FIN 310 Final Exam Multiple Choice Questions With
Complete Solutions
1.1. Which of the following statements is FALSE?
A. Financial Managers make three basic types of decisions:
Capital Budgeting, Capital Structure, and Working Capital
Management.
B. Capital budgeting is the process of planning and managing a
firm's short-term investments.
C. The primary goal for corporate managers should be to make
good decisions to maximize the market value of the owner's
equity.
D. Agency conflicts, which sometimes arise when CEOs are
overly motivated to seek job security, can be reduced by
adjusting managerial compensation. correct answers B
1.2. Which of the following statements is TRUE?
A. In a sole proprietorship, the owner has limited liability and
full control.
B. In a partnership, ownership can be transferred quickly, and
capital can be raised easily.
C. Corporations face double taxation, meaning the corporation
pays taxes on income before dividends, while the owners pay
personal taxes on dividends and capital gains.
D. Intended to improve public disclosures, the Sarbanes-Oxley
Act has likely increased the number of small companies going
public in the USA. correct answers C
1.21. Which of the following statements is TRUE?
,A. The marginal tax rate for most U.S. corporations is 35%
while the average tax rate actually paid across U.S. corporations
has actually been closer to 25%
B. A Limited Liability Company (LLC) is legally defined as a
person, while a corporation with limited liability is considered a
partnership of several persons
C. The ability of a corporation to grow can be seriously limited
by an inability to raise cash via the primary capital markets for
investment.
D. According to the theory of the firm, among all stakeholders,
the stockholders take the least risk. correct answers A
1.3. Managers should act in shareholders' interests because
shareholders have ___________ priority in receiving their
claims.
A. Top
B. Somewhere in the middle
C. Bottom
D. Equal (to those of all other stakeholders) correct answers C
1.4. Which of the following is NOT an effective means of
aligning management goals with shareholder interests?
A. Employee stock options
B. Threat of a takeover
C. Management bonuses tied to performance goals
D. Compensating managers with salaries significantly higher
than their peers correct answers D
1.43.F13. Which of the following is an advantage of the
corporate form of organization?
,A. Corporations can easily raise capital and its ownership can be
transferred easily.
B. Corporations can be started easily and face little regulation.
C. Owners of corporations have unlimited liability and full
control.
D. Corporations pay taxes on income before dividends to their
owners. correct answers A
1.C1. If any, which of the following statements is FALSE?
A. Capital Budgeting is the process of planning and managing a
firm's long-term investments where managers identify
investments that are worth more than they cost to acquire.
B. Capital Structure is the mix of debt and equity maintained by
a firm to finance operations, where the firm decides how much
to borrow and what the cheapest sources of funds are.
C. Working Capital Management is the day-to-day management
of finances that determines how much cash and inventory should
be kept on hand, whether to sell on credit to customers, and how
to obtain short-term financing.
D. None of the above statements is false. correct answers D
1.F12. Which of the following statements is TRUE?
A. Bank loans, private placements to funds and insurance
companies, and investment bank transactions are all activities in
the secondary markets.
B. Like general partners, the owners of a corporation have
unlimited liability for business debts.
C. While maximizing stockholder wealth is the relevant goal of
the corporation, sometimes management goals are pursued at the
expense of the stockholders.
, D. The Sarbanes-Oxley Act of 2002 dramatically streamlined
American corporate regulations resulting in billions of dollars in
overall savings. correct answers C
1.F15.8. Hon just bought 800 shares of TYUJ stock, which has
been trading for some time on the NYSE. In which market did
Hon's purchase occur?
A. Dealer market
B. Secondary market
C. Derivative market
D. Primary market correct answers B
1.Hwk5.F13. Which of the following statements is TRUE?
A. All secondary markets are dealer markets.
B. All secondary markets are broker markets.
C. All stock trades between existing shareholders are secondary
market transactions.
D. All stock transactions are secondary market transactions
correct answers C
1.MC23. Which of the following is NOT an advantage to the
corporate form of organization?
A. Ability to raise large sums of equity capital
B. Ease of ownership transfer
C. Profits taxed at the corporate level
D. Limited liability for all owners correct answers C
1.S13.Hwk4. Which of the following statements about the
corporate form of ownership is FALSE?
A. The shareholders are the owners of the firm and hold the top
priority claim among all stakeholders.
