Test Bank for Corporate Finance 13th Edition by Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

Test Bank for Corporate Finance 13th Edition Stephen Ross, Randolph Westerfield, Jeffrey Jaffe Complete Guide. Chapter 1 Student name:__________ MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question. 1) Generally, among those who report directly to the ________ are the treasurer and the controller of a corporation. A) board of directors B) chairperson of the board C) chief executive officer D) president E) chief financial officer 2) A typical chain of command in a corporation is described by which one of the following statements? A) The information systems manager reports to the treasurer. B) The credit manager reports to the treasurer. C) The controller reports to the chief executive officer. D) The tax manager reports to the treasurer. E) The capital expenditures manager reports to the controller. 3) Answering which one of the following questions involves making a capital budgeting decision? Version 1 2 A) How much debt should the firm borrow from a particular lender? B) Should the firm build a new production facility? C) Should the firm issue new equity to pay for its growth goals? D) How much inventory should the firm keep on hand? E) How much credit should the firm extend to a particular customer? 4) Which one of the following statements is accurate? A) Net working capital equals current assets plus current liabilities. B) Current liabilities are debts that must be repaid in 18 months or less. C) Current assets are assets with short lives, such as accounts receivable. D) Long-term debt is defined as a residual claim on a firm’s assets. E) Tangible assets are fixed assets such as patents. 5) Among the typical responsibilities of the corporate controller is: A) capital expenditures management. B) cash management. C) tax reporting. D) financial planning. E) credit management. 6) ________ is typically the responsibility of the corporate treasurer. A) Financial planning B) Cost accounting C) Tax reporting D) Information systems E) Financial accounting 7) A firm’s ________ define(s) its capital structure. Version 1 3 A) mixture of various types of production equipment B) investment selections for its excess cash reserves C) combination of cash and cash equivalents D) combination of accounts appearing on the left side of its balance sheet E) proportions of financing from debt and equity 8) The focus of short-term finance is on: A) the timing of cash flows. B) acquiring and selling fixed assets. C) financing long-term projects. D) capital budgeting. E) issuing additional shares of common stock. 9) Net working capital includes: A) copyrights. B) manufacturing equipment. C) common stock. D) long-term debt. E) inventory. 10) ________ is defined as planning and managing a firm’s long-term assets. A) Working capital management B) Cash management C) Cost accounting management D) Capital budgeting E) Capital structure management 11) An amount the firms owes, which it must repay within twelve months, is called a(n): Version 1 4 A) current liability. B) long-term debt. C) intangible asset. D) accounts receivable. E) current asset. 12) The business entity that is typically the least expensive to form is the: A) limited liability company. B) joint stock company. C) general partnership. D) limited partnership. E) sole proprietorship. 13) A ________ is a business owned by a single individual. A) corporation B) sole proprietorship C) general partnership D) limited partnership E) limited liability company 14) Regarding a sole proprietorship, which one of the following statements is accurate? A) It is more difficult to form than other forms of business. B) Its business profits are taxed twice at the federal level. C) Its business profits are taxed separately from the personal income of the owner. D) The owner may be forced to sell his or her personal assets to pay the company's debts. E) It has an unlimited life span. 15) Regarding a sole proprietorship, which one of the following statements is accurate? Version 1 5 A) The ability to raise capital is limited by the owner’s personal wealth. B) It pays taxes at the corporate tax rate. C) Ownership of the firm is easy to transfer to another individual. D) It must pay income taxes separately from the taxes paid by the owner. E) The legal costs to form it are usually substantial. 16) The primary advantage of being a limited partner rather than a general partner is: A) being entitled to a larger portion of the partnership’s income. B) having responsibility for day-to-day management of the business. C) earning profits that are free from income taxation. D) the ability to have overall control of the partnership. E) one’s personal financial liability is limited to the amount of capital invested. 17) A general partner: A) has less legal liability than a limited partner. B) can end the partnership by withdrawing. C) faces double taxation of profits whereas a limited partner does not. D) cannot lose more than the amount of his or her equity investment. E) is the term applied only to corporations that invest in partnerships. 18) A partnership: A) is taxed in the same fashion that a corporation is taxed. B) terminates upon the death of any limited partner. C) creates for all general partners an unlimited liability for the partnership's debts. D) has the same ability as a corporation to raise capital. E) allows for easy transfer of ownership from one general partner to another. 19) One advantage of a partnership is the: Version 1 6 A) personal liability for all of the firm’s debts. B) limited life of the entity. C) limited liability protection for all of the partners. D) relatively low cost of formation. E) ease of transferring full ownership to others. 20) One disadvantage of the corporate form of business ownership is the: A) limited liability protection provided for all owners. B) firm’s ability to raise cash. C) unlimited life of the firm. D) difficulties encountered when changing ownership. E) double taxation of business profits. 21) Which one of the following statements is correct? A) Both partnerships and corporations are subject to double taxation. B) Sole proprietorships and partnerships are taxed in a similar fashion. C) Partnerships are the most complicated type of business to form. D) Both partnerships and corporations have limited liability for all owners. E) All types of business formations have limited lives. 22) The articles of incorporation: A) can be used to remove the firm’s management. B) are amended annually by the firm’s stockholders. C) set forth the rights granted to shareholders. D) set forth the rules by which the corporation regulates its existence. E) can set forth the conditions under which the firm can avoid double taxation.