Corporate Finance MCQ's Questions and
Answers Grade A+ 2023
The liability of sole proprietors is limited to the amount of their investment in the company. - -
FALSE - The liability of sole proprietors is unlimited
-General partners have limited personal liability for business debts in a limited partnership. - -
FALSE - General partners have unlimited personal liability in a limited partnership.
-The liability of sole proprietors is limited to the amount of their investment in the company. - -
FALSE - The liability of sole proprietors is unlimited
-The separation of ownership and management is one distinctive feature of corporations. - -
TRUE
-A major disadvantage of partnerships is that they have double taxation of profits. - -FALSE -
The owner and business are not separately taxed in partnerships.
-Financial assets have value because they are claims on the firm's real assets and the cash that
those assets will produce. - -TRUE
-Capital budgeting decisions are used to determine how to raise the cash necessary for
investments. - -FALSE - Capital Budgeting (investment) decision to invest in tangible and
intangible assets.
-A successful investment is one that increases the value of the firm. - -TRUE
-Facebook's decision to spend $700 million to acquire Instagram is an investment decision. - -
TRUE
-Boards of directors are generally appointed by the firm's senior officers. - -FALSE - Boards of
directors appoints the firm's senior officers.
-Financial analysts are involved in monitoring the risk associated with investment projects
and financing decisions. - -TRUE
-The primary goal of any company should be to maximize current period profits. - -FALSE - The
primary goal is to maximize the wealth of shareholders.
-Maximizing profits is the same as maximizing the value of the firm. - -FALSE - maximizing the
value of the firm = maximizing the share price
-Sole proprietorships face the same agency problems as those associated with corporations. - -
FALSE - No separation of ownership and control in sole proprietorship
,-Real assets can be intangible assets. - -TRUE
-Making good investment and financing decisions is the chief task of the financial manager. - -
TRUE
-If a project's value is less than its required investment, then the project is financially
attractive. - -FALSE - If a project's value is greater than its required investment, then the project
is financially attractive.
-GlaxoSmithKline's spending of $3.6 billion on research and development of new drugs is
a capital budgeting decision but not a financing decision. - -TRUE
-Deltas's issuance of a $1.0 billion bond is a financing decision. - -TRUE
-An IOU ("I owe you") from your brother-in-law is a financial asset. - -TRUE
-The separation of ownership and management is one distinctive feature of both
corporations and sole proprietors. - -FALSE - only corporations
-Shareholders welcome higher short-term profits even when they damage long-term profits. - -
FALSE - Damage in the long run decline the value of the firm. It negatively affects
the shareholder wealth maximization.
-A well-designed compensation package can help a firm achieve its goal of maximizing
market value. - -TRUE
-While control of large public companies in the United States is exercised through the board
of directors and pressure from the stock market, in many other countries the stock market is
less important and control shifts to major stockholders, typically banks and other companies. - -
TRUE
-Investors are responsible for deciding whether to reinvest in the firm's operations or take
the profits as a distribution. - -FALSE - Financial managers are responsible for deciding whether
to reinvest in
the firm's operations or take the profits as a distribution.
-Established firms can create value by developing long-term relationships and maintaining
a good reputation. - -TRUE
-Only small companies can go through financial markets to obtain financing. - -FALSE - Large
companies (issuing debt securities and/or stocks)
-The reinvestment of cash back into the firm's operations is an example of a flow of savings
to investment. - -TRUE
, -Smaller businesses are especially dependent upon internally generated funds. - -TRUE
-An individual can save and invest in a corporation by lending money to it or by purchasing
additional shares. - -TRUE
-Previously issued securities are traded among investors in the secondary markets. - -TRUE
-Only the IPOs for large corporations are sold in primary markets. - -FALSE - Issuing debt
securities in addition to IPO in primary markets.
-Hedge fund managers, unlike mutual fund managers, do not receive fund-performancerelated
fees. - -FALSE - Hedge fund managers receive fund-performance-related fees.
-The markets for long-term debt and equity are called capital markets. - -TRUE
-The stocks of major companies are traded in many markets throughout the world on a
continuous or near-continuous basis. - -TRUE
-The market for derivatives is also a source of financing for corporations. - -FALSE - It only
helps financial managers to manage the business risk.
-In the United States, banks are the most important source of long-term financing for
corporations. - -FALSE - Insurance companies are more important than banks for the long-term
financing of business.
-A financial intermediary invests in financial assets rather than real assets. - -TRUE
-The key to the banks' ability to make illiquid loans is their ability to pool liquid deposits
from thousands of depositors. - -TRUE
-The cost of capital is the interest rate paid on a loan from a bank or some other financial
institution. - -FALSE - Cost of capital is the minimum acceptable rate of return on capital
investment.
-Like public companies, private companies can also use their stock price as a measure of
performance. - -FALSE - Information regarding the stock value of a private company is not
publicly
listed.
