ch1
Student: ___________________________________________________________________________
1. As finance emerged as a new field, much emphasis was placed on mergers and acquisitions.
True False
2. Inflation is assumed to be a temporary problem that does not affect financial decisions.
True False
3. Financial Capital is composed of long-term plant and equipment, as well as other tangible investments.
True False
4. Real Capital is composed of long-term plant and equipment.
True False
5. During the 1930s, financial practice revolved around such topics as the preservation of capital,
maintenance of liquidity, reorganization of financially troubled corporations and bankruptcy.
True False
6. In the mid 1950s, finance began to change to a more analytical, decision oriented approach.
True False
7. Recently, the emphasis of financial management has been on the relationships between risk and return.
True False
8. The first Nobel Prizes given to finance professors was for their contributions to capital structure theory
and portfolio theories of risk and return.
True False
9. The Internet impacts e-commerce by creating a mechanism for improved communications between a
business, its customers and its suppliers.
True False
10. The Internet has accounted for an acceleration of productivity for "old economy" firms.
True False
11. The Internet is largely responsible for the internationalization of the financial markets.
True False
12. Businesses will increasingly rely on B2B Internet applications to speed up the cash flows through their
firms.
True False
1
,13. The sole proprietorship represents single-person ownership and offers the advantages of simplicity of
decision making and low organizational and operating costs.
True False
14. Profits of sole proprietorships are taxed at corporate tax rates.
True False
15. There is unlimited liability in a general partnership.
True False
16. The most common partnership arrangement carries limited liability to the partners.
True False
17. A limited partnership limits the profits partners may receive.
True False
18. In terms of revenues and profits, the corporation is by far the most important form of business
organization in the United States.
True False
19. Dividends paid to corporate stockholders have already been taxed once as corporate income.
True False
20. One advantage of the corporate form of organization is that income received by stockholders is not
taxable since the corporation already paid taxes on the income distributed.
True False
21. A corporation must have at least 75 stockholders to qualify for Subchapter S designation.
True False
22. Profits of a Subchapter S corporation are taxed at corporate tax rates.
True False
23. The formation of a Subchapter S corporation is a way to circumvent the double taxation of a small
corporation.
True False
24. Corporate Governance issues have become less important to the financial community during the first
decade of the new millennium.
True False
25. The issues of corporate governance are really agency problems.
True False
2
,26. Agency Theory examines the relationship between companies and their customers.
True False
27. Institutional investors have had increasing influence over corporations with their ability to vote large
blocks of stock and replace poor performing boards of Easy directors.
True False
28. Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.
True False
29. The Sarbanes Oxley Act reduced agency conflicts by giving corporate managers greater flexibility to
select their preferred candidates to the Board of Directors.
True False
30. A major focus of the Sarbanes Oxley Act is to make sure that publicly traded companies accurately
present their assets, liabilities and income in their financial statements.
True False
31. The Sarbanes Oxley Act is primarily intended to increase public scrutiny of private companies that had
previously been exempt from many public disclosure requirements.
True False
32. Timing is not a particularly important consideration in financial decisions.
True False
33. The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.
True False
34. There are some serious problems with the financial goal of maximizing the earnings of the firm.
True False
35. Maximizing the earnings of the firm is the goal of financial management.
True False
36. Because socially desirable goals can impede profitability in many instances, managers should not try to
operate under the assumption of wealth maximization.
True False
37. Insider trading involves the use of information not available to the general public to make profits from
trading in a company's stock.
True False
38. Social responsibility and profit maximization are synonymous.
True False
3
, 39. Financial markets exist as a vast global network of individuals and financial institutions that may be
lenders, borrowers, or owners of public companies worldwide.
True False
40. Money markets refer to those markets dealing with short-term securities having a life of one year or
less.
True False
41. Money markets refer to markets where excess corporate cash is exchanged for foreign currencies that
can earn a higher return than domestic money.
True False
42. Capital markets refer to those markets dealing with short-term securities having a life of one year or
less.
True False
43. The primary market includes the sale of securities by way of initial public offerings.
True False
44. High quality initial public offerings are usually sold in a primary market, such as the New York Stock
Exchange. However, low-quality stocks must usually be sold in secondary markets, such as NASDAQ.
True False
45. Although NASDAQ is a secondary market, some of the firms traded there, such as Microsoft, are large
enough to move to the primary market if they so desire.
True False
46. The secondary market characteristically has had stable prices over the past 20 years.
True False
47. In the United States, stocks sold on either the New York Stock Exchange or NASDAQ are considered
sold in the primary market.
True False
48. New issues are sold in the secondary market.
True False
49. Existing securities are traded in the secondary market.
True False
50. Many companies have cross-listed their stock on multiple international stock exchanges and more than
several hundred foreign companies have listed their shares on the New York Stock Exchange.
