BADM*3000 CHAPTER QUIZZES 1-3 UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Question:
1. Which of the following represents a financing decision?
A. a decision to borrow $10 million through a bank loan.
B. a decision to invest in the common stock of another
corporation.
C. a decision to buy a new mainframe computer.
D. a decision to pay $1 million of accounts payable.
Answer:
A. a decision to borrow $10 million through a bank loan.
Question:
2. For small firms, shareholders and management may be
one and the same. But for large companies, separation of
ownership and management is:
A. a practical necessity.
B. not a necessity.
C. a liability.
D. a fraudulent move.
Answer:
A. a practical necessity.
Question:
3. Which of the following would not be considered a real
asset?
A. a corporate bond
B. a machine
C. a patent
D. a factory
Answer:
A. a corporate bond
,Question:
4. Which of the following would be considered an
advantage of the sole proprietorship form of
organization?
A. wide access to capital markets
B. unlimited liability
C. a pool of expertise
D. profits taxed at only one level
Answer:
D. profits taxed at only one level
Question:
5. Sole proprietorships resolve the issue of agency
problems by:
A. avoiding excessive expense accounts.
B. discharging those who violate the rules.
C. allowing owners to share the cost of their actions with
others.
D. forcing owners to bear the full cost of their actions.
Answer:
D. forcing owners to bear the full cost of their actions.
Question:
6. When managers' compensation plans are tied in a
meaningful manner to the profits of the firm, agency
problems:
A. can be reduced.
B. will be created.
C. are shifted to other stakeholders.
D. are eliminated entirely from the firm.
Answer:
A. can be reduced.
Question:
7. In a firm having both a treasurer and a controller, which
of the following would most likely be handled by the
controller?
A. internal auditing
B. credit management
C. banking relationships
D. insurance
Answer:
A. internal auditing
, Question:
8. Which of the following is not an advantage to
incorporating a business?
A. easier access to financial markets.
B. limited liability.
C. becoming a permanent legal entity.
D. profits taxed at the corporate level and the
shareholder level.
Answer:
D. profits taxed at the corporate level and the shareholder level.
Question:
9. In a partnership form of organization, income tax
liability, if any, is incurred by:
A. the partnership itself.
B. the partners individually.
C. Both the partnership and the partners.
D. Neither the partnership nor the partners.
Answer:
B. the partners individually.
Question:
10. In the case of a professional corporation, ________
has/have limited liability.
A. only the professionals
B. only the business
C. Both the professionals and the business
D. Neither the professionals nor the business
Answer:
B. only the business
Question:
11. A firm decides to pay for a small investment project
through a $1 million increase in short-term bank loans.
This is best described as an example of a(n):
A. financing decision.
B. investment decision.
C. capital budgeting decision.
D. capital market decision.
Answer:
A. financing decision.
QUESTIONS AND CORRECT ANSWERS
Question:
1. Which of the following represents a financing decision?
A. a decision to borrow $10 million through a bank loan.
B. a decision to invest in the common stock of another
corporation.
C. a decision to buy a new mainframe computer.
D. a decision to pay $1 million of accounts payable.
Answer:
A. a decision to borrow $10 million through a bank loan.
Question:
2. For small firms, shareholders and management may be
one and the same. But for large companies, separation of
ownership and management is:
A. a practical necessity.
B. not a necessity.
C. a liability.
D. a fraudulent move.
Answer:
A. a practical necessity.
Question:
3. Which of the following would not be considered a real
asset?
A. a corporate bond
B. a machine
C. a patent
D. a factory
Answer:
A. a corporate bond
,Question:
4. Which of the following would be considered an
advantage of the sole proprietorship form of
organization?
A. wide access to capital markets
B. unlimited liability
C. a pool of expertise
D. profits taxed at only one level
Answer:
D. profits taxed at only one level
Question:
5. Sole proprietorships resolve the issue of agency
problems by:
A. avoiding excessive expense accounts.
B. discharging those who violate the rules.
C. allowing owners to share the cost of their actions with
others.
D. forcing owners to bear the full cost of their actions.
Answer:
D. forcing owners to bear the full cost of their actions.
Question:
6. When managers' compensation plans are tied in a
meaningful manner to the profits of the firm, agency
problems:
A. can be reduced.
B. will be created.
C. are shifted to other stakeholders.
D. are eliminated entirely from the firm.
Answer:
A. can be reduced.
Question:
7. In a firm having both a treasurer and a controller, which
of the following would most likely be handled by the
controller?
A. internal auditing
B. credit management
C. banking relationships
D. insurance
Answer:
A. internal auditing
, Question:
8. Which of the following is not an advantage to
incorporating a business?
A. easier access to financial markets.
B. limited liability.
C. becoming a permanent legal entity.
D. profits taxed at the corporate level and the
shareholder level.
Answer:
D. profits taxed at the corporate level and the shareholder level.
Question:
9. In a partnership form of organization, income tax
liability, if any, is incurred by:
A. the partnership itself.
B. the partners individually.
C. Both the partnership and the partners.
D. Neither the partnership nor the partners.
Answer:
B. the partners individually.
Question:
10. In the case of a professional corporation, ________
has/have limited liability.
A. only the professionals
B. only the business
C. Both the professionals and the business
D. Neither the professionals nor the business
Answer:
B. only the business
Question:
11. A firm decides to pay for a small investment project
through a $1 million increase in short-term bank loans.
This is best described as an example of a(n):
A. financing decision.
B. investment decision.
C. capital budgeting decision.
D. capital market decision.
Answer:
A. financing decision.
