Question 1

The owners of a firm are unaffected by agency costs.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following individuals is typically most responsible for managing a large corporation's financial function?

Accepted Answer

A)   The CEO.
B)   The Chairman of the board.
C)   The CBO.
D)   The CFO.E) B) and C)
F) A) and D)

Question 3

Which organizational form best enables a firm to sell its securities to the market?

Accepted Answer

A)   sole proprietorship
B)   partnership
C)   private corporation
D)   public corporationE) A) and B)
F) All of the above

Question 4

With regard to information, a central idea of fairness suggests that

Accepted Answer

A)   decisions should be made on an even playing field.
B)   insiders should be able to trade whenever they want.
C)   insiders should never be able to trade.
D)   outsiders should not be allowed to trade since, by definition, they are at a disadvantage.E) All of the above
F) None of the above

Question 5

Explain what should be the goal of the firm.

Accepted Answer

The goal of the firm should be to maximi...

Question 6

When analysts and investors determine the value of a firm's stock, they should consider

Accepted Answer

A)   the size of the expected cash flows associated with owning the stock.
B)   the timing of the cash flows.
C)   the riskiness of the cash flows.
D)   all of the above.E) All of the above
F) A) and B)

Question 7

A stakeholder is

Accepted Answer

A)   anyone geographically close to the firm's headquarters.
B)   anyone with a claim on the cash flows of the firm.
C)   any governmental agency.
D)   all of the above.E) A) and B)
F) A) and C)

Question 8

Explain how agency costs might be found within a firm whose CEO owns no shares in the firm and whose compensation package is unaffected by the profits (cash or accounting profits) of the firm.

Accepted Answer

Since the manager has no ownership inter...

Question 9

Unlimited liability means that the owner of a firm is responsible for paying all the firm's bills.

Accepted Answer

A) True 
 B)False

Question 10

The cash remaining after the firm has met its operating expenses, payments to creditors, and taxes is called

Accepted Answer

A)   earnings per share.
B)   capital contributed in excess of par.
C)   residual cash.
D)   assets.E) C) and D)
F) A) and D)

Question 11

The treasurer of a corporation usually reports to the CFO of the firm.

Accepted Answer

A) True 
 B)False

Question 12

You have a friend who tells you that ethics are completely unimportant in business since a number of laws have been set up for us to know the rules of the game.

Accepted Answer

Despite heavy regulation, the financial ...

Question 13

Intangible assets generate most of a manufacturing firm's cash flows.

Accepted Answer

A) True 
 B)False

Question 14

Which corporate officer, when he or she is guilty of serious misconduct, can subject the firm to the most serious losses in financial wealth?

Accepted Answer

A)   CEO
B)   CFO
C)   Chief Technology Officer
D)   Chief Risk OfficerE) C) and D)
F) A) and B)

Question 15

A sole proprietorship is an owner's only business.

Accepted Answer

A) True 
 B)False

Question 16

Capital assets are generally short term in nature.

Accepted Answer

A) True 
 B)False

Question 17

Which organizational form accounts for 90 percent of the revenues of all firms in the United States?

Accepted Answer

A)   sole proprietorship
B)   partnership
C)   corporation
D)   a and bE) C) and D)
F) A) and B)

Question 18

What is the major complaint concerning the Sarbanes-Oxley Act of 2002 by firms?

Accepted Answer

A)   the legislative maximum allowable compensation for a CEO
B)   the legal requirement to disclose project information
C)   the cost of compliance
D)   the cost of maintaining an SEC-employed officer at the firm's premisesE) B) and D)
F) A) and B)

Question 19

A director who is not an employee of the firm is called

Accepted Answer

A)   an executive director.
B)   an inside director.
C)   an independent director.
D)   an official director.E) B) and C)
F) C) and D)

Question 20

Cash dividends are paid out of

Accepted Answer

A)   residual cash.
B)   liquidated assets.
C)   long-term debt.
D)   all of the above.E) None of the above
F) B) and D)

Exam 1: The Financial Manager and the Company

Unlimited liability means that the owner of a firm is responsible for paying all the firm's bills.

Correct AnswerverifiedShow Answer

Capital assets are generally short term in nature.

Correct AnswerverifiedShow Answer

Explain what should be the goal of the firm.

Correct AnswerverifiedThe goal of the firm should be to maximi...View AnswerShow Answer

The cash remaining after the firm has met its operating expenses, payments to creditors, and taxes is called

Correct AnswerverifiedShow Answer

Which organizational form accounts for 90 percent of the revenues of all firms in the United States?

Correct AnswerverifiedShow Answer

Explain how agency costs might be found within a firm whose CEO owns no shares in the firm and whose compensation package is unaffected by the profits (cash or accounting profits) of the firm.

Correct AnswerverifiedSince the manager has no ownership inter...View AnswerShow Answer

Intangible assets generate most of a manufacturing firm's cash flows.

Correct AnswerverifiedShow Answer

The treasurer of a corporation usually reports to the CFO of the firm.

Correct AnswerverifiedShow Answer

You have a friend who tells you that ethics are completely unimportant in business since a number of laws have been set up for us to know the rules of the game.

Correct AnswerverifiedDespite heavy regulation, the financial ...View AnswerShow Answer

What is the major complaint concerning the Sarbanes-Oxley Act of 2002 by firms?

Correct AnswerverifiedShow Answer

Which of the following individuals is typically most responsible for managing a large corporation's financial function?

Correct AnswerverifiedShow Answer

Cash dividends are paid out of

Correct AnswerverifiedShow Answer

When analysts and investors determine the value of a firm's stock, they should consider

Correct AnswerverifiedShow Answer

Which corporate officer, when he or she is guilty of serious misconduct, can subject the firm to the most serious losses in financial wealth?

Correct AnswerverifiedShow Answer

A sole proprietorship is an owner's only business.

Correct AnswerverifiedShow Answer

Which organizational form best enables a firm to sell its securities to the market?

Correct AnswerverifiedShow Answer

The owners of a firm are unaffected by agency costs.

Correct AnswerverifiedShow Answer

With regard to information, a central idea of fairness suggests that

Correct AnswerverifiedShow Answer

A director who is not an employee of the firm is called

Correct AnswerverifiedShow Answer

A stakeholder is

Correct AnswerverifiedShow Answer

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The goal of the firm should be to maximi...
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Since the manager has no ownership inter...
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Despite heavy regulation, the financial ...
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