-The opportunity cost of capital is the expected rate of return that shareholders can obtain
in the financial markets on investments with the same risk as the firm's capital investments. - -
TRUE
-Once Apple Computer had become a public company, it was able to raise financing from
venture capital companies. - -FALSE - Venture capital is a form of private equity and a type of
financing that
Answers Grade A+ 2023
The liability of sole proprietors is limited to the amount of their investment in the company. - -
FALSE - The liability of sole proprietors is unlimited
-General partners have limited personal liability for business debts in a limited partnership. - -
FALSE - General partners have unlimited personal liability in a limited partnership.
-The liability of sole proprietors is limited to the amount of their investment in the company. - -
FALSE - The liability of sole proprietors is unlimited
-The separation of ownership and management is one distinctive feature of corporations. - -
TRUE
-A major disadvantage of partnerships is that they have double taxation of profits. - -FALSE -
The owner and business are not separately taxed in partnerships.
-Financial assets have value because they are claims on the firm's real assets and the cash that
those assets will produce. - -TRUE
-Capital budgeting decisions are used to determine how to raise the cash necessary for
investments. - -FALSE - Capital Budgeting (investment) decision to invest in tangible and
intangible assets.
-A successful investment is one that increases the value of the firm. - -TRUE
-Facebook's decision to spend $700 million to acquire Instagram is an investment decision. - -
TRUE
-Boards of directors are generally appointed by the firm's senior officers. - -FALSE - Boards of
directors appoints the firm's senior officers.
-Financial analysts are involved in monitoring the risk associated with investment projects
and financing decisions. - -TRUE
-The primary goal of any company should be to maximize current period profits. - -FALSE - The
primary goal is to maximize the wealth of shareholders.
-Maximizing profits is the same as maximizing the value of the firm. - -FALSE - maximizing the
value of the firm = maximizing the share price
-Sole proprietorships face the same agency problems as those associated with corporations. - -
FALSE - No separation of ownership and control in sole proprietorship
,-Real assets can be intangible assets. - -TRUE
-Making good investment and financing decisions is the chief task of the financial manager. - -
TRUE
-If a project's value is less than its required investment, then the project is financially
attractive. - -FALSE - If a project's value is greater than its required investment, then the project
is financially attractive.
-GlaxoSmithKline's spending of $3.6 billion on research and development of new drugs is
a capital budgeting decision but not a financing decision. - -TRUE
-Deltas's issuance of a $1.0 billion bond is a financing decision. - -TRUE
-An IOU ("I owe you") from your brother-in-law is a financial asset. - -TRUE
-The separation of ownership and management is one distinctive feature of both
corporations and sole proprietors. - -FALSE - only corporations
-Shareholders welcome higher short-term profits even when they damage long-term profits. - -
FALSE - Damage in the long run decline the value of the firm. It negatively affects
the shareholder wealth maximization.
-A well-designed compensation package can help a firm achieve its goal of maximizing
market value. - -TRUE
-While control of large public companies in the United States is exercised through the board
of directors and pressure from the stock market, in many other countries the stock market is
less important and control shifts to major stockholders, typically banks and other companies. - -
TRUE
-Investors are responsible for deciding whether to reinvest in the firm's operations or take
the profits as a distribution. - -FALSE - Financial managers are responsible for deciding whether
to reinvest in
the firm's operations or take the profits as a distribution.
-Established firms can create value by developing long-term relationships and maintaining
a good reputation. - -TRUE
-Only small companies can go through financial markets to obtain financing. - -FALSE - Large
companies (issuing debt securities and/or stocks)
-The reinvestment of cash back into the firm's operations is an example of a flow of savings
to investment. - -TRUE
, -Smaller businesses are especially dependent upon internally generated funds. - -TRUE
-An individual can save and invest in a corporation by lending money to it or by purchasing
additional shares. - -TRUE
-Previously issued securities are traded among investors in the secondary markets. - -TRUE
-Only the IPOs for large corporations are sold in primary markets. - -FALSE - Issuing debt
securities in addition to IPO in primary markets.
-Hedge fund managers, unlike mutual fund managers, do not receive fund-performancerelated
fees. - -FALSE - Hedge fund managers receive fund-performance-related fees.
-The markets for long-term debt and equity are called capital markets. - -TRUE
-The stocks of major companies are traded in many markets throughout the world on a
continuous or near-continuous basis. - -TRUE
-The market for derivatives is also a source of financing for corporations. - -FALSE - It only
helps financial managers to manage the business risk.
-In the United States, banks are the most important source of long-term financing for
corporations. - -FALSE - Insurance companies are more important than banks for the long-term
financing of business.
-A financial intermediary invests in financial assets rather than real assets. - -TRUE
-The key to the banks' ability to make illiquid loans is their ability to pool liquid deposits
from thousands of depositors. - -TRUE
-The cost of capital is the interest rate paid on a loan from a bank or some other financial
institution. - -FALSE - Cost of capital is the minimum acceptable rate of return on capital
investment.
-Like public companies, private companies can also use their stock price as a measure of
performance. - -FALSE - Information regarding the stock value of a private company is not
publicly
listed.
-The opportunity cost of capital is the expected rate of return that shareholders can obtain
in the financial markets on investments with the same risk as the firm's capital investments. - -
TRUE
-Once Apple Computer had become a public company, it was able to raise financing from
venture capital companies. - -FALSE - Venture capital is a form of private equity and a type of
financing that
