FIN 300 QUIZ QUESTIONS WITH ALL
CORRECT ANSWERS LATEST
UPDATE
Which of the following is an example of a capital market instrument? a. Commercial
paper.
b. Preferred stock.
c. U.S. Treasury bills.
d. Banker's acceptances.
e. Money market mutual funds. - Answer- b. Preferred stock.
The NYSE is defined as a "spot" market purely and simply because it has a physical
location. The NASDAQ, on the other hand, is not a spot market because it has no one
central location. - Answer- False
A publicly owned corporation is a company whose shares are held by the investing
public, which may include other corporations as well as institutional investors. - Answer-
True
Which of the following statements is CORRECT?
a. The NYSE does not exist as a physical location. Rather it represents a loose
collection of dealers who trade stock electronically.
b. An example of a primary market transaction would be your uncle transferring 100
shares of Walmart stock to you as a birthday gift.
c. Capital market instruments include both long-term debt and common stocks.
d. If your uncle in New York sold 100 shares of Microsoft through his broker to an
investor in Los Angeles, this would be a primary market transaction.
e. While the two frequently perform similar functions, investment banks generally
specialize in lending money, whereas commercial banks generally help companies raise
large blocks of capital from investors. - Answer- c. Capital market instruments include
both long-term debt and common stocks.
,Money markets are markets for
a. Foreign currencies.
b. Consumer automobile loans.
c. Common stocks.
d. Long-term bonds.
e. Short-term debt securities such as Treasury bills and commercial paper. - Answer- e.
Short-term debt securities such as Treasury bills and commercial paper.
You recently sold 200 shares of Disney stock, and the transfer was made through a
broker. This is an example of:
a. A secondary market transaction
b. A ovc markert transaction
c. A money market transaction
d. A primary market transaction
e. A future market transaction - Answer- a. A secondary market transaction
Which of the following statements is CORRECT?
a. Ethics is not an important consideration in business and in business schools.
b. Ethical behavior is not influenced by training and auditing procedures. People are
either ethical or they are not, and this is what determines ethical behavior in business.
c. If a lower level person in a firm does something illegal, like "cooking the books" to
understate costs and thereby artificially increase profits because he or she was ordered
to do so by a superior, the lower level person cannot be prosecuted but the superior can
be prosecuted.
d. If someone deliberately understates costs and thereby causes reported profits to
increase, this can cause the stock price to rise above its intrinsic value. The stock will
probably fall in the future. Both those who participated in the fraud and the firm itself can
be prosecuted.
e. There are many types of unethical business behavior. - Answer- d. If someone
deliberately understates costs and thereby causes reported profits to increase, this can
cause the stock price to rise above its intrinsic value. The stock will probably fall in the
future. Both those who participated in the fraud and the firm itself can be prosecuted.
,Which of the following statements is CORRECT?
a. One disadvantage of operating as a corporation rather than as a partnership is that
corporate shareholders are exposed to more personal liability than are partners.
b. Stockholders should generally be happier than bondholders to have managers invest
in risky projects with high potential returns as opposed to safe projects with lower
expected returns.
c. There is no good reason to expect a firm's stockholders and bondholders to react
differently to the types of assets in which it invests.
d. Relative to proprietorships, corporations generally face fewer regulations, and they
also find it easier to raise capital.
e. Stockholders in general would be better off if managers never disclosed favorable
events and therefore caused the price of the firm's stock to sell at a price below its
intrinsic value. - Answer- b. Stockholders should generally be happier than bondholders
to have managers invest in risky projects with high potential returns as opposed to safe
projects with lower expected returns.
Which of the following statements is CORRECT?
a. Corporate shareholders are exposed to unlimited liability.
b. It is usually easier to transfer ownership in a corporation than in a partnership.
c. Corporations generally face fewer regulations than proprietorships.
d. There is a tax disadvantage to incorporation, and there is no way any corporation can
escape this disadvantage, even if it is very small.
e. Corporate shareholders are exposed to unlimited liability, but this factor is offset by
the tax advantages of incorporation. - Answer- b. It is usually easier to transfer
ownership in a corporation than in a partnership.
