Question 1

Besides maximizing shareholder wealth, what should corporations consider to be goals? List and briefly explain.

Accepted Answer

Corporations, which receive their operat...

Question 2

Dividends paid to corporate shareholders have already been taxed once as corporate income.

Accepted Answer

A) True 
 B)False

Question 3

A corporation is not:

Accepted Answer

A)   owned by shareholders who enjoy the privilege of limited liability.
B)   easily divisible between owners.
C)   a separate legal entity with perpetual life.
D)   a separate legal entity with limited life.

Question 4

The partnership form of organization:

Accepted Answer

A)   avoids the double taxation of earnings and dividends found in the corporate form of organization.
B)   usually provides limited liability to the partners.
C)   has unlimited life.
D)   simplifies decision making.

Question 5

In the 1930s, financial practices didn't focus on:

Accepted Answer

A)   maintenance of liquidity.
B)   reorganization of financially distressed companies.
C)   the bankruptcy process.
D)   international exchange costs.

Question 6

Agency theory deals with the issue of:

Accepted Answer

A)   when to hire an agent to represent the firm in negotiations.
B)   the legal liabilities of a firm if an employee, acting as the firm's agent, injures someone.
C)   the limitations placed on an employee acting as the firm's agent to obligate or bind the firm.
D)   the conflicts that can arise between the viewpoints and motivations of a firm's owners and managers.

Question 7

The internationalization of the financial markets has:

Accepted Answer

A)   allowed firms such as Bombardier to raise capital around the world.
B)   raised the cost of capital.
C)   forced companies to value everything in U.S. dollars.
D)   created ASPE.

Question 8

Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.

Accepted Answer

A) True 
 B)False

Question 9

Inflation is assumed to be a temporary problem that does not affect financial decisions.

Accepted Answer

A) True 
 B)False

Question 10

What are the characteristics of a partnership? What are the advantages compared to a sole proprietorship?

Accepted Answer

A partnership is characterized by
• Mult...

Question 11

What is the primary goal of financial management?

Accepted Answer

A)   Increased earnings
B)   Maximizing cash flow
C)   Maximizing shareholder wealth
D)   Minimizing risk of the firm

Question 12

The largest Canadian corporations are mainly:

Accepted Answer

A)   widely held.
B)   family controlled.
C)   U.S. controlled.
D)   Japanese controlled.

Question 13

There is unlimited liability in a general partnership.

Accepted Answer

A) True 
 B)False

Question 14

The sole proprietorship represents single-person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs.

Accepted Answer

A) True 
 B)False

Question 15

The primary market includes the sale of securities by way of initial public offerings.

Accepted Answer

A) True 
 B)False

Question 16

The increase in the internationalization of financial markets has led:

Accepted Answer

A)   to companies searching the global financial markets for high cost funds.
B)   to a decrease in Canadian companies listing on the New York Stock Exchange.
C)   to a decrease in debt obligations denominated in foreign currency on Canadian corporate balance sheets.
D)   to the tasks of the financial manager being reshaped.

Question 17

The secondary market characteristically has had stable prices over the past 20 years.

Accepted Answer

A) True 
 B)False

Question 18

The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.

Accepted Answer

A) True 
 B)False

Question 19

In the past, the study of finance has included:

Accepted Answer

A)   operational efficiency.
B)   employee relationships.
C)   legal cases.
D)   mergers and acquisitions.

Question 20

In the mid 1950s, finance began to change to a more analytical, decision oriented approach.

Accepted Answer

A) True 
 B)False

Exam 1: The Goals and Functions of Financial Management

What are the characteristics of a partnership? What are the advantages compared to a sole proprietorship?

Correct AnswerverifiedA partnership is characterized by• Mult...View AnswerShow Answer

Dividends paid to corporate shareholders have already been taxed once as corporate income.

Correct AnswerverifiedShow Answer

Inflation is assumed to be a temporary problem that does not affect financial decisions.

Correct AnswerverifiedShow Answer

The secondary market characteristically has had stable prices over the past 20 years.

Correct AnswerverifiedShow Answer

The sole proprietorship represents single-person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs.

Correct AnswerverifiedShow Answer

The partnership form of organization:

Correct AnswerverifiedShow Answer

The increase in the internationalization of financial markets has led:

Correct AnswerverifiedShow Answer

The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.

Correct AnswerverifiedShow Answer

The internationalization of the financial markets has:

Correct AnswerverifiedShow Answer

Besides maximizing shareholder wealth, what should corporations consider to be goals? List and briefly explain.

Correct AnswerverifiedCorporations, which receive their operat...View AnswerShow Answer

What is the primary goal of financial management?

Correct AnswerverifiedShow Answer

In the 1930s, financial practices didn't focus on:

Correct AnswerverifiedShow Answer

A corporation is not:

Correct AnswerverifiedShow Answer

Agency theory deals with the issue of:

Correct AnswerverifiedShow Answer

Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.

Correct AnswerverifiedShow Answer

The largest Canadian corporations are mainly:

Correct AnswerverifiedShow Answer

The primary market includes the sale of securities by way of initial public offerings.

Correct AnswerverifiedShow Answer

In the mid 1950s, finance began to change to a more analytical, decision oriented approach.

Correct AnswerverifiedShow Answer

In the past, the study of finance has included:

Correct AnswerverifiedShow Answer

There is unlimited liability in a general partnership.

Correct AnswerverifiedShow Answer

Correct Answer
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A partnership is characterized by
• Mult...
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Corporations, which receive their operat...
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