FIN 300 Exam 1 Multiple Choice
questions with verified answers
2025/2026
Profit maximization as a goal of the firm:
a. is an economic principle and not an accounting one
b. is superior to other goals that could be pursued
c. maximizes the wealth of the owners
d. does not consider cash flow or risk - ANS ✔✔d. does not consider cash flow or risk
Wealth maximization as a goal of the firm:
a. is usually discounted by bondholders
b. takes a long-run perspective and focuses on the owners of the firm
c. is a long-run perspective used by financial managers for internal use only
d. is an accounting number - ANS ✔✔b. take a long-run perspective and focuses on the owners
of the firm
An important advantage a general partner usually has is:
a. limited liability
b. usually a larger share of profit distribution when the firm is successful
c. unlimited liability
d. profits received are tax-free - ANS ✔✔b. usually a larger share of profit distribution when the
firm is successful
A Subchapter S corporation:
,a. is a large corporation
b. has limited liability for its owners
c. is double taxed
d. has unlimited liability for its owners - ANS ✔✔b. has limited liability for for its owners
One of the most important disadvantages of the corporate form of business is:
a. shares that can be sold
b. professional managers
c. double taxation
d. unlimited owner liability - ANS ✔✔c. double taxation
A manager has responsibilities to stockholders:
a. for legal and ethical issues
b. only at firms that are public corporations
c. never
d. only where legal issues apply - ANS ✔✔a. for legal and ethical issues
Problems with seeking profit as a goal of the firm would include each of the following except:
a. profit is completely unrelated to cash flow
b. profit goals involve timing issues
c. accountants have different ways of measuring profit
d. profit is only a proxy for cash flow - ANS ✔✔b. accountants have different ways of measuring
profit
Which statement is correct about limited partners?
a. they have management control equal to their percent of investment
, b. they have no tax liability
c. they can lose only one half of their initial investment
d. there is no limit to the number of limited partners that may participate - ANS ✔✔d. there is
no limit to the number of limited partners that may participate
Which of the following would least affect the value of a firm's stock?
a. cashflows
b. market share
c. timing on cash flows
d. risk associated with receiving cash flows - ANS ✔✔b. market share
Which of the following areas of finance is concerned with internal decision-making of a
business?
a. Financial markets and institutions
b. Financial Management
c. Investments
d. Agency Issues - ANS ✔✔b. financial managment
The term "financial management" refers to:
a. The variety of job titles often given to financial managers.
b. The duties of the one person who makes most of the financial decisions.
c. The process of decision-making that produces value.
d. The chief financial officer (CFO). - ANS ✔✔c. the process of decision-making that produces
value
"The primary financial goal of the business firm is to maximize the wealth of the firm's owners."
For a corporation, this statement means that managers should focus on maximizing the wealth
of its shareholders or its:
questions with verified answers
2025/2026
Profit maximization as a goal of the firm:
a. is an economic principle and not an accounting one
b. is superior to other goals that could be pursued
c. maximizes the wealth of the owners
d. does not consider cash flow or risk - ANS ✔✔d. does not consider cash flow or risk
Wealth maximization as a goal of the firm:
a. is usually discounted by bondholders
b. takes a long-run perspective and focuses on the owners of the firm
c. is a long-run perspective used by financial managers for internal use only
d. is an accounting number - ANS ✔✔b. take a long-run perspective and focuses on the owners
of the firm
An important advantage a general partner usually has is:
a. limited liability
b. usually a larger share of profit distribution when the firm is successful
c. unlimited liability
d. profits received are tax-free - ANS ✔✔b. usually a larger share of profit distribution when the
firm is successful
A Subchapter S corporation:
,a. is a large corporation
b. has limited liability for its owners
c. is double taxed
d. has unlimited liability for its owners - ANS ✔✔b. has limited liability for for its owners
One of the most important disadvantages of the corporate form of business is:
a. shares that can be sold
b. professional managers
c. double taxation
d. unlimited owner liability - ANS ✔✔c. double taxation
A manager has responsibilities to stockholders:
a. for legal and ethical issues
b. only at firms that are public corporations
c. never
d. only where legal issues apply - ANS ✔✔a. for legal and ethical issues
Problems with seeking profit as a goal of the firm would include each of the following except:
a. profit is completely unrelated to cash flow
b. profit goals involve timing issues
c. accountants have different ways of measuring profit
d. profit is only a proxy for cash flow - ANS ✔✔b. accountants have different ways of measuring
profit
Which statement is correct about limited partners?
a. they have management control equal to their percent of investment
, b. they have no tax liability
c. they can lose only one half of their initial investment
d. there is no limit to the number of limited partners that may participate - ANS ✔✔d. there is
no limit to the number of limited partners that may participate
Which of the following would least affect the value of a firm's stock?
a. cashflows
b. market share
c. timing on cash flows
d. risk associated with receiving cash flows - ANS ✔✔b. market share
Which of the following areas of finance is concerned with internal decision-making of a
business?
a. Financial markets and institutions
b. Financial Management
c. Investments
d. Agency Issues - ANS ✔✔b. financial managment
The term "financial management" refers to:
a. The variety of job titles often given to financial managers.
b. The duties of the one person who makes most of the financial decisions.
c. The process of decision-making that produces value.
d. The chief financial officer (CFO). - ANS ✔✔c. the process of decision-making that produces
value
"The primary financial goal of the business firm is to maximize the wealth of the firm's owners."
For a corporation, this statement means that managers should focus on maximizing the wealth
of its shareholders or its:
