Finance Exam #1

Topics: Generally Accepted Accounting Principles, Balance sheet, Financial ratios Pages: 10 (1820 words) Published: January 24, 2013
Exam 1: Chapters 1, 3, and 5

Insider trading occurs when
| | someone has information not available to the public which they use to profit from trading in stocks.| | | corporate officers buy stock in their company.|
| | lawyers, investment bankers, and others buy common stock in companies represented by their firms.| | | any stock transactions occur in violation of the Federal Trade Commissions restrictions on monopolies.|

The secondary market is used
| | by corporations to raise new funds through selling securities.| | | by investors seeking to buy or sell previously-issued securities.| | | by corporations interested in disposing of fixed assets.| | | none of the above.|

Which of the following is true with respect to financial markets? | | Financial markets are separated into short-term and long-term markets.| | | Securities maturing in one year or less trade in the "money" market.| | | Securities maturing in more than one year trade in the "capital" market.| | | All of the above are true.|

Which of the following are among the tasks performed by financial managers? | | Receiving and disbursing funds|
| | Making capital budgeting decisions|
| | Obtaining funds for acquiring assets|
| | All of the above|

Agency problems are least likely to arise in which organizational form? | | sole proprietorship|
| | limited partnership|
| | corporation|
| | subchapter S corporation|

A corporate restructuring can result in
| | changes in the capital structure.|
| | selling of low-profit margin divisions.|
| | reductions in the work force.|
| | all of the above.|

Institutional investors are important in today's business world because | | as large investors they have more say in how businesses are managed| | | they have a fiduciary responsibility to the workers and investors that they represent to see that the firms they own are managed in an ethical way.| | | as a group they can vote large blocks of stock for the election of board members.| | | all of the above.|

One of the major disadvantages of a sole proprietorship is the | | unlimited liability of the owner.|
| | simplicity of decision-making.|
| | typically high organizational costs.|
| | taxation of both earnings and dividends.|

With a "Subchapter S" corporation
| | income is taxed as direct income to shareholders.|
| | shareholders have the same liability as members of a partnership.| | | the number of shareholders is unlimited.|
| | all of the above.|

Maximization of shareholder wealth is a concept in which
| | increased earnings is of primary importance.|
| | profits are maximized on a quarterly basis.|
| | virtually all earnings are paid as dividends to common stockholders.| | | optimally increasing the long-term value of the firm is emphasized.|

When a corporation uses the financial markets to raise new funds, the sale of securities is made in the | | primary market.|
| | secondary market.|
| | on-line market.|
| | third market.|

One of the major disadvantages of a sole proprietorship is
| | that there is unlimited liability to the owner.|
| | the simplicity of decision making.|
| | low organizational costs.|
| | low operating costs.|

Future financial managers will need to understand
| | international cash flows.|
| | computerized funds transfers.|
| | international currency hedging strategies.|
| | all of the above.|

Which of the following is not an example of restructuring as discussed in the text? | | repurchase of common stock|
| | creating a new organizational chart|
| | merging with companies in related industries|
| | divesting of an unprofitable division|

Companies that have higher risk than a competitor in the same...
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