财务管理 CHAPTER 1

CHAPTER 1

Introduction to Corporate Finance II。 CONCEPTS

FINANCIAL MANAGEMENT

d 21。 Which of the following questions are addressed by financial managers?

I. How long will it take to produce a product？

II。 How long should customers be given to pay for their credit purchases?

III. Should the firm borrow more money？

IV。 Should the firm build a new factory？

a. I and IV only

b. II and III only

c。 I, II, and III only

d。 II, III， and IV only

e。 I， II, III， and IV

ORGANIZATIONAL STRUCTURE

e 22. the：

The treasurer and the controller of a corporation generally report to

a. board of directors。

b. chairman of the board。

c。 chief executive officer.

d. president.

e. vice president of finance.

ORGANIZATIONAL STRUCTURE

b 23. Which one of the following statements is correct concerning the

organizational

structure of a corporation?

a。 The vice president of finance reports to the chairman of the board.

b。 The chief executive officer reports to the board of directors.

c。 The controller reports to the president。

d. The treasurer reports to the chief executive officer。

e。 The chief operations officer reports to the vice president of production。

CAPITAL BUDGETING

b 24. Which one of the following is a capital budgeting decision？

a。 determining how much debt should be borrowed from a particular lender

b。 deciding whether or not to open a new store

c。 deciding when to repay a long—term debt

d。 determining how much inventory to keep on hand

e. determining how much money should be kept in the checking account

CAPITAL BUDGETING

e 25. When considering a capital budgeting project the financial manager

should consider:

a. only the size of the project。

b. only the timing of the project cash flows。

c. only the risk of the project cash flows。

d。 only the size and timing of the project cash flows。

e. the size, timing, and risk of the project cash flows。

CAPITAL STRUCTURE

a 26。 Capital structure decisions include consideration of the:

I. amount of long-term debt to assume。

II。 cost of acquiring funds。

III. current assets and liabilities.

IV。 net working capital。

a. I and II only

b。 II and III only

c。 IIIand IV only

d。 I， II， and IV only

e. I， III, and IV only

CAPITAL STRUCTURE

e 27. The decision of which lender to use and which type of long—term

loan is best for a

project is part of:

a。 working capital management。

b. the net working capital decision。

c。 capital budgeting。

d。 a controller’s duties.

e。 the capital structure decision。

WORKING CAPITAL MANAGEMENT

e 28。 Working capital management includes decisions concerning which of the following?

I。 accounts payable

II。 long—term debt

III。 accounts receivable

IV。 inventory

a. I and II only

b. I and III only

c。 II and IV only

d。 I， II， and III only

e。 I, III, and IV only

WORKING CAPITAL MANAGEMENT

e 29。 Working capital management：

a。 ensures that sufficient equipment is available to produce the amount of product desired

on a daily basis。

b. ensures that long—term debt is acquired at the lowest possible cost。

c. ensures that dividends are paid to all stockholders on an annual basis.

d。 balances the amount of company debt to the amount of available equity。

e。 is concerned with having sufficient funds to operate the business on a daily basis。

SOLE PROPRIETORSHIP

d 30。 Which one of the following statements concerning a sole proprietorship is correct？

a。 A sole proprietorship is the least common form of business ownership。

b. The profits of a sole proprietorship are taxed twice.

c。 The owners of a sole proprietorship share profits as established by the partnership

agreement。

d。 The owner of a sole proprietorship may be forced to sell his/her personal assets to pay

company debts。

e。 A sole proprietorship is often structured as a limited liability company.

SOLE PROPRIETORSHIP

a 31。 Which one of the following statements concerning a sole proprietorship is correct？

a。 The life of the firm is limited to the life span of the owner。

b。 The owner can generally raise large sums of capital quite easily。

c。 The ownership of the firm is easy to transfer to another individual。

d。 The company must pay separate taxes from those paid by the owner。

e。 The legal costs to form a sole proprietorship are quite substantial。

PARTNERSHIP

e 32。 Which one of the following best describes the primary advantage of being a limited

partner rather than a general partner？

a. entitlement to a larger portion of the partnership’s income

b. ability to manage the day-to-day affairs of the business

c。 no potential financial loss

d. greater management responsibility

e。 liability for firm debts limited to the capital invested

PARTNERSHIP

b 33. A general partner：

a。 has less legal liability than a limited partner。

b。 has more management responsibility than a limited partner.

