Chapter 1: Corporate Finance and the Financial Manager
Questions and Answers Grade A+ 2023
Which one of the following terms is defined as the management of a firm's long-term
investments?
A. working capital management
B. financial allocation
C. agency cost analysis
D. capital budgeting
E. capital structure - -D. capital budgeting
-Which one of the following terms is defined as the mixture of a firm's debt and equity
financing?
A. working capital management
B. cash management
C. cost analysis
D. capital budgeting
E. capital structure - -E. capital structure
-Which one of the following is defined as a firm's short term assets and its short-term liabilities?
A. working capital
B. debt
C. investment capital
D. net capital
E. capital structure - -A. working capital
-A business owned by a solidarity individual who has unlimited liability for its debt is called a:
A. corporation
B. sole proprietorship
C. general partnership
D. limited partnership
E. limited liability company - -B. sole proprietorship
-A business formed by two or more individuals who each have unlimited liability for all of the
firm's business debts is called a:
A. corporation
B. sole proprietorship
C. general partnership
D. limited partnership
E. limited liability company - -C. general partnership
, -A business partner whose potential financial loss in the partnership will not exceed his or her
investment in that partnership is called a:
A. generally partner
B. sole proprietor
C. limited partner
D. corporate shareholder
E. zero partner - -C. limited partner
-A business created as a distinct legal entity and treated as a legal "person" is called a:
A. corporation
B. sole proprietorship
C. general partnership
D. limited partnership
E. unlimited liability company - -A. corporation
-Which one of the following terms is defined as a conflict of interest between the corporate
shareholders and the corporate managers?
A. articles of incorporation
B. corporate breakdown
C. agency problem
D. bylaws
E. legal liability - -C. agency problem
-A stakeholder is:
A. a person who owns shares of stock
B. any person who has voting rights based on stock ownership of a corporation
C. a person who initially founded a firm and currently has management control over that firm
D. a creditor to whom a firm currently owes money
E. any person or entity other than a stockholder or creditor who potentially has a claim on the
cash flows of a firm - -E. any person or entity other than a stockholder or creditor who
potentially has a claim on the cash flows of a firm
-Which of the following questions are addressed by financial managers?
I. How should a product be marketed?
II. Should customers be given 30 or 45 days to pay for their credit purchases?
III. Should the firm borrow more money?
IV. Should the firm acquire new equipment?
A. I and IV only
B. II and III only
Questions and Answers Grade A+ 2023
Which one of the following terms is defined as the management of a firm's long-term
investments?
A. working capital management
B. financial allocation
C. agency cost analysis
D. capital budgeting
E. capital structure - -D. capital budgeting
-Which one of the following terms is defined as the mixture of a firm's debt and equity
financing?
A. working capital management
B. cash management
C. cost analysis
D. capital budgeting
E. capital structure - -E. capital structure
-Which one of the following is defined as a firm's short term assets and its short-term liabilities?
A. working capital
B. debt
C. investment capital
D. net capital
E. capital structure - -A. working capital
-A business owned by a solidarity individual who has unlimited liability for its debt is called a:
A. corporation
B. sole proprietorship
C. general partnership
D. limited partnership
E. limited liability company - -B. sole proprietorship
-A business formed by two or more individuals who each have unlimited liability for all of the
firm's business debts is called a:
A. corporation
B. sole proprietorship
C. general partnership
D. limited partnership
E. limited liability company - -C. general partnership
, -A business partner whose potential financial loss in the partnership will not exceed his or her
investment in that partnership is called a:
A. generally partner
B. sole proprietor
C. limited partner
D. corporate shareholder
E. zero partner - -C. limited partner
-A business created as a distinct legal entity and treated as a legal "person" is called a:
A. corporation
B. sole proprietorship
C. general partnership
D. limited partnership
E. unlimited liability company - -A. corporation
-Which one of the following terms is defined as a conflict of interest between the corporate
shareholders and the corporate managers?
A. articles of incorporation
B. corporate breakdown
C. agency problem
D. bylaws
E. legal liability - -C. agency problem
-A stakeholder is:
A. a person who owns shares of stock
B. any person who has voting rights based on stock ownership of a corporation
C. a person who initially founded a firm and currently has management control over that firm
D. a creditor to whom a firm currently owes money
E. any person or entity other than a stockholder or creditor who potentially has a claim on the
cash flows of a firm - -E. any person or entity other than a stockholder or creditor who
potentially has a claim on the cash flows of a firm
-Which of the following questions are addressed by financial managers?
I. How should a product be marketed?
II. Should customers be given 30 or 45 days to pay for their credit purchases?
III. Should the firm borrow more money?
IV. Should the firm acquire new equipment?
A. I and IV only
B. II and III only