If ownership in a proprietorship or partnership is transferred, the basic documents under
which the firm operates must be rewritten, whereas for a corporation the seller simply
sells shares to a buyer.
In order to maximize its shareholders' value, a firm's management must attempt to
maximize the stock price on a specific target date.
Answers:
True
False - Answer- False
Partnerships and proprietorships generally have a tax advantage over corporations.
Answers:
, True
False - Answer- True
In order to maximize its shareholders' value, a firm's management must attempt to
maximize the stock price in the long run, or the stock's "intrinsic value."
Answers:
True
False - Answer- True
The Chairman of the Board must also be the CEO.
Answers:
True
False - Answer- False
Which of the following statements is CORRECT?
a. Hostile takeovers are most likely to occur when a firm's stock is selling below its
intrinsic value as a result of poor management.
b. The efficiency of the U.S. economy would probably be increased if hostile takeovers
were absolutely forbidden.
c. Stockholders in general would be better off if managers never disclosed favorable
events and therefore caused the price of the firm's stock to sell at a price below its
intrinsic value.
d. The managers of established, stable companies sometimes attempt to get their state
legislatures to remove rules that make it more difficult for raiders to succeed with hostile
takeovers.
e. In general, it is more in bondholders' interests than stockholders' interests for a firm to
shift its investment focus away from safe, stable investments and into risky investments,
especially those that primarily involve research and development. - Answer- a. Hostile
takeovers are most likely to occur when a firm's stock is selling below its intrinsic value
as a result of poor management.
If a firm's stock is undervalued relative to its potential, then someone can profit by taking
the firm over and doing a better job running it.
Which of the following mechanisms would be most likely to help motivate managers to
act in the best interests of shareholders?
a. Elect a board of directors that allows managers greater freedom of action.
b. Decrease the use of restrictive covenants in bond agreements.
c. Increase the proportion of executive compensation that comes from stock options and
reduce the proportion that is paid as cash salaries.
CORRECT ANSWERS LATEST
UPDATE
Which of the following is an example of a capital market instrument? a. Commercial
paper.
b. Preferred stock.
c. U.S. Treasury bills.
d. Banker's acceptances.
e. Money market mutual funds. - Answer- b. Preferred stock.
The NYSE is defined as a "spot" market purely and simply because it has a physical
location. The NASDAQ, on the other hand, is not a spot market because it has no one
central location. - Answer- False
A publicly owned corporation is a company whose shares are held by the investing
public, which may include other corporations as well as institutional investors. - Answer-
True
Which of the following statements is CORRECT?
a. The NYSE does not exist as a physical location. Rather it represents a loose
collection of dealers who trade stock electronically.
b. An example of a primary market transaction would be your uncle transferring 100
shares of Walmart stock to you as a birthday gift.
c. Capital market instruments include both long-term debt and common stocks.
d. If your uncle in New York sold 100 shares of Microsoft through his broker to an
investor in Los Angeles, this would be a primary market transaction.
e. While the two frequently perform similar functions, investment banks generally
specialize in lending money, whereas commercial banks generally help companies raise
large blocks of capital from investors. - Answer- c. Capital market instruments include
both long-term debt and common stocks.
,Money markets are markets for
a. Foreign currencies.
b. Consumer automobile loans.
c. Common stocks.
d. Long-term bonds.
e. Short-term debt securities such as Treasury bills and commercial paper. - Answer- e.
Short-term debt securities such as Treasury bills and commercial paper.
