Foundations of Finance Exam 1 Questions
With Correct Answers
Determining the best way to raise money to fund a firm's
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long-term investments is called - CORRECT ANSWER✔✔-the capital
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structure decision |
The five basic principles of finance include all of the following EXCEPT
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A. Money has a time value.
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B. Risk requires a reward.
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C. Incremental profits determine value.
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D. Cash flow is what matters. - CORRECT ANSWER✔✔-C. Incremental
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profits determine value
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Which of the following statements about the corporate form of business
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organization is true?
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,A. The corporate form is preferred over the sole proprietorship because
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a corporation is easier to form and faces less regulation.
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B. Sole proprietorships are the most common form of business
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organization because liability is limited to the amount invested in the
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business by the sole proprietor.
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C. The corporate form has the advantage of unlimited liability.
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D. The corporate form has the disadvantage of double taxation relative
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to a sole proprietorship. - CORRECT ANSWER✔✔-D. The corporate form
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has the disadvantage of double taxation relative to a sole
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proprietorship.
The principle of risk-return trade-off means that - CORRECT
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ANSWER✔✔-a rational investor will only take on higher risk if he
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expects a higher return. | | |
Advantages of the corporation include - CORRECT ANSWER✔✔-
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transferability of ownership and the ability of the corporation to raise
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capital
, In the search for profits, U.S. corporations have been forced to look
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beyond our country's borders. All of the following contributed to the
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movement EXCEPT |
A. information technology revolution.
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B. trade protectionism.
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C. acceptance of the free market system in Third World countries.
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D. collapse of communism. - CORRECT ANSWER✔✔-B. trade
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protectionism.
In terms of the costs to organize each, which of the following sequences
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|is correct, moving from highest to lowest cost?
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A. sole proprietorship, general partnership, limited partnership,
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corporation
B. sole proprietorship, general partnership, corporation, limited
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partnership
With Correct Answers
Determining the best way to raise money to fund a firm's
| | | | | | | | | | |
long-term investments is called - CORRECT ANSWER✔✔-the capital
| | | | | | | |
structure decision |
The five basic principles of finance include all of the following EXCEPT
| | | | | | | | | | |
A. Money has a time value.
| | | | |
B. Risk requires a reward.
| | | |
C. Incremental profits determine value.
| | | |
D. Cash flow is what matters. - CORRECT ANSWER✔✔-C. Incremental
| | | | | | | | | |
profits determine value
| |
Which of the following statements about the corporate form of business
| | | | | | | | | |
organization is true?
| | |
,A. The corporate form is preferred over the sole proprietorship because
| | | | | | | | | | |
a corporation is easier to form and faces less regulation.
| | | | | | | | |
B. Sole proprietorships are the most common form of business
| | | | | | | | | |
organization because liability is limited to the amount invested in the
| | | | | | | | | | |
business by the sole proprietor.
| | | |
C. The corporate form has the advantage of unlimited liability.
| | | | | | | | |
D. The corporate form has the disadvantage of double taxation relative
| | | | | | | | | | |
to a sole proprietorship. - CORRECT ANSWER✔✔-D. The corporate form
| | | | | | | | | |
has the disadvantage of double taxation relative to a sole
| | | | | | | | | |
proprietorship.
The principle of risk-return trade-off means that - CORRECT
| | | | | | | | |
ANSWER✔✔-a rational investor will only take on higher risk if he
| | | | | | | | | | |
expects a higher return. | | |
Advantages of the corporation include - CORRECT ANSWER✔✔-
| | | | | | |
transferability of ownership and the ability of the corporation to raise
| | | | | | | | | | |
capital
, In the search for profits, U.S. corporations have been forced to look
| | | | | | | | | | | |
beyond our country's borders. All of the following contributed to the
| | | | | | | | | | |
movement EXCEPT |
A. information technology revolution.
| | |
B. trade protectionism.
| |
C. acceptance of the free market system in Third World countries.
| | | | | | | | | |
D. collapse of communism. - CORRECT ANSWER✔✔-B. trade
| | | | | | | |
protectionism.
In terms of the costs to organize each, which of the following sequences
| | | | | | | | | | | |
|is correct, moving from highest to lowest cost?
| | | | | | |
A. sole proprietorship, general partnership, limited partnership,
| | | | | | |
corporation
B. sole proprietorship, general partnership, corporation, limited
| | | | | | |
partnership
