1. This book is mainly about
A. financial decisions made by corporations.
B. financial decisions made by households.
C. financial decisions made by governments.
D. financial decisions made by employees.
Accessibility: Keyboard Navigation
Difficulty: Basic
2. Shareholders of a corporation may be, among others,
A. individuals.
B. individuals and pension funds.
C. pension funds.
D. individuals, pension funds, and insurance companies.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
3. Generally, a corporation is owned by its
A. managers.
B. board of directors and shareholders.
C. shareholders.
D. managers, board of directors, and shareholders.
Accessibility: Keyboard Navigation
Difficulty: Basic
4. A corporation, potentially, has infinite life because it
A. is a legal entity.
B. has the same ownership and management.
C. has limited liability.
D. is closely regulated.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
5. Limited liability is an important feature of
A. sole proprietorships.
B. partnerships.
C. corporations.
D. both partnerships and corporations.
Accessibility: Keyboard Navigation
Difficulty: Basic
6. As a legal entity, a corporation can perform the following functions except
A. borrow money and lend money.
B. borrow money, lend money, and sue and be sued.
C. vote.
D. borrow money, lend money, sue and be sued, and vote.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
,7. Which of the following assets is tangible?
A. ExxonMobil's corporate headquarters building
B. Apple Inc.'s trademark
C. Hewlett-Packard's most recent printer patent
D. Microsoft's technical expertise
Accessibility: Keyboard Navigation
Difficulty: Intermediate
8. Which of the following types of assets are intangible?
A. Production machinery
B. Factories
C. Trademarks
D. Office equipment
Accessibility: Keyboard Navigation
Difficulty: Intermediate
9. A firm's investment decision is also called its
A. financing decision.
B. liquidity decision.
C. capital budgeting decision.
D. leasing decision.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
10. Which of the following is not a financial asset?
A. Common stock
B. Bank loans
C. Preferred stock
D. Buildings
Accessibility: Keyboard Navigation
Difficulty: Intermediate
11. Which of the following is an important function of financial markets?
A. Providing financing
B. Providing financing and liquidity
C. Providing financing, providing liquidity, reducing risk, and providing information
D. Providing information
Accessibility: Keyboard Navigation
Difficulty: Intermediate
12. Disadvantages of the corporate form include
A. agency costs.
B. double taxation.
C. cost of managing the corporation.
D. all of the options.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
13. In the principal–agent framework,
A. shareholders are the principals.
B. managers are the principals.
C. managers are the agents.
,D. shareholders are the principals and managers are the agents.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
14. Costs associated with the conflicts of interest between the bondholders and the shareholders of a corporation
are called
A. legal costs.
B. bankruptcy costs.
C. administrative costs.
D. agency costs.
Accessibility: Keyboard Navigation
Difficulty: Challenge
15. A corporation may incur agency costs because
A. managers may not attempt to maximize the value of the firm to shareholders.
B. shareholders incur monitoring costs.
C. of the separation of ownership and management.
D. all of the responses are correct.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
16. The following groups are some of the claimants to a firm's income stream
A. shareholders and bondholders only.
B. shareholders, bondholders, and employees only.
C. shareholders, bondholders, employees, and management only.
D. shareholders, bondholders, employees, management, and government.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
17. The financial goal of a corporation is to
A. maximize profits.
B. maximize sales.
C. maximize the value of the firm for the shareholders.
D. maximize managers' benefits.
Accessibility: Keyboard Navigation
Difficulty: Challenge
18. The firm's purchase of real assets is also referred to as the
A. capital structure decision.
B. CFO decision.
C. financing decision.
D. capital investment decision.
Accessibility: Keyboard Navigation
Difficulty: Basic
19. The sale of financial assets by a corporation is also referred to as the
A. capital budgeting decision.
B. CFO decision.
C. financing decision.
D. investment decision.
Accessibility: Keyboard Navigation
Difficulty: Basic
, 20. The choice of the proper mixture of debt and equity, used to finance a corporation, is also referred to as the
A. capital budgeting decision.
B. capital structure decision.
C. investment decision.
D. liquidity decision.
Accessibility: Keyboard Navigation
Difficulty: Basic
21. Which of the following groups are referred to as stakeholders?
A. Employees, customers, and suppliers only
B. Shareholders only
C. Employees and customers only
D. Employees, customers, shareholders, and suppliers
Accessibility: Keyboard Navigation
Difficulty: Intermediate
22. The following are examples of real assets:
A. machinery, office buildings, and warehouses only.
B. machinery and office buildings only.
C. common stock only.
D. machinery only.
Accessibility: Keyboard Navigation
Difficulty: Basic
23. The following are examples of tangible assets except
A. machinery only.
B. machinery and office buildings only.
C. training courses for employees only.
D. machinery, office buildings, and warehouses only.
Accessibility: Keyboard Navigation
Difficulty: Basic
24. The ultimate financial goal of a corporation is to
A. minimize stockholder risk.
B. maximize profit.
C. maximize the value of the corporation to the stockholders.
D. increase the size of the firm.
Accessibility: Keyboard Navigation
Difficulty: Basic
25. Mr. Free has $100 income this year and zero income next year. The market interest rate is 10 percent per year.
If Mr. Free consumes $30 this year and invests the rest in the market, what will be his consumption next year?