c. faces double taxation whereas a limited partner does not。

d。 cannot lose more than the amount of his/her equity investment。

e. is the term applied only to corporations which invest in partnerships。

PARTNERSHIP

c 34。 A partnership：

a。 is taxed the same as a corporation.

b。 agreement defines whether the business income will be taxed like a partnership or

a corporation.

c。 terminates at the death of any general partner.

d. has less of an ability to raise capital than a proprietorship。

e。 allows for easy transfer of interest from one general partner to another.

PARTNERSHIP

d 35。 Which of the following are disadvantages of a partnership?

I。 limited life of the firm

II. personal liability for firm debt

III。 greater ability to raise capital than a sole proprietorship

IV。 lack of ability to transfer partnership interest

a. I and II only

b。 IIIand IV only

c. II and III only

d. I, II， and IV only

e。 I, III, and IV only

CORPORATION

e 36。 Which of the following are advantages of the corporate form of business ownership？

I。 limited liability for firm debt

II。 double taxation

III。 ability to raise capital

IV. unlimited firm life

a. I and II only

b。 IIIand IV only

c。 I, II, and III only

d。 II， III, and IV only

e。 I， III, and IV only

CORPORATION

a 37。 Which one of the following statements corporations?

a。 The largest firms are usually corporations。

b。 The majority of firms are corporations.

is correct concerning

c。 The stockholders are usually the managers of a corporation。

d。 The ability of a corporation to raise capital is quite limited。

e. The income of a corporation is taxed as personal income of the stockholders。

BUSINESS TYPES

b 38。 Which one of the following statements is correct?

a. Both partnerships and corporations incur double taxation。

b. Both sole proprietorships and partnerships are taxed in a similar fashion。

c. Partnerships are the most complicated type of business to form。

d. Both partnerships and corporations have bylaws。

e。 All types of business formations have limited lives.

ARTICLES OF INCORPORATION

c 39。 The articles of incorporation:

a. can be used to remove company management。

b. are amended annually by the company stockholders。

c. set forth the number of shares of stock that can be issued.

d。 set forth the rules by which the corporation regulates its existence。

e. can set forth the conditions under which the firm can avoid taxation.

double

BYLAWS

d 40。 The bylaws：

a。 establish the name of the corporation.

b。 are rules which apply only to limited liability companies。

c. set forth the purpose of the firm。

d。 mandate the procedure for electing corporate directors。

e。 set forth the procedure by which the stockholders elect the senior managers of the firm。

LIMITED LIABILITY COMPANY

c 41。 The owners of a limited liability company prefer：

a. being taxed like a corporation.

b。 having liability exposure similar to that of a sole proprietor。

c。 being taxed personally on all business income。

d. having liability exposure similar to that of a general partner.

e. being taxed like a corporation with liability like a partnership.

CORPORATION

c 42. Which one of the following business types is best suited to raising

large amounts of

capital?

a。 sole proprietorship

b。 limited liability company

c。 corporation

d. general partnership

e。 limited partnership

CORPORATION

d 43. Which type of business organization has all the respective rights and

privileges of a

legal person？

a。 sole proprietorship

b。 general partnership

c。 limited partnership

d. corporation

e。 limited liability company

GOAL OF FINANC IAL MANAGEMENT

c 44. Financial managers should strive to maximize the current value per

share of the

existing stock because:

a. doing so guarantees the company will grow in size at the maximum possible rate.

b. doing so increases the salaries of all the employees.

c. the current stockholders are the owners of the corporation。

d。 doing so means the firm is growing in size faster than its competitors。

e。 the managers often receive shares of stock as part of their compensation。

GOAL OF FINANCIAL MANAGEMENT

d 45。 The decisions made by financial managers should all be ones which increase the：

a。 size of the firm。

b。 growth rate of the firm。

c。 marketability of the managers.

d. market value of the existing owners’ equity.

e. financial distress of the firm。

AGENCY PROBLEM

c 46。 Which one of the following actions by a financial manager creates an agency problem？

a. refusing to borrow money when doing so will create losses for the firm

b. refusing to lower selling prices if doing so will reduce the net profits

c。 agreeing to expand the company at the expense of stockholders’ value

d. agreeing to pay bonuses based on the market value of the company stock

e。 increasing current costs in order to increase the market value of the stockholders’

equity

AGENCY PROBLEM

e 47。 Which of the following help convince managers to work in the best interest of the

stockholders?

