FINA 5320 Ch1 Exam Questions
and Answers All Correct
Which one of the following business types is best for raising large amounts of capital ?
0 A ) Sole proprietorship B ) Limited liability company C ) Corporation D ) General
partnership E ) Limited partnership - Answer-C
Which type of business organization has the same rights and privileges accorded to a
legal person ? A ) Sole rietorship B ) General partnership C ) Limited partnership D )
Corporation E ) Limited liability company - Answer-D
A is a business formed by two or more individuals who each have unlimited personal
liability for all of the firm's debts . 0 A ) corporation B ) sole proprietorship C ) general
partnership D ) limited partnership E ) limited liability company - Answer-C
The describes the fraction of the work and cash to be contributed partnership by each
member of that partnership . - Answer-Parynership agreement
A ( n ) is a business created as a distinct legal entity , separate from its owners . A )
corporation B ) sole proprietorship C ) general partnership D ) limited partnership
unlimited liability company 0 - Answer-A
In a limited partnership , each limited partner's liability for the partnership's debts is : A )
limited to his or her personal net worth . B ) limited to the amount he or she invested into
the partnership . C ) limited to his or her total earnings received from the partnership . D
) unlimited . E ) limited to the total amount invested by all partners . - Answer-B
A provides each owner with limited liability , and is operated and taxed like a partnership
A ) limited liability company B ) general partnership C ) limited proprietorship D ) limited
partnership E ) corporation 0 - Answer-A
The profits earned by a partnership are : - Answer-Fully distributed as taxable income to
the partners
Financial managers primarily create firm value by : A ) maximizing current dividends . B
) investing in assets that generate cash in excess of their cost . C ) lowering the
earnings per share . D ) increasing the firm's market share . E ) maximizing current
sales . 0 - Answer-B
, Accounting profits and cash flows are generally : A ) equal because they reflect current
laws and accounting standards . B ) equal because accounting profits reflect the timing f
cash flows . C ) unequal because of how income is recognized according to GAAP . D )
unequal because cash inflows must occur before revenue recognition . E ) equal
because of the requirements of GAAP . - Answer-C
Which one of the following transactions will result in a cash outflow from the corporation
? A ) Selling an asset B ) Paying income taxes C ) Issuing common stock D ) Borrowing
from a lender E ) Retaining profit earned by the firm - Answer-B
A firm creates value by : A ) having a greater cash inflow from its stockholders than its
outflow them . B ) paying more cash to its creditors and stockholders than the amount it
received from C ) borrowing long - term debt . D ) generating sales whether or not
payment received for all of those sales . E ) purchasing assets that create cash inflows
equal to the cost of those assets . - Answer-B
If a firm is profitable , it follows that : 0 A ) its cash inflows exceed its cash outflows . B )
its sales exceed its costs . its cash flows are known with certainty . D ) it has sufficient
cash to pay its bills in a timely manner . E ) the timing of its cash flows is irrelevant . -
Answer-B
Which one of the following statements is accurate ? A ) Individuals generally prefer later
cash flows rather than current cash flows . ( B ) The value of an investment depends on
the size , timing , and risk of the investment's cash flows C ) When selecting one of two
projects , managers should select the project with the higher total expected cash flow D
) Most investors prefer greater risk rather than less risk . E ) Accountants record sales
and expenses after the related cash flows occur . - Answer-B
A firm is considering a new project . Analysts at the firm would be justified in having the
greatest level of certainty in the : A ) amount of the project's cash inflow in Year 3 . B )
timing of the last cash inflow from the project . C) project's initial cost . - Answer-C
Financial managers should primarily strive to : A ) minimize costs while increasing
current dividends . B ) maximize the current profits of the firm.dgn C ) maximize the
current value per share of existing stock . D ) maximize current dividends even if doing
so adds financial distress costs to the firm . E ) maximize current market share in every
market in which the firm participates . - Answer-C
Financial managers should make decisions in such a way as to increase the : A ) size of
the firm . B ) growth rate of the firm . C ) marketability of the managers . D ) market
value of the existing owners ' equity . E ) firm's current sales . - Answer-D
Which one of the following actions by a financial manager creates an agency problem ?
A) Borrowing money , when doing so creates value for the firm B ) Lowering selling
prices , which will result in increased firm value C ) Agreeing to expand the company at
the expense of stockholders ' value Ď ) Agreeing to pay management bonuses based
and Answers All Correct
Which one of the following business types is best for raising large amounts of capital ?
