Corporate Finance Test Bank Ch1

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Multiple Choice Questions 1. The person generally directly responsible for overseeing the tax management, cost accounting, financial accounting, and information system functions is the: A. B. C. D. E. treasurer. director. controller. chairman of the board. chief executive officer.

2. The person generally directly responsible for overseeing the cash and credit functions, financial planning, and capital expenditures is the: A. B. C. D. E. treasurer. director. controller. chairman of the board. chief operations officer.

3. The process of planning and managing a firm's long-term investments is called: A. B. C. D. E. working capital management. financial depreciation. agency cost analysis. capital budgeting. capital structure.

4. The mixture of debt and equity used by a firm to finance its operations is called: A. B. C. D. E. working capital management. financial depreciation. cost analysis. capital budgeting. capital structure.

5. The management of a firm's short-term assets and liabilities is called: A. B. C. D. E. working capital management. debt management. equity management. capital budgeting. capital structure.

6. A business owned by a single individual is called a: A. B. C. D. E. corporation. sole proprietorship. general partnership. limited partnership. limited liability company.

7. A business formed by two or more individuals who each have unlimited liability for business debts is called a: A. B. C. D. E. corporation. sole proprietorship. general partnership. limited partnership. limited liability company.

8. The division of profits and losses among the members of a partnership is formalized in the: A. B. C. D. E. indemnity clause. indenture contract. statement of purpose. partnership agreement. group charter.

9. A business created as a distinct legal entity composed of one or more individuals or entities is called a: A. B. C. D. E. corporation. sole proprietorship. general partnership. limited partnership. unlimited liability company.

10. The corporate document that sets forth the business purpose of a firm is the: A. B. C. D. E. indenture contract. state tax agreement. corporate bylaws. corporate charter. articles of incorporation.

11. The rules by which corporations govern themselves are called: A. B. C. D. E. indenture provisions. indemnity provisions. charter agreements. bylaws. articles of incorporation.

12. A business entity operated and taxed like a partnership, but with limited liability for the owners, is called a: A. B. C. D. E. limited liability company. general partnership. limited proprietorship. sole proprietorship. corporation.

13. The primary goal of financial management is to: A. B. C. D. E. maximize current dividends per share of the existing stock. maximize the current value per share of the existing stock. avoid financial distress. minimize operational costs and maximize firm efficiency. maintain steady growth in both sales and net earnings.

14. A conflict of interest between the stockholders and management of a firm is called: A. B. C. D. E. stockholders' liability. corporate breakdown. the agency problem. corporate activism. legal liability.

15. Agency costs refer to: A. B. C. D. E. the total dividends paid to stockholders over the lifetime of a firm. the costs that result from default and bankruptcy of a firm. corporate income subject to double taxation. the costs of any conflicts of interest between stockholders and management. the total interest paid to creditors over the lifetime of the firm.

16. A stakeholder is: A. any person or entity that owns shares of stock of a corporation. B. any person or entity that has voting rights based on stock ownership of a corporation. C. a person who initially started a firm and currently has management control over the cash flows of the firm due to his/her current ownership of company stock. D. a creditor...
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