财务管理chapter1.docx

财务管理chapter1.docx

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财务管理chapter1

CHAPTER1

IntroductiontoCorporateFinance

II.CONCEPTS

FINANCIALMANAGEMENT

d21.Whichofthefollowingquestionsareaddressedbyfinancialmanagers

I.Howlongwillittaketoproduceaproduct

II.Howlongshouldcustomersbegiventopayfortheircreditpurchases

III.Shouldthefirmborrowmoremoney

IV.Shouldthefirmbuildanewfactory

a.IandIVonly

b.IIandIIIonly

c.I,II,andIIIonly

d.II,III,andIVonly

e.I,II,III,andIV

ORGANIZATIONALSTRUCTURE

e22.Thetreasurerandthecontrollerofacorporationgenerallyreporttothe:

a.boardofdirectors.

b.chairmanoftheboard.

c.chiefexecutiveofficer.

d.president.

e.vicepresidentoffinance.

ORGANIZATIONALSTRUCTURE

b23.Whichoneofthefollowingstatementsiscorrectconcerningtheorganizational

structureofacorporation

a.Thevicepresidentoffinancereportstothechairmanoftheboard.

b.Thechiefexecutiveofficerreportstotheboardofdirectors.

c.Thecontrollerreportstothepresident.

d.Thetreasurerreportstothechiefexecutiveofficer.

e.Thechiefoperationsofficerreportstothevicepresidentofproduction.

CAPITALBUDGETING

b24.Whichoneofthefollowingisacapitalbudgetingdecision

a.determininghowmuchdebtshouldbeborrowedfromaparticularlender

b.decidingwhetherornottoopenanewstore

c.decidingwhentorepayalong-termdebt

d.determininghowmuchinventorytokeeponhand

e.determininghowmuchmoneyshouldbekeptinthecheckingaccount

CAPITALBUDGETING

e25.Whenconsideringacapitalbudgetingprojectthefinancialmanagershouldconsider:

a.onlythesizeoftheproject.

b.onlythetimingoftheprojectcashflows.

c.onlytheriskoftheprojectcashflows.

d.onlythesizeandtimingoftheprojectcashflows.

e.thesize,timing,andriskoftheprojectcashflows.

CAPITALSTRUCTURE

a26.Capitalstructuredecisionsincludeconsiderationofthe:

I.amountoflong-termdebttoassume.

II.costofacquiringfunds.

III.currentassetsandliabilities.

IV.networkingcapital.

a.IandIIonly

b.IIandIIIonly

c.IIIandIVonly

d.I,II,andIVonly

e.I,III,andIVonly

CAPITALSTRUCTURE

e27.Thedecisionofwhichlendertouseandwhichtypeoflong-termloanisbestfora

projectispartof:

a.workingcapitalmanagement.

b.thenetworkingcapitaldecision.

c.capitalbudgeting.

d.acontroller’sduties.

e.thecapitalstructuredecision.

WORKINGCAPITALMANAGEMENT

e28.Workingcapitalmanagementincludesdecisionsconcerningwhichofthefollowing

I.accountspayable

II.long-termdebt

III.accountsreceivable

IV.inventory

a.IandIIonly

b.IandIIIonly

c.IIandIVonly

d.I,II,andIIIonly

e.I,III,andIVonly

WORKINGCAPITALMANAGEMENT

e29.Workingcapitalmanagement:

a.ensuresthatsufficientequipmentisavailabletoproducetheamountofproductdesired

onadailybasis.

b.ensuresthatlong-termdebtisacquiredatthelowestpossiblecost.

c.ensuresthatdividendsarepaidtoallstockholdersonanannualbasis.

d.balancestheamountofcompanydebttotheamountofavailableequity.

e.isconcernedwithhavingsufficientfundstooperatethebusinessonadailybasis.

SOLEPROPRIETORSHIP

d30.Whichoneofthefollowingstatementsconcerningasoleproprietorshipiscorrect

a.Asoleproprietorshipistheleastcommonformofbusinessownership.

b.Theprofitsofasoleproprietorshiparetaxedtwice.

c.Theownersofasoleproprietorshipshareprofitsasestablishedbythepartnershipagreement.

d.Theownerofasoleproprietorshipmaybeforcedtosellhis/herpersonalassetstopay

companydebts.

e.Asoleproprietorshipisoftenstructuredasalimitedliabilitycompany.

SOLEPROPRIETORSHIP

a31.Whichoneofthefollowingstatementsconcerningasoleproprietorshipiscorrect

a.Thelifeofthefirmislimitedtothelifespanoftheowner.

b.Theownercangenerallyraiselargesumsofcapitalquiteeasily.

c.Theownershipofthefirmiseasytotransfertoanotherindividual.

d.Thecompanymustpayseparatetaxesfromthosepaidbytheowner.

e.Thelegalcoststoformasoleproprietorshiparequitesubstantial.

PARTNERSHIP

e32.Whichoneofthefollowingbestdescribestheprimaryadvantageofbeingalimited

partnerratherthanageneralpartner

a.entitlementtoalargerportionofthepartnership’sincome

b.abilitytomanagetheday-to-dayaffairsofthebusiness

c.nopotentialfinancialloss

d.greatermanagementresponsibility

e.liabilityforfirmdebtslimitedtothecapitalinvested

PARTNERSHIP

b33.Ageneralpartner:

a.haslesslegalliabilitythanalimitedpartner.

b.hasmoremanagementresponsibilitythanalimitedpartner.

c.facesdoubletaxationwhereasalimitedpartnerdoesnot.

d.cannotlosemorethantheamountofhis/herequityinvestment.

e.isthetermappliedonlytocorporationswhichinvestinpartnerships.