0 A ) Sole proprietorship B ) Limited liability company C ) Corporation D ) General
partnership E ) Limited partnership - Answer-C
Which type of business organization has the same rights and privileges accorded to a
legal person ? A ) Sole rietorship B ) General partnership C ) Limited partnership D )
Corporation E ) Limited liability company - Answer-D
A is a business formed by two or more individuals who each have unlimited personal
liability for all of the firm's debts . 0 A ) corporation B ) sole proprietorship C ) general
partnership D ) limited partnership E ) limited liability company - Answer-C
The describes the fraction of the work and cash to be contributed partnership by each
member of that partnership . - Answer-Parynership agreement
A ( n ) is a business created as a distinct legal entity , separate from its owners . A )
corporation B ) sole proprietorship C ) general partnership D ) limited partnership
unlimited liability company 0 - Answer-A
In a limited partnership , each limited partner's liability for the partnership's debts is : A )
limited to his or her personal net worth . B ) limited to the amount he or she invested into
the partnership . C ) limited to his or her total earnings received from the partnership . D
) unlimited . E ) limited to the total amount invested by all partners . - Answer-B
A provides each owner with limited liability , and is operated and taxed like a partnership
A ) limited liability company B ) general partnership C ) limited proprietorship D ) limited
partnership E ) corporation 0 - Answer-A
The profits earned by a partnership are : - Answer-Fully distributed as taxable income to
the partners
Financial managers primarily create firm value by : A ) maximizing current dividends . B
) investing in assets that generate cash in excess of their cost . C ) lowering the
earnings per share . D ) increasing the firm's market share . E ) maximizing current
sales . 0 - Answer-B
, Accounting profits and cash flows are generally : A ) equal because they reflect current
laws and accounting standards . B ) equal because accounting profits reflect the timing f
cash flows . C ) unequal because of how income is recognized according to GAAP . D )
unequal because cash inflows must occur before revenue recognition . E ) equal
because of the requirements of GAAP . - Answer-C
Which one of the following transactions will result in a cash outflow from the corporation
? A ) Selling an asset B ) Paying income taxes C ) Issuing common stock D ) Borrowing
from a lender E ) Retaining profit earned by the firm - Answer-B
A firm creates value by : A ) having a greater cash inflow from its stockholders than its
outflow them . B ) paying more cash to its creditors and stockholders than the amount it
received from C ) borrowing long - term debt . D ) generating sales whether or not
payment received for all of those sales . E ) purchasing assets that create cash inflows
equal to the cost of those assets . - Answer-B
If a firm is profitable , it follows that : 0 A ) its cash inflows exceed its cash outflows . B )
its sales exceed its costs . its cash flows are known with certainty . D ) it has sufficient
cash to pay its bills in a timely manner . E ) the timing of its cash flows is irrelevant . -
Answer-B
Which one of the following statements is accurate ? A ) Individuals generally prefer later
cash flows rather than current cash flows . ( B ) The value of an investment depends on
the size , timing , and risk of the investment's cash flows C ) When selecting one of two
projects , managers should select the project with the higher total expected cash flow D
) Most investors prefer greater risk rather than less risk . E ) Accountants record sales
and expenses after the related cash flows occur . - Answer-B
A firm is considering a new project . Analysts at the firm would be justified in having the
greatest level of certainty in the : A ) amount of the project's cash inflow in Year 3 . B )
timing of the last cash inflow from the project . C) project's initial cost . - Answer-C
Financial managers should primarily strive to : A ) minimize costs while increasing
current dividends . B ) maximize the current profits of the firm.dgn C ) maximize the
current value per share of existing stock . D ) maximize current dividends even if doing
so adds financial distress costs to the firm . E ) maximize current market share in every
market in which the firm participates . - Answer-C
Financial managers should make decisions in such a way as to increase the : A ) size of
the firm . B ) growth rate of the firm . C ) marketability of the managers . D ) market
value of the existing owners ' equity . E ) firm's current sales . - Answer-D
Which one of the following actions by a financial manager creates an agency problem ?
A) Borrowing money , when doing so creates value for the firm B ) Lowering selling
prices , which will result in increased firm value C ) Agreeing to expand the company at
the expense of stockholders ' value Ď ) Agreeing to pay management bonuses based
