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Topics: Corporation, Types of business entity, Partnership Pages: 7 (5076 words) Published: November 3, 2014
Chapter 1 Getting Started-Principles of Finance 1.1 Finance An Overview 1) Which of the following statements best represents what finance is about A) How political, social, and economic forces affect corporations B) Maximizing profits C) Creation and maintenance of economic wealth D) Reducing risk Answer C Diff 1 Topic 1.1 Finance An Overview Keywords what is finance Principles Principle 3 Cash Flows Are the Source of Value 2) The goal of the firm should be A) maximization of profits. B) maximization of shareholder wealth. C) maximization of consumer satisfaction. D) maximization of sales. Answer B Diff 1 Topic 1.1 Finance An Overview Keywords shareholder Principles Principle 3 Cash Flows Are the Source of Value 3) Which of the following factors enable a public corporation to grow to a greater extent, and perhaps at a faster rate, than a partnership or a proprietorship A) Unlimited liability of shareholders B) Access to the capital markets C) Limited life D) Elimination of double taxation on corporate income E) All of the above Answer B Diff 2 Topic 1.1 Finance An Overview Keywords corporation 4) Which of the following reasons is most responsible for corporations being the most important form of business organization in the United States A) Corporations have limited life. B) Stockholders have unlimited liability. C) Corporations are subject to less government regulation than the other forms of business organization. D) Corporations have the ability to raise larger sums of capital than the other forms of business organization. E) Corporations are subjected to less taxation than the other forms of business organization. Answer D Diff 2 Topic 1.1 Finance An Overview Keywords corporation 5) Difficulty in finding profitable projects is due to A) social responsibility. B) competitive markets. C) ethical dilemmas. D) opportunity costs. Answer B Diff 2 Topic 1.1 Finance An Overview Keywords competitive markets Principles Principle 2 There Is a Risk-Return Tradeoff 6) Which of the following is NOT a principle of basic financial management A) Risk/return tradeoff B) Incremental cash flow counts C) Efficient capital markets D) Profit is king Answer D Diff 2 Topic 1.1 Finance An Overview Keywords basic financial management principles 7) The corporation is the most effective form of organization in terms of raising capital. Answer TRUE Diff 1 Topic 1.1 Finance An Overview Keywords corporation 8) Ethical dilemmas frequently exist in finance. Answer TRUE Diff 1 Topic 1.1 Finance An Overview Keywords what is finance 9) Compare and contrast primary market and secondary market transactions as it relates to the flow of funds in the transactions. Answer The proceeds from the sale in the primary market go to the corporation issuing the security. The proceeds from the sale in the secondary market go to the previous owner of the stock, not the corporation. In a secondary market transaction, there is no effect on the corporation whose stock is sold. Diff 2 Topic 1.1 Finance An Overview Keywords primary market transactions, secondary market transactions 1.2 Three Types of Business 1) Which of the following is NOT an advantage of the sole proprietorship A) Limited liability B) No time limit imposed on its existence C) No legal requirements for starting the business D) None of the above Answer A Diff 2 Topic 1.2 Three Types of Business Organizations Keywords corporation Principles Principle 1 Money Has a Time Value 2) What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form A) Sole proprietorships are subject to double taxation of profits. B) The cost of formation. C) Inadequate profit sharing. D) Owners have unlimited liability. Answer D Diff 2 Topic 1.2 Three Types of Business Organizations Keywords corporation Principles Principle 1 Money Has a Time Value 3) Which of the following is NOT...
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