A. $50
B. $55
C. $77
D. $100
Accessibility: Keyboard Navigation
Difficulty: Challenge
A. financial decisions made by corporations.
B. financial decisions made by households.
C. financial decisions made by governments.
D. financial decisions made by employees.
Accessibility: Keyboard Navigation
Difficulty: Basic
2. Shareholders of a corporation may be, among others,
A. individuals.
B. individuals and pension funds.
C. pension funds.
D. individuals, pension funds, and insurance companies.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
3. Generally, a corporation is owned by its
A. managers.
B. board of directors and shareholders.
C. shareholders.
D. managers, board of directors, and shareholders.
Accessibility: Keyboard Navigation
Difficulty: Basic
4. A corporation, potentially, has infinite life because it
A. is a legal entity.
B. has the same ownership and management.
C. has limited liability.
D. is closely regulated.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
5. Limited liability is an important feature of
A. sole proprietorships.
B. partnerships.
C. corporations.
D. both partnerships and corporations.
Accessibility: Keyboard Navigation
Difficulty: Basic
6. As a legal entity, a corporation can perform the following functions except
A. borrow money and lend money.
B. borrow money, lend money, and sue and be sued.
C. vote.
D. borrow money, lend money, sue and be sued, and vote.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
,7. Which of the following assets is tangible?
A. ExxonMobil's corporate headquarters building
B. Apple Inc.'s trademark
C. Hewlett-Packard's most recent printer patent
D. Microsoft's technical expertise
Accessibility: Keyboard Navigation
Difficulty: Intermediate
8. Which of the following types of assets are intangible?
A. Production machinery
B. Factories
C. Trademarks
D. Office equipment
Accessibility: Keyboard Navigation
Difficulty: Intermediate
9. A firm's investment decision is also called its
A. financing decision.
B. liquidity decision.
C. capital budgeting decision.
D. leasing decision.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
10. Which of the following is not a financial asset?
A. Common stock
B. Bank loans
C. Preferred stock
D. Buildings
Accessibility: Keyboard Navigation
Difficulty: Intermediate
11. Which of the following is an important function of financial markets?
A. Providing financing
B. Providing financing and liquidity
C. Providing financing, providing liquidity, reducing risk, and providing information
D. Providing information
Accessibility: Keyboard Navigation
Difficulty: Intermediate
12. Disadvantages of the corporate form include
A. agency costs.
B. double taxation.
C. cost of managing the corporation.
D. all of the options.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
13. In the principal–agent framework,
A. shareholders are the principals.
B. managers are the principals.
C. managers are the agents.
,D. shareholders are the principals and managers are the agents.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
14. Costs associated with the conflicts of interest between the bondholders and the shareholders of a corporation
are called
A. legal costs.
B. bankruptcy costs.
C. administrative costs.
D. agency costs.
Accessibility: Keyboard Navigation
Difficulty: Challenge
15. A corporation may incur agency costs because
A. managers may not attempt to maximize the value of the firm to shareholders.
B. shareholders incur monitoring costs.
C. of the separation of ownership and management.
D. all of the responses are correct.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
16. The following groups are some of the claimants to a firm's income stream
A. shareholders and bondholders only.
B. shareholders, bondholders, and employees only.
C. shareholders, bondholders, employees, and management only.
D. shareholders, bondholders, employees, management, and government.
Accessibility: Keyboard Navigation
Difficulty: Intermediate
17. The financial goal of a corporation is to
A. maximize profits.
B. maximize sales.
C. maximize the value of the firm for the shareholders.
D. maximize managers' benefits.
Accessibility: Keyboard Navigation
Difficulty: Challenge
18. The firm's purchase of real assets is also referred to as the
A. capital structure decision.
B. CFO decision.
C. financing decision.
D. capital investment decision.
Accessibility: Keyboard Navigation
Difficulty: Basic
19. The sale of financial assets by a corporation is also referred to as the
A. capital budgeting decision.
B. CFO decision.
C. financing decision.
D. investment decision.
Accessibility: Keyboard Navigation
Difficulty: Basic
, 20. The choice of the proper mixture of debt and equity, used to finance a corporation, is also referred to as the
A. capital budgeting decision.
B. capital structure decision.
C. investment decision.
D. liquidity decision.
Accessibility: Keyboard Navigation
Difficulty: Basic
21. Which of the following groups are referred to as stakeholders?
A. Employees, customers, and suppliers only
B. Shareholders only
C. Employees and customers only
D. Employees, customers, shareholders, and suppliers
Accessibility: Keyboard Navigation
Difficulty: Intermediate
22. The following are examples of real assets:
A. machinery, office buildings, and warehouses only.
B. machinery and office buildings only.
C. common stock only.
D. machinery only.
Accessibility: Keyboard Navigation
Difficulty: Basic
23. The following are examples of tangible assets except
A. machinery only.
B. machinery and office buildings only.
C. training courses for employees only.
D. machinery, office buildings, and warehouses only.
Accessibility: Keyboard Navigation
Difficulty: Basic
24. The ultimate financial goal of a corporation is to
A. minimize stockholder risk.
B. maximize profit.
C. maximize the value of the corporation to the stockholders.
D. increase the size of the firm.
Accessibility: Keyboard Navigation
Difficulty: Basic
25. Mr. Free has $100 income this year and zero income next year. The market interest rate is 10 percent per year.
If Mr. Free consumes $30 this year and invests the rest in the market, what will be his consumption next year?
A. $50
B. $55
C. $77
D. $100
Accessibility: Keyboard Navigation
Difficulty: Challenge
