. Refer to section 1.2 AACSB: N/ADifficulty: IntermediateLearning Objective: 1-3Section: 1.2Topic: Corporation 1-14Chapter 01 - Introduction to Corporate Finance 29. Which one of the following statements is correct? A. A general partnership is legally the same as a corporation. B. Both sole proprietorship and partnership income is taxed as individual income. C. Partnerships are the most complicated type of business to form. D. All business organizations have bylaws. E. Only firms organized as sole proprietorships have limited lives. Refer to section 1.2 AACSB: N/ADifficulty: IntermediateLearning Objective: 1-3Section: 1.2Topic: Business entity 30. The articles of incorporation: I. describe the purpose of the firm. II. are amended periodically. III. set forth the number of shares of stock that can be issued. IV. detail the method that will be used to elect corporate directors. A. I and III only B. I and IV only C. II and III only D. II and IV only E. I, III, and IV only Refer to section 1.2 AACSB: N/ADifficulty: IntermediateLearning Objective: 1-3Section: 1.2Topic: Articles of incorporation 1-15