Chapter 01
Introduction to Corporate Finance
Multiple Choice Questions
1. Which one of the following terms is defined as the management of a firm's
long-term investments?
A. working capital management
B. financial allocation
C. agency cost analysis
D. capital budgeting
E. capital structure
2. Which one of the following terms is defined as the mixture of a firm's debt and
equity financing?
A. working capital management
B. cash management
C. cost analysis
D. capital budgeting
E. capital structure
,3. Which one of the following is defined as a firm's short-term assets and its
short-term liabilities?
A. working capital
B. debt
C. investment capital
D. net capital
E. capital structure
4. A business owned by a solitary individual who has unlimited liability for its
debt is called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. limited liability company.
,5. A business formed by two or more individuals who each have unlimited liability
for all of the firm's business debts is called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. limited liability company.
6. A business partner whose potential financial loss in the partnership will not
exceed his or her investment in that partnership is called a:
A. generally partner.
B. sole proprietor.
C. limited partner.
D. corporate shareholder.
E. zero partner.
, 7. A business created as a distinct legal entity and treated as a legal "person" is
called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. unlimited liability company.
8. Which one of the following terms is defined as a conflict of interest between
the corporate shareholders and the corporate managers?
A. articles of incorporation
B. corporate breakdown
C. agency problem
D. bylaws
E. legal liability
Introduction to Corporate Finance
Multiple Choice Questions
1. Which one of the following terms is defined as the management of a firm's
long-term investments?
A. working capital management
B. financial allocation
C. agency cost analysis
D. capital budgeting
E. capital structure
2. Which one of the following terms is defined as the mixture of a firm's debt and
equity financing?
A. working capital management
B. cash management
C. cost analysis
D. capital budgeting
E. capital structure
,3. Which one of the following is defined as a firm's short-term assets and its
short-term liabilities?
A. working capital
B. debt
C. investment capital
D. net capital
E. capital structure
4. A business owned by a solitary individual who has unlimited liability for its
debt is called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. limited liability company.
,5. A business formed by two or more individuals who each have unlimited liability
for all of the firm's business debts is called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. limited liability company.
6. A business partner whose potential financial loss in the partnership will not
exceed his or her investment in that partnership is called a:
A. generally partner.
B. sole proprietor.
C. limited partner.
D. corporate shareholder.
E. zero partner.
, 7. A business created as a distinct legal entity and treated as a legal "person" is
called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. unlimited liability company.
8. Which one of the following terms is defined as a conflict of interest between
the corporate shareholders and the corporate managers?
A. articles of incorporation
B. corporate breakdown
C. agency problem
D. bylaws
E. legal liability
