FIN 300 CHAPTER 1 EXAM
QUESTIONS AND ANSWERS
The net impact of the lower individual income tax rates brought by TCJA is expected to
be (choose all that apply): - Answer- Downward pressure on housing sales in the high-
value market
More free cash for consumers to spend
More potential savings on the part of investors
Which of these features could accurately be included in the definition of a corporation?
Select all that apply. - Answer- Separate legal entity
Double taxation
Division of ownership and control
Which of the following are finance functions that fall under the supervision of the
treasurer? - Answer- Managing cash
Interest rate hedging
Capital spending
Which one of these best defines corporate governance? - Answer- Corporate
governance is the ongoing process of monitoring managers and aligning their incentives
with shareholder goals.
One change brought by TCJA is that only the interest on the first $________ of
mortgage debt is deductible. - Answer- 750000
Which of these best defines ethics? - Answer- Ethics is the study of values, morals, and
morality.
The profitability of financial market intermediaries depends upon which of these? -
Answer- Successful execution of unique professional services
Managerial finance helps managers make decisions related to cash management,
capital investments, and risk reduction. - Answer- true
Which one of these functions is a treasury function? - Answer- Managing the firms
pension plan. This is a function of the controller. Pension plans are a treasury function.
, Which one of the following best illustrates the definition of a sole proprietorship? -
Answer- Ted was forced to sell his personal home in order to pay the debts of a
business he owned in entirety.
What is a sole proprietorship? - Answer- The profits are taxed once at the personal level
It has a single owner who receives all the profits and is personally responsible for all the
losses
they offer no protection, such at limited liability
A person who works for a firm but is not an owner - Answer- an agent
What is the definition of an agency problem - Answer- An agency problem is defined as
the difficulties that arise when a principal hires an agent and cannot fully monitor the
agent's actions.
What are the two key characteristics of a hybrid organization? - Answer- single taxation
and limited liability
Ethics is the study of values, morals, and business judgments. - Answer- False
Which of these factors are credited for providing financial institutions with high profit
margins? - Answer- Expertise and monopoly power
The financial markets are competitive. The two key factors are expertise and unique
assets
What results did you expect from firms that make wise to financial decisions? - Answer-
You should expect the wealth of individuals to increase in the future
Which of the following are finance functions that fall under the supervision of the
treasurer - Answer- Capital spending
interest rate hedging
managing cash
Jurisdiction of the controller - Answer- Taxes fall under the jurisdiction of the controller.
All the other functions are treasury functions
An agency problem is defined as a situation where a firm's managers fail to put the
interests of which one of these parties first when making decisions? - Answer-
Shareholders
Which of these functions is a treasury function - Answer- Managing the firms pension
plan
How is risk defined? - Answer- Risk is a potential future negative impact to value and/or
cash flows
QUESTIONS AND ANSWERS
The net impact of the lower individual income tax rates brought by TCJA is expected to
be (choose all that apply): - Answer- Downward pressure on housing sales in the high-
value market
More free cash for consumers to spend
More potential savings on the part of investors
Which of these features could accurately be included in the definition of a corporation?
Select all that apply. - Answer- Separate legal entity
Double taxation
Division of ownership and control
Which of the following are finance functions that fall under the supervision of the
treasurer? - Answer- Managing cash
Interest rate hedging
Capital spending
Which one of these best defines corporate governance? - Answer- Corporate
governance is the ongoing process of monitoring managers and aligning their incentives
with shareholder goals.
One change brought by TCJA is that only the interest on the first $________ of
mortgage debt is deductible. - Answer- 750000
Which of these best defines ethics? - Answer- Ethics is the study of values, morals, and
morality.
The profitability of financial market intermediaries depends upon which of these? -
Answer- Successful execution of unique professional services
Managerial finance helps managers make decisions related to cash management,
capital investments, and risk reduction. - Answer- true
Which one of these functions is a treasury function? - Answer- Managing the firms
pension plan. This is a function of the controller. Pension plans are a treasury function.
, Which one of the following best illustrates the definition of a sole proprietorship? -
Answer- Ted was forced to sell his personal home in order to pay the debts of a
business he owned in entirety.
What is a sole proprietorship? - Answer- The profits are taxed once at the personal level
It has a single owner who receives all the profits and is personally responsible for all the
losses
they offer no protection, such at limited liability
A person who works for a firm but is not an owner - Answer- an agent
What is the definition of an agency problem - Answer- An agency problem is defined as
the difficulties that arise when a principal hires an agent and cannot fully monitor the
agent's actions.
What are the two key characteristics of a hybrid organization? - Answer- single taxation
and limited liability
Ethics is the study of values, morals, and business judgments. - Answer- False
Which of these factors are credited for providing financial institutions with high profit
margins? - Answer- Expertise and monopoly power
The financial markets are competitive. The two key factors are expertise and unique
assets
What results did you expect from firms that make wise to financial decisions? - Answer-
You should expect the wealth of individuals to increase in the future
Which of the following are finance functions that fall under the supervision of the
treasurer - Answer- Capital spending
interest rate hedging
managing cash
Jurisdiction of the controller - Answer- Taxes fall under the jurisdiction of the controller.
All the other functions are treasury functions
An agency problem is defined as a situation where a firm's managers fail to put the
interests of which one of these parties first when making decisions? - Answer-
Shareholders
Which of these functions is a treasury function - Answer- Managing the firms pension
plan
How is risk defined? - Answer- Risk is a potential future negative impact to value and/or
cash flows