I. compensation based on the value of the stock

II. stock option plans

III。 threat of a company takeover

IV. threat of a proxy fight

a。 I and II only

b。 IIIand IV only

c. I, II， and III only

d。 I， III， and IV only

e。 I, II, III， and IV

AGENCY PROBLEM

d 48. Which form of business structure faces problems?

a. sole proprietorship

b. general partnership

c。 limited partnership

d。 corporation

e。 limited liability company

AGENCYCOST

c 49。 Which of the following are agency costs？

the greatest agency

I。 forgoing an investment opportunity which would add to the market value of the

owner’s equity

II。 paying a dividend to each of the existing shareholders

III。 purchasing new equipment which increases the value of each share of stock

IV。 hiring outside auditors to verify the accuracy of the company financial statements

a。 II and III only

b。 I and III only

c。 I and IV only

d. II and IV only

e。 I, II， and IV only

STAKEHOLDERS

a 50. firm？

Which one of the following parties is considered a stakeholder of a

a。 employee

b。 short—term creditor

c。 long-term creditor

d。 preferred stockholder

e。 common stockholder

CASH FLOWS

b 51。 Which of the following represent cash outflows from a firm?

I。 issuance of securities

II. payment of dividends

III. new loan proceeds

IV. payment of government taxes

a。 I and III only

b。 II and IV only

c。 I and IV only

d。 I, II， and IV only

e。 II, III， and IV only

PRIMARY MARKET

b 52。 Which one of the following is a primary market transaction？

a. a dealer selling shares of stock to an individual investor

b. a dealer buying newly issued shares of stock from a corporation

c. an individual investor selling shares of stock to another individual

d。 a bank selling shares of a medical firm to an individual

e. a sole proprietor buying shares of stock from an individual investor

AUCTION MARKET

b 53。 Which of the following statements concerning auction markets is （are) correct?

I。 NASDAQ is an auction market。

II. The NYSE is an auction market.

III。 All trades involve a dealer in an auction market。

IV。 An auction market is called an over-the—counter market。

a。 I only

b. II only

c。 I and III only

d。 II and III only

e。 II and IV only

STOCK EXCHANGE

d 54。 Which one of the following statements concerning stock exchanges is correct？

a。 The NYSE has more listed stocks than NASDAQ。

b. The NYSE is a dealer market。

c. The exchange with the strictest listing requirements is NASDAQ。

d。 Some large companies are listed on NASDAQ.

e. Most debt securities are traded on the NYSE。

DEALER MARKETS

c 55。 Dealer markets：

a。 are reserved strictly for trading debt securities.

b。 only exist outside of the United States。

c。 are called over—the—counter markets.

d。 include the American Exchange and the Pacific Stock Exchange。

e。 list only the securities of the largest firms。

NYSE

a 56。 Which one of the following statements is correct concerning the NYSE？

a。 A firm is expected to have a market value for its publicly held shares

of at least ＄100 million to be listed on the NYSE.

b。 The NYSE is the largest dealer market for listed securities in the United States。

c。 The NYSE accounts for only 50 percent of the shares traded in the

auction markets。

d。 Any corporation desiring to be listed on the NYSE can do so.

e。 The NYSE is an over—the—counter exchange functioning as both a

primary and a secondary market。

NASDAQ

d 57. Which of the following statements concerning NASDAQ are correct？

I。 Most smaller firms are listed on NASDAQ rather than on the NYSE。

II。 NASDAQ is an electronic market.

III. NASDAQ is an auction market。

IV。 NASDAQ is an OTC market.

a。 I and II only

b。 I and III only

c. II and IV only

d. I， II, and IV only

e。 I, II， III， and IV