FI 320 EXAM QUESTIONS WITH ANSWERS
100% CORRECT
Which of the following statements is/are true?
I. The top financial manager within a firm is usually the Chief Financial Officer
II. Treasurer is also a financial manager, who oversees cash management, credit
management, capital expenditures, and financial planning
III. Controller is also a financial manager, who oversees taxes, cost accounting, financial
accounting, and data processing - ANSWER All are correct
Which of the following statements is/are true?
I. Capital budgeting deals with long-term investments and/or projects.
II. Capital structure helps answer the type of financing to be used.
III. One drawback for sole proprietorship is unlimited liability.
IV. One advantage of corporation is the separation of ownership and management. -
ANSWER All are correct
Which of the following statements is/are true?
I. Agency problem deals with the conflict of interest between the principal (stockholders)
and agent (managers).
II. Capital structure helps answer how much debt should be assumed to fund a project.
III. Capital budgeting concerns the management of a firm's long-term investments.
,IV. A business formed by two or more individuals who each have unlimited liability for all
of the firm's business debts is called a general partnership. - ANSWER All are correct
Which of the following individuals have unlimited liability for a firm's debts based on
their ownership interest? - ANSWER Both general partners and sole proprietors
Which one of the following actions by a financial manager is most apt to create an
agency problem? - ANSWER Increasing current profits when doing so lowers the value of
the company's equity
Which of the following statements is/are true?
I. Sole proprietorship has only one owner.
II. Both partnership and corporation can have unlimited term of existence.
III. Corporation suffers from double taxation. - ANSWER Only I and III are correct
An agency problem occurs when: - ANSWER Selina's agent went golfing today instead of
meeting with a film producer to sign a movie deal. When questioned, the agent admitted
that the decision is not in the best interests of the principal, Selina
The prospect for both sole proprietorships and partnerships is limited by: - ANSWER
Inability to access large amounts of funds or the potential death of the owners
Double taxation means that corporate dividends are taxed at both the corporate level
and the personal level - ANSWER True
, Financial managers should focus on the interests of _________ and the main goal for
financial management is ________ - ANSWER Shareholders; maximize equity (share price)
Which of the following statements is/are true when making an income statement for
Year T?
I. Relevant information of the firm's operation in Year T is needed.
II. Various costs are deducted before distribution to various stakeholders.
III. The bottom of the income statement is net income, which belongs to stockholder (the
residual stakeholder). Net income is distributed to shareholders in the form of dividends
or returned to the company for future operations in the form of retained earnings.
IV. Entries in the income statement are needed for both the firm's statement of
stockholders' equity and cash flows. - ANSWER All are correct
Which of the following statements is/are true about the statement of stockholders'
equity for Year T?
I. It expands the section of the common equity on the balance sheets, i.e., helps explain
the changes from Year T-1 and Year T.
II. The retained earnings portion in the income statement for Year T = entry of retained
earnings on the Year T balance sheet minus entry of retained earnings on Year T-1
balance sheet.
III. If the differences of the entry common stock in the balance sheets from Year T-1 to
Year T is positive, it is the net issuance of new stocks in the statement of stockholders'
equity. - ANSWER All are correct
100% CORRECT
Which of the following statements is/are true?
I. The top financial manager within a firm is usually the Chief Financial Officer
II. Treasurer is also a financial manager, who oversees cash management, credit
management, capital expenditures, and financial planning
III. Controller is also a financial manager, who oversees taxes, cost accounting, financial
accounting, and data processing - ANSWER All are correct
Which of the following statements is/are true?
I. Capital budgeting deals with long-term investments and/or projects.
II. Capital structure helps answer the type of financing to be used.
III. One drawback for sole proprietorship is unlimited liability.
IV. One advantage of corporation is the separation of ownership and management. -
ANSWER All are correct
Which of the following statements is/are true?
I. Agency problem deals with the conflict of interest between the principal (stockholders)
and agent (managers).
II. Capital structure helps answer how much debt should be assumed to fund a project.
III. Capital budgeting concerns the management of a firm's long-term investments.
,IV. A business formed by two or more individuals who each have unlimited liability for all
of the firm's business debts is called a general partnership. - ANSWER All are correct
Which of the following individuals have unlimited liability for a firm's debts based on
their ownership interest? - ANSWER Both general partners and sole proprietors
Which one of the following actions by a financial manager is most apt to create an
agency problem? - ANSWER Increasing current profits when doing so lowers the value of
the company's equity
Which of the following statements is/are true?
I. Sole proprietorship has only one owner.
II. Both partnership and corporation can have unlimited term of existence.
III. Corporation suffers from double taxation. - ANSWER Only I and III are correct
An agency problem occurs when: - ANSWER Selina's agent went golfing today instead of
meeting with a film producer to sign a movie deal. When questioned, the agent admitted
that the decision is not in the best interests of the principal, Selina
The prospect for both sole proprietorships and partnerships is limited by: - ANSWER
Inability to access large amounts of funds or the potential death of the owners
Double taxation means that corporate dividends are taxed at both the corporate level
and the personal level - ANSWER True
, Financial managers should focus on the interests of _________ and the main goal for
financial management is ________ - ANSWER Shareholders; maximize equity (share price)
Which of the following statements is/are true when making an income statement for
Year T?
I. Relevant information of the firm's operation in Year T is needed.
II. Various costs are deducted before distribution to various stakeholders.
III. The bottom of the income statement is net income, which belongs to stockholder (the
residual stakeholder). Net income is distributed to shareholders in the form of dividends
or returned to the company for future operations in the form of retained earnings.
IV. Entries in the income statement are needed for both the firm's statement of
stockholders' equity and cash flows. - ANSWER All are correct
Which of the following statements is/are true about the statement of stockholders'
equity for Year T?
I. It expands the section of the common equity on the balance sheets, i.e., helps explain
the changes from Year T-1 and Year T.
II. The retained earnings portion in the income statement for Year T = entry of retained
earnings on the Year T balance sheet minus entry of retained earnings on Year T-1
balance sheet.
III. If the differences of the entry common stock in the balance sheets from Year T-1 to
Year T is positive, it is the net issuance of new stocks in the statement of stockholders'
equity. - ANSWER All are correct
