Question 1

Financial Managers rely on the firm's ________ department to relay key financial data,such as cash flow statements,to aid in capital budgeting and financing decisions.

Accepted Answer

A)  human resources
B)  accounting
C)  marketing
D)  operations

Question 2

If managers are making decisions to maximize shareholder wealth,they are primarily making decisions that:

Accepted Answer

A)  maximize sales revenue.
B)  minimize risk.
C)  maximization of the market value of shareholders' common stock.
D)  reduce the costs of borrowing. C

Question 3

Profit maximization does not adequately describe the goal of the firm because:

Accepted Answer

A)  profit maximization does not require the consideration of risk.
B)  profit maximization often has a short-term focus.
C)  maximization of dividend payout ratio is a better description of the goal of the firm.
D)  Both A and B

Question 4

Which of the following is NOT considered a factor that affects the industry in which the firm operates?

Accepted Answer

A)  Technology
B)  Interest rates
C)  Regulation
D)  Credit conditions D

Question 5

General partners have unrestricted transferability of ownership,while limited partners must have the consent of all partners to transfer their ownership.

Accepted Answer

A) True 
 B)False

Question 6

The major disadvantage of a general partnership is:

Accepted Answer

A)  each partner is fully responsible for the liabilities incurred by the partnership.
B)  it is difficult to raise equity capital.
C)  the costs of forming the partnership are high.
D)  profits are taxed double.

Question 7

Cash management is typically the responsibility of the:

Accepted Answer

A)  chief executive officer.
B)  vice president of production and operations.
C)  financial manager.
D)  company internal auditor.

Question 8

The ________ measure a firm's performance over a specified period of time whereas a ________ provides a snapshot of the firm as of a specific date.

Accepted Answer

A)  income and balance sheets; cash flow statement
B)  balance sheet and cash flow statement; income statement
C)  income and cash flow statements; balance sheet
D)  None of the choices are correct.

Question 9

Which of the following goals of the firm is equivalent to the maximization of shareholder wealth?

Accepted Answer

A)  Profit maximization
B)  Risk minimization
C)  Maximization of the total market value of the firm's common stock
D)  None of the above

Question 10

The creation of value:

Accepted Answer

A)  implies that one firm will gain at the expense of others.
B)  provides benefits to society as scarce resources are directed to their most productive use.
C)  is not a practical goal since it cannot be measured effectively.
D)  is achieved only if cash flows exceed accounting profits.

Question 11

Which of the following is NOT a disadvantage of a sole proprietorship as a form of business organization compared to the corporate form of business organization?

Accepted Answer

A)  Access to the capital markets
B)  Unlimited liability of the owners
C)  Subject to the double taxation
D)  Limited liability of the shareholders

Question 12

Accounting supports financial managers by providing all of the following EXCEPT:

Accepted Answer

A)  identifying relevant data related to the activities of the firm.
B)  presenting data in an agreed-upon and standardized form known as generally accepted accounting practices.
C)  summarizing the firm's economic activity in the form of financial statements.
D)  generating revenue for the firm.

Question 13

Ensuring that there is adequate cash to pay the firm's suppliers is an example of which cash-related activity in the cash flow cycle?

Accepted Answer

A)  Operating activity
B)  Profitability activity
C)  Investing activity
D)  Financing activity

Question 14

Financing activities are concerned with:

Accepted Answer

A)  determining whether a company's assets should be financed with debt or equity.
B)  managing a firm's cash management procedures.
C)  managing a firm's working capital.
D)  planning sales of a corporation's equity capital.

Question 15

One of the advantages of a sole proprietorship is:

Accepted Answer

A)  limited liability for its owners.
B)  double taxation for its owners.
C)  complexity of transferring ownership.
D)  no significant legal requirements for starting the business.

Question 16

S-type corporation have all the following advantages EXCEPT:

Accepted Answer

A)  they are taxed as a partnership.
B)  the owners have limited liability.
C)  distributions are taxed twice,similar to corporate dividend payments.
D)  all owners must be people,not corporations.

Question 17

Limited partnerships are not as prevalent as corporations because:

Accepted Answer

A)  limited partners can lose up to three times the amount they invested in the partnership if the business goes bankrupt.
B)  limited partnerships have the disadvantage of double taxation.
C)  the general partner has no liability,making it difficult for the partnership to borrow money.
D)  it is easier to transfer ownership by selling common stock than it is to sell the partnership. D

Question 18

Which of the following statements is TRUE?

Accepted Answer

A)  An advantage of a corporation is that there is less regulation of the business.
B)  An advantage of a corporation is that it is subject to double taxation.
C)  Unlike a partnership,a disadvantage of a corporation is that it has limited liability.
D)  Corporations face more regulations when compared to partnerships.

Question 19

The limited liability company (LLC) form of business organization is:

Accepted Answer

A)  able to retain limited liability for its owners.
B)  a cross between a partnership and a corporation.
C)  it is taxed like a partnership.
D)  All of the above.

Question 20

Which of the following is NOT an advantage of a sole proprietorship?

Accepted Answer

A)  Minimum legal requirements to start the business
B)  Firm exists until dissolved by the owner
C)  Limited liability
D)  None of the above

Exam 1: Overview of Financial Management

Financial Managers rely on the firm's ________ department to relay key financial data,such as cash flow statements,to aid in capital budgeting and financing decisions.

Correct AnswerverifiedShow Answer

If managers are making decisions to maximize shareholder wealth,they are primarily making decisions that:

Correct AnswerverifiedC

Profit maximization does not adequately describe the goal of the firm because:

Correct AnswerverifiedShow Answer

Which of the following is NOT considered a factor that affects the industry in which the firm operates?

Correct AnswerverifiedD

General partners have unrestricted transferability of ownership,while limited partners must have the consent of all partners to transfer their ownership.

Correct AnswerverifiedShow Answer

The major disadvantage of a general partnership is:

Correct AnswerverifiedShow Answer

Cash management is typically the responsibility of the:

Correct AnswerverifiedShow Answer

The ________ measure a firm's performance over a specified period of time whereas a ________ provides a snapshot of the firm as of a specific date.

Correct AnswerverifiedShow Answer

Which of the following goals of the firm is equivalent to the maximization of shareholder wealth?

Correct AnswerverifiedShow Answer

The creation of value:

Correct AnswerverifiedShow Answer

Which of the following is NOT a disadvantage of a sole proprietorship as a form of business organization compared to the corporate form of business organization?

Correct AnswerverifiedShow Answer

Accounting supports financial managers by providing all of the following EXCEPT:

Correct AnswerverifiedShow Answer

Ensuring that there is adequate cash to pay the firm's suppliers is an example of which cash-related activity in the cash flow cycle?

Correct AnswerverifiedShow Answer

Financing activities are concerned with:

Correct AnswerverifiedShow Answer

One of the advantages of a sole proprietorship is:

Correct AnswerverifiedShow Answer

S-type corporation have all the following advantages EXCEPT:

Correct AnswerverifiedShow Answer

Limited partnerships are not as prevalent as corporations because:

Correct AnswerverifiedD

Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

The limited liability company (LLC) form of business organization is:

Correct AnswerverifiedShow Answer

Which of the following is NOT an advantage of a sole proprietorship?

Correct AnswerverifiedShow Answer

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C

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D

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The measure a firm's performance over a specified period of time whereas a provides a snapshot of the firm as of a specific date.

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D

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