Finance 325 Final Exam Questions with Correct
Answers
Which one of the following terms is defined as the management of a
firm's long-term investments? Correct Answer-capital budgeting
A business partner whose potential financial loss in the partnership will
not exceed his or her investment in that partnership is called a: Correct
Answer-limited partner
A business created as a distinct legal entity and treated as a legal
"person" is called a: Correct Answer-corporation
Which of the following questions are addressed by financial managers?
I. How should a product be marketed?
II. Should customers be given 30 or 45 days to pay for their credit
purchases?
III. Should the firm borrow more money?
IV. Should the firm acquire new equipment? Correct Answer-I, III, and
IV only
Which one of the following functions should be the responsibility of the
controller rather than the treasurer? Correct Answer-income tax returns
Which one of the following correctly defines the upward chain of
command in a typical corporate organizational structure? Correct
Answer-The treasurer reports to the vice president of finance.
,Which of the following should a financial manager consider when
analyzing a capital budgeting project?
I. Project start-up costs.
II. Timing of all projected cash flows.
III. Dependability of future cash flows.
IV. Dollar amount of each projected cash flow. Correct Answer-I, II, III,
and IV.
Which of the following accounts are included in working capital
management?
I. Accounts Payable
II. Accounts Receivable
III. Fixed Assets
IV. Inventory Correct Answer-I, II, and IV only.
Which one of the following is a working capital management decision?
Correct Answer-Determining whether to pay cash for a purchase or use
the credit offered by the supplier.
Which of the following individuals have unlimited liability based on
their ownership interest?
I. General partner
II. Sole proprietor
III. Stockholder
,IV. Limited partner Correct Answer-I and II only.
Which one of the following statements is correct? Correct Answer-
Corporations can raise large amounts of capital generally easier than
partnerships can.
Which one of the following statements is correct? Correct Answer-
Income from both sole proprietorships and partnerships is taxed as
individual income.
The articles of incorporation:
I. Describe the purpose of the firm.
II. Are amended periodically.
III. Set forth the number of shares of stock that can be issued.
IV. Detail the method that will be used to elect corporate directors.
Correct Answer-I and III only
Corporate bylaws: Correct Answer-determine how a corporation
regulates itself
Sam, Alfredo, and Juan want to start a small U.S. business. Juan will
fund the venture but wants to limit his liability to his initial investment
and has no interest in the daily operations. Sam will contribute his full
efforts on a daily basis but has limited funds to invest in the business.
Alfredo will be involved as an active consultant and manager and will
also contribute funds. Sam and Alfredo are willing to accept liability for
the firm's debts as they feel they have nothing to lose by doing so. All
, three individuals will share in the firm's profits and wish to keep the
initial organizational costs of the business to a minimum. Which form of
business entity should these individuals adopt? Correct Answer-limited
partnership
Which one of the following best states the primary goal of financial
management? Correct Answer-maximize the current value per share
Decisions made by financial managers should primarily focus on
increasing which one of the following? Correct Answer-Market value
per share of outstanding stock.
The Sarbanes-Oxley Act of 2002 is a governmental response to: Correct
Answer-management greed and abuses
Which one of the following is an unintended result of the Sarbanes-
Oxley Act? Correct Answer-corporations delisting from major
exchanges
Which one of the following actions by a financial manager is most apt to
create an agency problem? Correct Answer-Increasing current profits
when doing so lowers the value of the firm's equity.
Which form of business structure is most associated with agency
problems? Correct Answer-corporation
Answers
Which one of the following terms is defined as the management of a
firm's long-term investments? Correct Answer-capital budgeting
A business partner whose potential financial loss in the partnership will
not exceed his or her investment in that partnership is called a: Correct
Answer-limited partner
A business created as a distinct legal entity and treated as a legal
"person" is called a: Correct Answer-corporation
Which of the following questions are addressed by financial managers?
I. How should a product be marketed?
II. Should customers be given 30 or 45 days to pay for their credit
purchases?
III. Should the firm borrow more money?
IV. Should the firm acquire new equipment? Correct Answer-I, III, and
IV only
Which one of the following functions should be the responsibility of the
controller rather than the treasurer? Correct Answer-income tax returns
Which one of the following correctly defines the upward chain of
command in a typical corporate organizational structure? Correct
Answer-The treasurer reports to the vice president of finance.
,Which of the following should a financial manager consider when
analyzing a capital budgeting project?
I. Project start-up costs.
II. Timing of all projected cash flows.
III. Dependability of future cash flows.
IV. Dollar amount of each projected cash flow. Correct Answer-I, II, III,
and IV.
Which of the following accounts are included in working capital
management?
I. Accounts Payable
II. Accounts Receivable
III. Fixed Assets
IV. Inventory Correct Answer-I, II, and IV only.
Which one of the following is a working capital management decision?
Correct Answer-Determining whether to pay cash for a purchase or use
the credit offered by the supplier.
Which of the following individuals have unlimited liability based on
their ownership interest?
I. General partner
II. Sole proprietor
III. Stockholder
,IV. Limited partner Correct Answer-I and II only.
Which one of the following statements is correct? Correct Answer-
Corporations can raise large amounts of capital generally easier than
partnerships can.
Which one of the following statements is correct? Correct Answer-
Income from both sole proprietorships and partnerships is taxed as
individual income.
The articles of incorporation:
I. Describe the purpose of the firm.
II. Are amended periodically.
III. Set forth the number of shares of stock that can be issued.
IV. Detail the method that will be used to elect corporate directors.
Correct Answer-I and III only
Corporate bylaws: Correct Answer-determine how a corporation
regulates itself
Sam, Alfredo, and Juan want to start a small U.S. business. Juan will
fund the venture but wants to limit his liability to his initial investment
and has no interest in the daily operations. Sam will contribute his full
efforts on a daily basis but has limited funds to invest in the business.
Alfredo will be involved as an active consultant and manager and will
also contribute funds. Sam and Alfredo are willing to accept liability for
the firm's debts as they feel they have nothing to lose by doing so. All
, three individuals will share in the firm's profits and wish to keep the
initial organizational costs of the business to a minimum. Which form of
business entity should these individuals adopt? Correct Answer-limited
partnership
Which one of the following best states the primary goal of financial
management? Correct Answer-maximize the current value per share
Decisions made by financial managers should primarily focus on
increasing which one of the following? Correct Answer-Market value
per share of outstanding stock.
The Sarbanes-Oxley Act of 2002 is a governmental response to: Correct
Answer-management greed and abuses
Which one of the following is an unintended result of the Sarbanes-
Oxley Act? Correct Answer-corporations delisting from major
exchanges
Which one of the following actions by a financial manager is most apt to
create an agency problem? Correct Answer-Increasing current profits
when doing so lowers the value of the firm's equity.
Which form of business structure is most associated with agency
problems? Correct Answer-corporation
