Question 1

An employee stock option plan is:

Accepted Answer

A)  a perk usually only given to the board of directors as compensation.
B)  a plan that only partnerships can use to defer compensation to partners.
C)  a way to align the interests of employees with those of the owners.
D)  None of these answers is correct.E) A) and C)
F) All of the above

Question 2

These individuals examine the firm's accounting systems and comment on whether financial statements fairly represent the firm's financial position.

Accepted Answer

A)  Accounting departments
B)  Chief financial officers
C)  Board of directors
D)  AuditorsE) None of the above
F) B) and C)

Question 3

This subarea of finance involves methods and techniques to make appropriate decisions about what kinds of securities to own, which firms' securities to buy, and how to be paid back in the form that the investor wishes.

Accepted Answer

A)  Real markets
B)  Investments
C)  Financial management
D)  None of theseE) B) and C)
F) All of the above

Question 4

As individual legal entities, corporations assume liability for their own debts, so the shareholders hold:

Accepted Answer

A)  only limited liability.
B)  unlimited liability.
C)  shared liability.
D)  joint liability.E) None of the above
F) C) and D)

Question 5

From a taxation perspective, the form of business organization with the highest business level taxes is the:

Accepted Answer

A)  sole proprietorship.
B)  corporation.
C)  partnership.
D)  S corporation.E) None of the above
F) B) and C)

Question 6

All of the following are advantages to organizing as a corporation EXCEPT:

Accepted Answer

A)  limited liability.
B)  double taxation.
C)  easy access to capital.
D)  easy to transfer ownership.E) A) and B)
F) A) and C)

Question 7

This group is elected by stockholders to oversee management in a corporation.

Accepted Answer

A)  Chief counselors
B)  Chief executives
C)  Board of directors
D)  AuditorsE) A) and B)
F) C) and D)

Question 8

The financial crisis that started in 2006 was magnified by which of the following?

Accepted Answer

A)  Public concern over the war in Afghanistan
B)  Consistently increasing oil and gas prices
C)  Ethical issues affecting high value investment
D)  Mortgage lenders securitizing large quantities of their loansE) None of the above
F) B) and C)

Question 9

Which of the following is defined as a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations?

Accepted Answer

A)  Investments
B)  Asset classes
C)  Market instruments
D)  Financial marketsE) B) and C)
F) A) and B)

Question 10

Which of the following managers would NOT use finance?

Accepted Answer

A)  Operational managers
B)  Marketing managers
C)  Human resource managers
D)  All of these would use finance.E) C) and D)
F) B) and D)

Question 11

Which of these does NOT act as a monitor of how the firm is being run outside the firm?

Accepted Answer

A)  Auditors
B)  Analysts
C)  Credit rating agencies
D)  Members of the board of directorsE) None of the above
F) A) and B)

Question 12

Which statement is incorrect regarding hybrid organizations?

Accepted Answer

A)  They offer single taxation.
B)  They offer limited risk to the owners.
C)  They offer the same type of control as a sole proprietorship.
D)  All of these answers are correct statements.E) A) and D)
F) A) and C)

Question 13

The agency relationship in corporate finance refers to:

Accepted Answer

A)  when the shareholders hire a manager to run their company.
B)  when the corporate hires an advertising agency to market their new product or service.
C)  when the board of directors are elected to staggered terms.
D)  when the board of directors oversee the CEO.E) A) and D)
F) All of the above

Question 14

This is the set of laws, policies, incentives, and monitors designed to handle the issues arising from the separation of ownership and control.

Accepted Answer

A)  Agency theory
B)  Corporate governance
C)  Defined benefit plan
D)  Invisible handE) B) and D)
F) None of the above

Question 15

The most commonly accepted groups of asset classes include all of the following except:

Accepted Answer

A)  Stocks
B)  Bonds
C)  Machinery and equipment
D)  Real estateE) B) and D)
F) B) and C)

Question 16

This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow.

Accepted Answer

A)  Investment
B)  Financial asset
C)  Real asset
D)  Financial marketsE) C) and D)
F) B) and C)

Question 17

These individuals examine a firm's financial strength for its debt holders.

Accepted Answer

A)  Auditors
B)  Investment analysts
C)  Investment bankers
D)  Credit analystsE) A) and B)
F) A) and C)

Question 18

Which of the following is NOT considered a hybrid organization?

Accepted Answer

A)  S corporation
B)  Limited liability partnership
C)  Limited liability company
D)  Limited partnership
E)  All of these are considered hybrid organizations.F) A) and D)
G) A) and C)

Question 19

Individuals who provide small amounts of capital and expert business advice to small firms in exchange for an ownership stake in the firm are referred to as:

Accepted Answer

A)  institutional investors.
B)  corporate investors.
C)  angel investors.
D)  capital investors.E) B) and C)
F) None of the above

Question 20

Not all cash a company generates will be returned to the investors. Which of the following will NOT reduce the amount of capital returned to the investors?

Accepted Answer

A)  Retained earnings
B)  Taxes
C)  Dividends
D)  None of these will reduce the amount of capital returned to the investors.E) A) and B)
F) C) and D)

Exam 1: Introduction to Financial Management

This is the set of laws, policies, incentives, and monitors designed to handle the issues arising from the separation of ownership and control.

Correct AnswerverifiedShow Answer

Which of these does NOT act as a monitor of how the firm is being run outside the firm?

Correct AnswerverifiedShow Answer

The agency relationship in corporate finance refers to:

Correct AnswerverifiedShow Answer

Which of the following is NOT considered a hybrid organization?

Correct AnswerverifiedShow Answer

This subarea of finance involves methods and techniques to make appropriate decisions about what kinds of securities to own, which firms' securities to buy, and how to be paid back in the form that the investor wishes.

Correct AnswerverifiedShow Answer

This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow.

Correct AnswerverifiedShow Answer

The most commonly accepted groups of asset classes include all of the following except:

Correct AnswerverifiedShow Answer

All of the following are advantages to organizing as a corporation EXCEPT:

Correct AnswerverifiedShow Answer

This group is elected by stockholders to oversee management in a corporation.

Correct AnswerverifiedShow Answer

An employee stock option plan is:

Correct AnswerverifiedShow Answer

Which of the following is defined as a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations?

Correct AnswerverifiedShow Answer

The financial crisis that started in 2006 was magnified by which of the following?

Correct AnswerverifiedShow Answer

These individuals examine the firm's accounting systems and comment on whether financial statements fairly represent the firm's financial position.

Correct AnswerverifiedShow Answer

Which of the following managers would NOT use finance?

Correct AnswerverifiedShow Answer

Not all cash a company generates will be returned to the investors. Which of the following will NOT reduce the amount of capital returned to the investors?

Correct AnswerverifiedShow Answer

Individuals who provide small amounts of capital and expert business advice to small firms in exchange for an ownership stake in the firm are referred to as:

Correct AnswerverifiedShow Answer

Which statement is incorrect regarding hybrid organizations?

Correct AnswerverifiedShow Answer

From a taxation perspective, the form of business organization with the highest business level taxes is the:

Correct AnswerverifiedShow Answer

As individual legal entities, corporations assume liability for their own debts, so the shareholders hold:

Correct AnswerverifiedShow Answer

These individuals examine a firm's financial strength for its debt holders.

Correct AnswerverifiedShow Answer

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