~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&#########################
Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&
Correct answer:
Should the firm build a new production facility?
Answering which one of the following questions involves making a capital budgeting decision?
A) Should the firm issue new equity to pay for its growth goals?
B) Should the firm build a new production facility?
C) How much debt should the firm borrow from a particular lender?
D) How much inventory should the firm keep on hand?
E) How much credit should the firm extend to a particular customer?
Correct answer:
Limited access to capital markets and stock price declines
Which one of the following results have been reported as a consequence of a corporation "going
dark?"
A) Increased access to capital and lower costs associated with that capital
B) Limited access to capital markets and stock price declines
C) Increased market liquidity and lower costs
D) Increased audit costs and stock price increases
E) Lower audit costs and lower interest rates on bank loans
________ is typically the responsibility of the corporate treasurer.
Financial planning
Correct answer:
The payment required for an outside audit of the firm
Of the following choices, which one best fits the description of an agency cost?
A) The payment of interest on a firm's debts
B) The benefits received from reducing production costs per unit
C) The costs of increasing the dividend payment per share
D) The payment required for an outside audit of the firm
E) The payment of corporate income taxes
~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@
Finance 5320- Chapter 1Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~
,~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&#########################
Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&
Ultimately, the ________ control(s) the corporation.
Stockholders
Correct answer:
its sales exceed its costs.
If a firm is profitable, it follows that:
A) its cash flows are known with certainty.
B) the timing of its cash flows is irrelevant.
C) its cash inflows exceed its cash outflows.
D) its sales exceed its costs.
E) it has sufficient cash to pay its bills in a timely manner.
Correct answer:
Securities Act of 1933 and the Securities Exchange Act of 1934
Federal Reserve Bank,
The ________ established the basic regulatory framework for the public trading of securities in
the United States.
A) Securities Act of 1933 and the Securities Exchange Act of 1934
Federal Reserve Bank
B) when it was first authorized by Congress
C) Securities Exchange Act of 1934
D) New York Stock Exchange, when it was founded
E) Sarbanes-Oxley Act of 2002
Corporation
Which form of business structure typically has the greatest potential for agency problems?
~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@
Finance 5320- Chapter 1Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~
,~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&#########################
Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&
Correct answer:
raising managers' salaries based on their length of service
Of the following choices, ________ is leastlikely to convince managers to work in the best
interest of the stockholders.
A) tying management compensation to the market value of the firm's stock
B) being threatened with a takeover of the firm by unsatisfied stockholders
C) receiving a threat of a proxy fight
D) implementing a stock option plan
E) raising managers' salaries based on their length of service
A partnership
creates for all general partners an unlimited liability for the partnership's debts.
A ________ is a business formed by two or more individuals who each have unlimited personal
liability for all of the firm's debts.
general partnership
The owners of a limited liability company typically would prefer to:
be taxed personally on all business income.
~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@
Finance 5320- Chapter 1Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&#########################
Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&
Correct answer:
Should the firm build a new production facility?
Answering which one of the following questions involves making a capital budgeting decision?
A) Should the firm issue new equity to pay for its growth goals?
B) Should the firm build a new production facility?
C) How much debt should the firm borrow from a particular lender?
D) How much inventory should the firm keep on hand?
E) How much credit should the firm extend to a particular customer?
Correct answer:
Limited access to capital markets and stock price declines
Which one of the following results have been reported as a consequence of a corporation "going
dark?"
A) Increased access to capital and lower costs associated with that capital
B) Limited access to capital markets and stock price declines
C) Increased market liquidity and lower costs
D) Increased audit costs and stock price increases
E) Lower audit costs and lower interest rates on bank loans
________ is typically the responsibility of the corporate treasurer.
Financial planning
Correct answer:
The payment required for an outside audit of the firm
Of the following choices, which one best fits the description of an agency cost?
A) The payment of interest on a firm's debts
B) The benefits received from reducing production costs per unit
C) The costs of increasing the dividend payment per share
D) The payment required for an outside audit of the firm
E) The payment of corporate income taxes
~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@
Finance 5320- Chapter 1Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~
,~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&#########################
Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&
Ultimately, the ________ control(s) the corporation.
Stockholders
Correct answer:
its sales exceed its costs.
If a firm is profitable, it follows that:
A) its cash flows are known with certainty.
B) the timing of its cash flows is irrelevant.
C) its cash inflows exceed its cash outflows.
D) its sales exceed its costs.
E) it has sufficient cash to pay its bills in a timely manner.
Correct answer:
Securities Act of 1933 and the Securities Exchange Act of 1934
Federal Reserve Bank,
The ________ established the basic regulatory framework for the public trading of securities in
the United States.
A) Securities Act of 1933 and the Securities Exchange Act of 1934
Federal Reserve Bank
B) when it was first authorized by Congress
C) Securities Exchange Act of 1934
D) New York Stock Exchange, when it was founded
E) Sarbanes-Oxley Act of 2002
Corporation
Which form of business structure typically has the greatest potential for agency problems?
~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@
Finance 5320- Chapter 1Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~
,~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&#########################
Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&
Correct answer:
raising managers' salaries based on their length of service
Of the following choices, ________ is leastlikely to convince managers to work in the best
interest of the stockholders.
A) tying management compensation to the market value of the firm's stock
B) being threatened with a takeover of the firm by unsatisfied stockholders
C) receiving a threat of a proxy fight
D) implementing a stock option plan
E) raising managers' salaries based on their length of service
A partnership
creates for all general partners an unlimited liability for the partnership's debts.
A ________ is a business formed by two or more individuals who each have unlimited personal
liability for all of the firm's debts.
general partnership
The owners of a limited liability company typically would prefer to:
be taxed personally on all business income.
~~~&&&&&&&&############################@@@@@@@@@@@@@@@@22/2026//2027
!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~&&&&&&&&############################@@@@@
Finance 5320- Chapter 1Finance 5320- Chapter 1!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!~~~~~~~~~~~~~~~~~~~~~~