You recently sold 200 shares of Disney stock, and the transfer was made through a
broker. This is an example of:
a. A secondary market transaction
b. A ovc markert transaction
c. A money market transaction
d. A primary market transaction
e. A future market transaction - Answer- a. A secondary market transaction
Which of the following statements is CORRECT?
a. Ethics is not an important consideration in business and in business schools.
b. Ethical behavior is not influenced by training and auditing procedures. People are
either ethical or they are not, and this is what determines ethical behavior in business.
c. If a lower level person in a firm does something illegal, like "cooking the books" to
understate costs and thereby artificially increase profits because he or she was ordered
to do so by a superior, the lower level person cannot be prosecuted but the superior can
be prosecuted.
d. If someone deliberately understates costs and thereby causes reported profits to
increase, this can cause the stock price to rise above its intrinsic value. The stock will
probably fall in the future. Both those who participated in the fraud and the firm itself can
be prosecuted.
e. There are many types of unethical business behavior. - Answer- d. If someone
deliberately understates costs and thereby causes reported profits to increase, this can
cause the stock price to rise above its intrinsic value. The stock will probably fall in the
future. Both those who participated in the fraud and the firm itself can be prosecuted.
,Which of the following statements is CORRECT?
a. One disadvantage of operating as a corporation rather than as a partnership is that
corporate shareholders are exposed to more personal liability than are partners.
b. Stockholders should generally be happier than bondholders to have managers invest
in risky projects with high potential returns as opposed to safe projects with lower
expected returns.
c. There is no good reason to expect a firm's stockholders and bondholders to react
differently to the types of assets in which it invests.
d. Relative to proprietorships, corporations generally face fewer regulations, and they
also find it easier to raise capital.
e. Stockholders in general would be better off if managers never disclosed favorable
events and therefore caused the price of the firm's stock to sell at a price below its
intrinsic value. - Answer- b. Stockholders should generally be happier than bondholders
to have managers invest in risky projects with high potential returns as opposed to safe
projects with lower expected returns.
Which of the following statements is CORRECT?
a. Corporate shareholders are exposed to unlimited liability.
b. It is usually easier to transfer ownership in a corporation than in a partnership.
c. Corporations generally face fewer regulations than proprietorships.
d. There is a tax disadvantage to incorporation, and there is no way any corporation can
escape this disadvantage, even if it is very small.
e. Corporate shareholders are exposed to unlimited liability, but this factor is offset by
the tax advantages of incorporation. - Answer- b. It is usually easier to transfer
ownership in a corporation than in a partnership.
If ownership in a proprietorship or partnership is transferred, the basic documents under
which the firm operates must be rewritten, whereas for a corporation the seller simply
sells shares to a buyer.
In order to maximize its shareholders' value, a firm's management must attempt to
maximize the stock price on a specific target date.
Answers:
True
False - Answer- False
Partnerships and proprietorships generally have a tax advantage over corporations.
Answers:
, True
False - Answer- True
In order to maximize its shareholders' value, a firm's management must attempt to
maximize the stock price in the long run, or the stock's "intrinsic value."
Answers:
True
False - Answer- True
The Chairman of the Board must also be the CEO.
Answers:
True
False - Answer- False
Which of the following statements is CORRECT?
a. Hostile takeovers are most likely to occur when a firm's stock is selling below its
intrinsic value as a result of poor management.
b. The efficiency of the U.S. economy would probably be increased if hostile takeovers
were absolutely forbidden.
c. Stockholders in general would be better off if managers never disclosed favorable
events and therefore caused the price of the firm's stock to sell at a price below its
intrinsic value.
d. The managers of established, stable companies sometimes attempt to get their state
legislatures to remove rules that make it more difficult for raiders to succeed with hostile
takeovers.
e. In general, it is more in bondholders' interests than stockholders' interests for a firm to
shift its investment focus away from safe, stable investments and into risky investments,
especially those that primarily involve research and development. - Answer- a. Hostile
takeovers are most likely to occur when a firm's stock is selling below its intrinsic value
as a result of poor management.
If a firm's stock is undervalued relative to its potential, then someone can profit by taking
the firm over and doing a better job running it.
Which of the following mechanisms would be most likely to help motivate managers to
act in the best interests of shareholders?
a. Elect a board of directors that allows managers greater freedom of action.
b. Decrease the use of restrictive covenants in bond agreements.
c. Increase the proportion of executive compensation that comes from stock options and
reduce the proportion that is paid as cash salaries.
