Question 1

Explain how ethics can affect the value of a public corporation.

Accepted Answer

Student answers will vary but should exp...

Question 2

Which of the following is a true statement concerning corporations?

Accepted Answer

A)   The equity that can be raised by the corporation is limited to the current shareholders' personal wealth.
B)   The life of the corporation is unlimited.
C)   The corporation has limited liability for business debts.
D)   When dividends are paid, corporate proﬁts are taxed once.
E)   It is diﬃcult to transfer ownership of corporate shares.F) A) and D)
G) A) and C)

Question 3

A general partner:

Accepted Answer

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.F) A) and B)
G) B) and E)

Question 4

Elaborate on the ﬁnancial management function. In particular, the inter-relationships between the
CEO, COO and CFO. Expand on the CFO's responsibility from an accounting and ﬁnance
perspective.

Accepted Answer

The ﬁnancial management function is usua...

Question 5

Which statement best describes hedge funds:

Accepted Answer

A)   Hedge funds are largely unregulated and privately managed investment funds catering to sophisticated investors, which look to earn high returns using aggressive ﬁnancialStrategies prohibited by mutual funds.
B)   Hedge funds are highly regulated and publicly managed investment funds catering to novice investors, which look to earn average returns using simple ﬁnancial strategiesSimilar to mutual funds.
C)   Hedge funds are regulated and publicly managed investment funds catering to sophisticated investors, which look to earn high returns using aggressive ﬁnancialStrategies prohibited by mutual funds.
D)   Hedge funds are largely unregulated and privately managed investment funds catering to sophisticated investors, which look to earn high returns using aggressive ﬁnancialStrategies similar to mutual funds.
E)   Hedge funds are secondary market sources of raising capital for startup companies.F) A) and B)
G) A) and E)

Question 6

When owners are managers (such as in a sole proprietorship), a ﬁrm will have agency costs.

Accepted Answer

A) True 
 B)False

Question 7

The original sale of securities by governments and corporations to the general public occurs in the:

Accepted Answer

A)   Primary market.
B)   Secondary market.
C)   Private placement market.
D)   Proprietary market.
E)   Liquidation market.F) A) and B)
G) A) and C)

Question 8

Which one of the following actions best meets the goal of ﬁnancial management?

Accepted Answer

A)   Deciding a ﬁrm should be 100% equity ﬁnanced.
B)   Delaying cash payments in order to increase the total cash on hand.
C)   Easing the accounts receivable policies in order to increase current sales.
D)   Accepting a project that enhances the current market value of the ﬁrm's stock.
E)   Issuing additional shares of stock to increase the total cash on hand.F) A) and E)
G) A) and B)

Question 9

The primary market is deﬁned as the market:

Accepted Answer

A)   Wherein the original sale of securities by the issuer to the general public occurs.
B)   Where stocks and bonds are exchanged between dealers.
C)   Mechanism by which a sale of a ﬁnancial instrument between two shareholders isconducted.
D)   Operated by brokers for the beneﬁt of shareholders.
E)   Commonly known as the over-the-counter market.F) None of the above
G) B) and E)

Question 10

Trace the passage of cash from the ﬁnancial markets to the ﬁrm and from the ﬁrm back to the ﬁnancial markets.

Accepted Answer

A)   1. Cash ﬂows to the ﬁrm from the ﬁnancial market. 2. The ﬁrm invests the cash in current and ﬁxed assets. 3. These assets generate cash. 4. Corporate taxes are paid. 5. Cash ﬂowIs reinvested in the ﬁrm. 6. The rest goes back to the ﬁnancial markets as cash paid toCreditors and shareholders.
B)   1. The ﬁrm invests the cash in current and ﬁxed assets. 2. Cash ﬂows to the ﬁrm from the ﬁnancial market. 3. These assets generate cash. 4. Corporate taxes are paid. 5. Cash ﬂowIs reinvested in the ﬁrm. 6. The rest goes back to the ﬁnancial markets as cash paid toCreditors and shareholders.
C)   1. The ﬁrm invests the cash in current and ﬁxed assets. 2. These assets generate cash. 3. Cash ﬂows to the ﬁrm from the ﬁnancial market. 4. Corporate taxes are paid. 5. Cash ﬂowIs reinvested in the ﬁrm. 6. The rest goes back to the ﬁnancial markets as cash paid toCreditors and shareholders.
D)   1. The ﬁrm invests the cash in current and ﬁxed assets. 2. These assets generate cash. 3. The rest goes back to the ﬁnancial markets as cash paid to creditors and shareholders. 4.Cash ﬂows to the ﬁrm from the ﬁnancial market. 5. Corporate taxes are paid. 6. Cash ﬂowIs reinvested in the ﬁrm.
E)   1. The ﬁrm invests the cash in current and ﬁxed assets. 2. Corporate taxes are paid. 3. These assets generate cash. 4. Cash ﬂows to the ﬁrm from the ﬁnancial market. 5. Cashﬂow is reinvested in the ﬁrm. 6. The rest goes back to the ﬁnancial markets as cash paid toCreditors and shareholders.F) A) and B)
G) A) and C)

Question 11

Ensuring that a ﬁrm has suﬃcient cash available on a daily basis is part of:

Accepted Answer

A)   Capital budgeting.
B)   Working capital management.
C)   Business organization.
D)   Capital structure.
E)   Organizational structure.F) A) and B)
G) All of the above

Question 12

When a corporation issues additional shares of common stock to the general public, they do so:

Accepted Answer

A)   In the primary market.
B)   Through a dealer in the secondary market.
C)   Through a broker in the secondary market.
D)   Only through the OTC market.
E)   Only through the private markets.F) B) and D)
G) D) and E)

Question 13

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

Accepted Answer

A)   The NASDAQ has more listed stocks than NYSE.
B)   The TSX is primarily 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 TSX.F) C) and D)
G) A) and C)

Question 14

The management of the ﬁrm's short-term assets and liabilities is called:

Accepted Answer

A)   Working capital management.
B)   Financial depreciation.
C)   Agency cost analysis.
D)   Capital budgeting.
E)   Capital structure.F) C) and D)
G) A) and B)

Question 15

Research results on CSR activity and corporate performance has been mixed.

Accepted Answer

A) True 
 B)False

Question 16

Working capital management refers speciﬁcally to:

Accepted Answer

A)   Obtaining the necessary funds to ﬁnance a ﬁrm's long term activities.
B)   The daily use of a ﬁrm's ﬁxed assets to generate revenue.
C)   The oversight of a ﬁrm's current accounts.
D)   The management of a ﬁrm's Loan accounts from ﬁnancial institutions.
E)   The utilization of a ﬁrm's assets on a daily basis.F) None of the above
G) B) and E)

Question 17

Capital budgeting is deﬁned as the:

Accepted Answer

A)   Mix of debt and equity used by a ﬁrm to ﬁnance its operations.
B)   Management of a ﬁrm's long-term investments.
C)   Process of determining the optimal types and amounts of inventory to keep on hand.
D)   Determination of the total amount of money which a ﬁrm should borrow.
E)   Management of a ﬁrm's net working capital.F) C) and E)
G) D) and E)

Question 18

Tasks related to tax management, cost accounting, ﬁnancial accounting, and data processing are the responsibility of which corporate oﬃcer?

Accepted Answer

A)   The Corporate Treasurer.
B)   The Board of Directors.
C)   The Corporate Controller.
D)   The Chairman of the Board.
E)   The Vice President of Production.F) All of the above
G) B) and E)

Question 19

A market where trading takes place between buyers and sellers directly is called a(n) :

Accepted Answer

A)   Primary market.
B)   Secondary market.
C)   Dealer market.
D)   Auction market.
E)   Liquidation market.F) B) and C)
G) A) and E)

Question 20

The primary goal of ﬁnancial management is to:

Accepted Answer

A)   Maximize current sales.
B)   Maximize the current value per share of the existing stock.
C)   Avoid ﬁnancial distress.
D)   Minimize operational costs.
E)   Maintain steady earnings growth.F) B) and E)
G) A) and B)

Exam 1: Introduction to Corporate Finance

Tasks related to tax management, cost accounting, ﬁnancial accounting, and data processing are the responsibility of which corporate oﬃcer?

Correct AnswerverifiedShow Answer

Research results on CSR activity and corporate performance has been mixed.

Correct AnswerverifiedShow Answer

When owners are managers (such as in a sole proprietorship), a ﬁrm will have agency costs.

Correct AnswerverifiedShow Answer

Which statement best describes hedge funds:

Correct AnswerverifiedShow Answer

A market where trading takes place between buyers and sellers directly is called a(n) :

Correct AnswerverifiedShow Answer

Explain how ethics can affect the value of a public corporation.

Correct AnswerverifiedStudent answers will vary but should exp...View AnswerShow Answer

The original sale of securities by governments and corporations to the general public occurs in the:

Correct AnswerverifiedShow Answer

The management of the ﬁrm's short-term assets and liabilities is called:

Correct AnswerverifiedShow Answer

Ensuring that a ﬁrm has suﬃcient cash available on a daily basis is part of:

Correct AnswerverifiedShow Answer

Elaborate on the ﬁnancial management function. In particular, the inter-relationships between the CEO, COO and CFO. Expand on the CFO's responsibility from an accounting and ﬁnance perspective.

Correct AnswerverifiedThe ﬁnancial management function is usua...View AnswerShow Answer

Working capital management refers speciﬁcally to:

Correct AnswerverifiedShow Answer

When a corporation issues additional shares of common stock to the general public, they do so:

Correct AnswerverifiedShow Answer

A general partner:

Correct AnswerverifiedShow Answer

Which one of the following actions best meets the goal of ﬁnancial management?

Correct AnswerverifiedShow Answer

Which of the following is a true statement concerning corporations?

Correct AnswerverifiedShow Answer

Trace the passage of cash from the ﬁnancial markets to the ﬁrm and from the ﬁrm back to the ﬁnancial markets.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Capital budgeting is deﬁned as the:

Correct AnswerverifiedShow Answer

The primary market is deﬁned as the market:

Correct AnswerverifiedShow Answer

The primary goal of ﬁnancial management is to:

Correct AnswerverifiedShow Answer

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Student answers will vary but should exp...
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The ﬁnancial management function is usua...
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