PARTNERSHIP

c34.Apartnership:

a.istaxedthesameasacorporation.

b.agreementdefineswhetherthebusinessincomewillbetaxedlikeapartnershipor

acorporation.

c.terminatesatthedeathofanygeneralpartner.

d.haslessofanabilitytoraisecapitalthanaproprietorship.

e.allowsforeasytransferofinterestfromonegeneralpartnertoanother.

PARTNERSHIP

d35.Whichofthefollowingaredisadvantagesofapartnership

I.limitedlifeofthefirm

II.personalliabilityforfirmdebt

III.greaterabilitytoraisecapitalthanasoleproprietorship

IV.lackofabilitytotransferpartnershipinterest

a.IandIIonly

b.IIIandIVonly

c.IIandIIIonly

d.I,II,andIVonly

e.I,III,andIVonly

CORPORATION

e36.Whichofthefollowingareadvantagesofthecorporateformofbusinessownership

I.limitedliabilityforfirmdebt

II.doubletaxation

III.abilitytoraisecapital

IV.unlimitedfirmlife

a.IandIIonly

b.IIIandIVonly

c.I,II,andIIIonly

d.II,III,andIVonly

e.I,III,andIVonly

CORPORATION

a37.Whichoneofthefollowingstatementsiscorrectconcerningcorporations

a.Thelargestfirmsareusuallycorporations.

b.Themajorityoffirmsarecorporations.

c.Thestockholdersareusuallythemanagersofacorporation.

d.Theabilityofacorporationtoraisecapitalisquitelimited.

e.Theincomeofacorporationistaxedaspersonalincomeofthestockholders.

BUSINESSTYPES

b38.Whichoneofthefollowingstatementsiscorrect

a.Bothpartnershipsandcorporationsincurdoubletaxation.

b.Bothsoleproprietorshipsandpartnershipsaretaxedinasimilarfashion.

c.Partnershipsarethemostcomplicatedtypeofbusinesstoform.

d.Bothpartnershipsandcorporationshavebylaws.

e.Alltypesofbusinessformationshavelimitedlives.

ARTICLESOFINCORPORATION

c39.Thearticlesofincorporation:

a.canbeusedtoremovecompanymanagement.

b.areamendedannuallybythecompanystockholders.

c.setforththenumberofsharesofstockthatcanbeissued.

d.setforththerulesbywhichthecorporationregulatesitsexistence.

e.cansetforththeconditionsunderwhichthefirmcanavoiddoubletaxation.

BYLAWS

d40.Thebylaws:

a.establishthenameofthecorporation.

b.areruleswhichapplyonlytolimitedliabilitycompanies.

c.setforththepurposeofthefirm.

d.mandatetheprocedureforelectingcorporatedirectors.

e.setforththeprocedurebywhichthestockholderselecttheseniormanagersofthefirm.

LIMITEDLIABILITYCOMPANY

c41.Theownersofalimitedliabilitycompanyprefer:

a.beingtaxedlikeacorporation.

b.havingliabilityexposuresimilartothatofasoleproprietor.

c.beingtaxedpersonallyonallbusinessincome.

d.havingliabilityexposuresimilartothatofageneralpartner.

e.beingtaxedlikeacorporationwithliabilitylikeapartnership.

CORPORATION

c42.Whichoneofthefollowingbusinesstypesisbestsuitedtoraisinglargeamountsof

capital

a.soleproprietorship

b.limitedliabilitycompany

c.corporation

d.generalpartnership

e.limitedpartnership

CORPORATION

d43.Whichtypeofbusinessorganizationhasalltherespectiverightsandprivilegesofa

legalperson

a.soleproprietorship

b.generalpartnership

c.limitedpartnership

d.corporation

e.limitedliabilitycompany

GOALOFFINANCIALMANAGEMENT

c44.Financialmanagersshouldstrivetomaximizethecurrentvaluepershareofthe

existingstockbecause:

a.doingsoguaranteesthecompanywillgrowinsizeatthemaximumpossiblerate.

b.doingsoincreasesthesalariesofalltheemployees.

c.thecurrentstockholdersaretheownersofthecorporation.

d.doingsomeansthefirmisgrowinginsizefasterthanitscompetitors.

e.themanagersoftenreceivesharesofstockaspartoftheircompensation.

GOALOFFINANCIALMANAGEMENT

d45.Thedecisionsmadebyfinancialmanagersshouldallbeoneswhichincreasethe:

a.sizeofthefirm.

b.growthrateofthefirm.

c.marketabilityofthemanagers.

d.marketvalueoftheexistingowners’equity.

e.financialdistressofthefirm.

AGENCYPROBLEM

c46.Whichoneofthefollowingactionsbyafinancialmanagercreatesanagencyproblem

a.refusingtoborrowmoneywhendoingsowillcreatelossesforthefirm

b.refusingtolowersellingpricesifdoingsowillreducethenetprofits

c.agreeingtoexpandthecompanyattheexpenseofstockholders’value

d.agreeingtopaybonusesbasedonthemarketvalueofthecompanystock

e.increasingcurrentcostsinordertoincreasethemarketvalueofthestockholders’

equity

AGENCYPROBLEM

e47.Whichofthefollowinghelpconvince