Complete Solutions
1.1. Which of the following statements is FALSE?
A. Financial Managers make three basic types of decisions:
Capital Budgeting, Capital Structure, and Working Capital
Management.
B. Capital budgeting is the process of planning and managing a
firm's short-term investments.
C. The primary goal for corporate managers should be to make
good decisions to maximize the market value of the owner's
equity.
D. Agency conflicts, which sometimes arise when CEOs are
overly motivated to seek job security, can be reduced by
adjusting managerial compensation. correct answers B
1.2. Which of the following statements is TRUE?
A. In a sole proprietorship, the owner has limited liability and
full control.
B. In a partnership, ownership can be transferred quickly, and
capital can be raised easily.
C. Corporations face double taxation, meaning the corporation
pays taxes on income before dividends, while the owners pay
personal taxes on dividends and capital gains.
D. Intended to improve public disclosures, the Sarbanes-Oxley
Act has likely increased the number of small companies going
public in the USA. correct answers C
1.21. Which of the following statements is TRUE?
,A. The marginal tax rate for most U.S. corporations is 35%
while the average tax rate actually paid across U.S. corporations
has actually been closer to 25%
B. A Limited Liability Company (LLC) is legally defined as a
person, while a corporation with limited liability is considered a
partnership of several persons
C. The ability of a corporation to grow can be seriously limited
by an inability to raise cash via the primary capital markets for
investment.
D. According to the theory of the firm, among all stakeholders,
the stockholders take the least risk. correct answers A
1.3. Managers should act in shareholders' interests because
shareholders have ___________ priority in receiving their
claims.
A. Top
B. Somewhere in the middle
C. Bottom
D. Equal (to those of all other stakeholders) correct answers C
1.4. Which of the following is NOT an effective means of
aligning management goals with shareholder interests?
A. Employee stock options
B. Threat of a takeover
C. Management bonuses tied to performance goals
D. Compensating managers with salaries significantly higher
than their peers correct answers D
1.43.F13. Which of the following is an advantage of the
corporate form of organization?
,A. Corporations can easily raise capital and its ownership can be
transferred easily.
B. Corporations can be started easily and face little regulation.
C. Owners of corporations have unlimited liability and full
control.
D. Corporations pay taxes on income before dividends to their
owners. correct answers A
1.C1. If any, which of the following statements is FALSE?
A. Capital Budgeting is the process of planning and managing a
firm's long-term investments where managers identify
investments that are worth more than they cost to acquire.
B. Capital Structure is the mix of debt and equity maintained by
a firm to finance operations, where the firm decides how much
to borrow and what the cheapest sources of funds are.
C. Working Capital Management is the day-to-day management
of finances that determines how much cash and inventory should
be kept on hand, whether to sell on credit to customers, and how
to obtain short-term financing.
D. None of the above statements is false. correct answers D
1.F12. Which of the following statements is TRUE?
A. Bank loans, private placements to funds and insurance
companies, and investment bank transactions are all activities in
the secondary markets.
B. Like general partners, the owners of a corporation have
unlimited liability for business debts.
C. While maximizing stockholder wealth is the relevant goal of
the corporation, sometimes management goals are pursued at the
expense of the stockholders.
, D. The Sarbanes-Oxley Act of 2002 dramatically streamlined
American corporate regulations resulting in billions of dollars in
overall savings. correct answers C
1.F15.8. Hon just bought 800 shares of TYUJ stock, which has
been trading for some time on the NYSE. In which market did
Hon's purchase occur?
A. Dealer market
B. Secondary market
C. Derivative market
D. Primary market correct answers B
1.Hwk5.F13. Which of the following statements is TRUE?
A. All secondary markets are dealer markets.
B. All secondary markets are broker markets.
C. All stock trades between existing shareholders are secondary
market transactions.
D. All stock transactions are secondary market transactions
correct answers C
1.MC23. Which of the following is NOT an advantage to the
corporate form of organization?
A. Ability to raise large sums of equity capital
B. Ease of ownership transfer
C. Profits taxed at the corporate level
D. Limited liability for all owners correct answers C
1.S13.Hwk4. Which of the following statements about the
corporate form of ownership is FALSE?
A. The shareholders are the owners of the firm and hold the top
priority claim among all stakeholders.
