FIN 302 CH 1 EXAM QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026

FIN 302 CH 1 EXAM QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026 Working capital includes which of the following? - Answers - short-term assets - inventory - cash Which of the following are included in a firm's capital structure? - Answers - Equity - Long-term debt Which of the following positions generally report to the chief financial officer (CFO)? - Answers Both the treasurer and the controller report to the CFO. A sole proprietor has ______ personal liability for all business debts and obligations. - Answers unlimited The officer responsible for managing the firm's cash flows is the ______. - Answers treasurer The controller is responsible for which of the following tasks? - Answers - Financial accounting - Tax reporting and payments Ensuring that the firm has sufficient funds to continue operations on a day-to-day basis comes under the heading of __________ management. - Answers working capital A business without separate legal authority formed by two or more people is known as a _____. - Answers partnership Which term applies to the mixture of debt and equity maintained by a firm? - Answers Capital structure Which of the following are true of a sole proprietorship? - Answers - It is one of the simplest types of businesses to form. - A proprietorship has a limited life. Which corporate officer is responsible for managing the firm's cash? - Answers Treasurer A general partnership has which of the following characteristics? - Answers - Each owner has unlimited liability for all firm debts. - All the partners share in gains or losses of the partnership. Which corporate officer is responsible for accurate financial accounting of the firm's activities? - Answers Controller A partnership must have at least _______ owners. - Answers two What type of partnership involves both general and limited partners to run the business? - Answers limited partnership Which of the following is a disadvantage of sole proprietorships and partnerships? - Answers Difficulty of transferring ownership A partnership in which partners share in gains or losses, and carry unlimited liability for all partnership debts, is called a: - Answers general partnership Which of the following are reasons that the corporation is the most important form of business? - Answers - Corporations are separate legal entities. - Corporations can sue and be sued. - Corporations can enter contracts. In a limited partnership, a limited partner's liability for business debts is ______. - Answers limited to their cash contribution to the partnership An organization must prepare ______ and bylaws when forming a corporation. - Answers articles of incorporation Why don't large businesses organize as sole proprietorships or partnerships? - Answers It can be difficult to raise cash for investment in these forms, and that limits the ability of the business to grow. A sole proprietorship is a business that _______. - Answers is owned by one person The owners of a corporation are called ______. - Answers shareholders Businesses are motivated to organize as corporations because stockholders in a corporation have _______ liability for corporate debts. - Answers limited Since ________ and ownership are separated, a corporation's life is unlimited. - Answers management How is ownership of a corporation represented? - Answers Shares of stock When a corporation is formed, it is granted which of the following rights? - Answers - The ability to issue stock - Legal powers to sue When are corporate profits taxed? - Answers - Corporations pay taxes on corporate profits. - Individuals pay taxes on corporate dividends. A limited liability company's owners have ______ liability. - Answers limited True or false: In a large corporation, stockholders and managers are usually separate groups. - Answers true Corporations in other countries are often called: - Answers - Public limited companies - Limited liability company - Joint stock companies A corporation borrows money in its own name. - Answers true How is ownership transferred in a corporation? - Answers Ownership is transferred by gifting or selling shares of stock. Is profit maximization the primary objective of a business? - Answers No; profit maximization may not take into account other strategic objectives necessary to maximize shareholder value. The federal government taxes which of the following? - Answers Corporate earnings and shareholder dividends A limited liability company is taxed like a _________, but retains ________ ________ for owners. - Answers partnership; limited liability What is the main goal of financial management? - Answers To maximize current share value Public limited companies and joint stock companies are other names for __________. - Answers corporations The goal of a "for profit" business is to ______ the value of shareholder wealth. - Answers maximize True or False: "Profit maximization" is the goal for the management of a corporation in short-run only. - Answers False "Increasing shareholder wealth" means increasing the _________. - Answers current common stock value A good financial decision will do which of the following? - Answers - Increase the value of the firm's existing stock - Increase market value of shareholders' equity In a for-profit business, owners' equity is equivalent to: - Answers the total value of stock in a corporation The Sarbanes-Oxley Act is intended to strengthen protection against: - Answers corporate accounting fraud and financial malpractice How does the Sarbanes-Oxley Act primarily work to make sure that companies tell the truth in financial statements? - Answers It makes management personally responsible for the accuracy of a company's financial statements. A bad financial decision is defined as a decision that ______ shareholder wealth. - Answers decreases Which of these have been noted as unintended consequences of the Sarbanes-Oxley Act? - Answers - eliminating public disclosure for many firms - public firms "going dark" and leaving the stock market - firms going public outside of the U.S. market