True False
4
Student: ___________________________________________________________________________
1. As finance emerged as a new field, much emphasis was placed on mergers and acquisitions.
True False
2. Inflation is assumed to be a temporary problem that does not affect financial decisions.
True False
3. Financial Capital is composed of long-term plant and equipment, as well as other tangible investments.
True False
4. Real Capital is composed of long-term plant and equipment.
True False
5. During the 1930s, financial practice revolved around such topics as the preservation of capital,
maintenance of liquidity, reorganization of financially troubled corporations and bankruptcy.
True False
6. In the mid 1950s, finance began to change to a more analytical, decision oriented approach.
True False
7. Recently, the emphasis of financial management has been on the relationships between risk and return.
True False
8. The first Nobel Prizes given to finance professors was for their contributions to capital structure theory
and portfolio theories of risk and return.
True False
9. The Internet impacts e-commerce by creating a mechanism for improved communications between a
business, its customers and its suppliers.
True False
10. The Internet has accounted for an acceleration of productivity for "old economy" firms.
True False
11. The Internet is largely responsible for the internationalization of the financial markets.
True False
12. Businesses will increasingly rely on B2B Internet applications to speed up the cash flows through their
firms.
True False
1
,13. The sole proprietorship represents single-person ownership and offers the advantages of simplicity of
decision making and low organizational and operating costs.
True False
14. Profits of sole proprietorships are taxed at corporate tax rates.
True False
15. There is unlimited liability in a general partnership.
True False
16. The most common partnership arrangement carries limited liability to the partners.
True False
17. A limited partnership limits the profits partners may receive.
True False
18. In terms of revenues and profits, the corporation is by far the most important form of business
organization in the United States.
True False
19. Dividends paid to corporate stockholders have already been taxed once as corporate income.
True False
20. One advantage of the corporate form of organization is that income received by stockholders is not
taxable since the corporation already paid taxes on the income distributed.
True False
21. A corporation must have at least 75 stockholders to qualify for Subchapter S designation.
True False
22. Profits of a Subchapter S corporation are taxed at corporate tax rates.
True False
23. The formation of a Subchapter S corporation is a way to circumvent the double taxation of a small
corporation.
True False
24. Corporate Governance issues have become less important to the financial community during the first
decade of the new millennium.
True False
25. The issues of corporate governance are really agency problems.
True False
2
,26. Agency Theory examines the relationship between companies and their customers.
True False
27. Institutional investors have had increasing influence over corporations with their ability to vote large
blocks of stock and replace poor performing boards of Easy directors.
True False
28. Agency theory assumes that corporate managers act to increase the wealth of corporate shareholders.
True False
29. The Sarbanes Oxley Act reduced agency conflicts by giving corporate managers greater flexibility to
select their preferred candidates to the Board of Directors.
True False
30. A major focus of the Sarbanes Oxley Act is to make sure that publicly traded companies accurately
present their assets, liabilities and income in their financial statements.
True False
31. The Sarbanes Oxley Act is primarily intended to increase public scrutiny of private companies that had
previously been exempt from many public disclosure requirements.
True False
32. Timing is not a particularly important consideration in financial decisions.
True False
33. The higher the profit of a firm, the higher the value the firm is assured of receiving in the market.
True False
34. There are some serious problems with the financial goal of maximizing the earnings of the firm.
True False
35. Maximizing the earnings of the firm is the goal of financial management.
True False
36. Because socially desirable goals can impede profitability in many instances, managers should not try to
operate under the assumption of wealth maximization.
True False
37. Insider trading involves the use of information not available to the general public to make profits from
trading in a company's stock.
True False
38. Social responsibility and profit maximization are synonymous.
True False
3
, 39. Financial markets exist as a vast global network of individuals and financial institutions that may be
lenders, borrowers, or owners of public companies worldwide.
True False
40. Money markets refer to those markets dealing with short-term securities having a life of one year or
less.
True False
41. Money markets refer to markets where excess corporate cash is exchanged for foreign currencies that
can earn a higher return than domestic money.
True False
42. Capital markets refer to those markets dealing with short-term securities having a life of one year or
less.
True False
43. The primary market includes the sale of securities by way of initial public offerings.
True False
44. High quality initial public offerings are usually sold in a primary market, such as the New York Stock
Exchange. However, low-quality stocks must usually be sold in secondary markets, such as NASDAQ.
True False
45. Although NASDAQ is a secondary market, some of the firms traded there, such as Microsoft, are large
enough to move to the primary market if they so desire.
True False
46. The secondary market characteristically has had stable prices over the past 20 years.
True False
47. In the United States, stocks sold on either the New York Stock Exchange or NASDAQ are considered
sold in the primary market.
True False
48. New issues are sold in the secondary market.
True False
49. Existing securities are traded in the secondary market.
True False
50. Many companies have cross-listed their stock on multiple international stock exchanges and more than
several hundred foreign companies have listed their shares on the New York Stock Exchange.
True False
4
