MGMT 310 Midterm Quiz Questions With
Complete Solutions
CH1: The primary goal of financial management is to maximize the current value per share of
the existing stock.
True or False? - ANSWER True
CH1: When owners are managers (such as in a sole proprietorship), a firm will have agency
costs.
True or False? - ANSWER False
CH1: The process of planning and managing a firm's long-term investments is called capital
budgeting.
True or False? - ANSWER True
CH1: A corporation is a business owned by an individual who has unlimited personal liability.
True or False? - ANSWER False
CH1: Mr. Schwartz wants to start a new business decommissioning nuclear warheads and
reactors. The work will involve significant hazards, and he is concerned about protecting his
personal wealth from any losses the business might incur. Therefore, he should structure the
business as a proprietorship.
, True or False? - ANSWER True
CH1: The best definition of capital markets is a venue where long-term debt and equity
securities are bought and sold.
True or False? - ANSWER True
CH1: The management of the firm's short-term assets and liabilities is called capital structure.
True or False? - ANSWER False
CH1: An example of a primary market transaction is dealer buying newly issued shares of
stock from a corporation.
True or False? - ANSWER True
CH1: Maximization of the current earnings of the firm is the main goal of the financial
manager.
True or False? - ANSWER False
CH1: An agency problem is said to exist when there is a conflict of interest between a principal
and his or her agent.
True or False? - ANSWER True
CH2: Conceptually, capital cost allowance (CCA) is to tax like depreciation is to accounting.
Complete Solutions
CH1: The primary goal of financial management is to maximize the current value per share of
the existing stock.
True or False? - ANSWER True
CH1: When owners are managers (such as in a sole proprietorship), a firm will have agency
costs.
True or False? - ANSWER False
CH1: The process of planning and managing a firm's long-term investments is called capital
budgeting.
True or False? - ANSWER True
CH1: A corporation is a business owned by an individual who has unlimited personal liability.
True or False? - ANSWER False
CH1: Mr. Schwartz wants to start a new business decommissioning nuclear warheads and
reactors. The work will involve significant hazards, and he is concerned about protecting his
personal wealth from any losses the business might incur. Therefore, he should structure the
business as a proprietorship.
, True or False? - ANSWER True
CH1: The best definition of capital markets is a venue where long-term debt and equity
securities are bought and sold.
True or False? - ANSWER True
CH1: The management of the firm's short-term assets and liabilities is called capital structure.
True or False? - ANSWER False
CH1: An example of a primary market transaction is dealer buying newly issued shares of
stock from a corporation.
True or False? - ANSWER True
CH1: Maximization of the current earnings of the firm is the main goal of the financial
manager.
True or False? - ANSWER False
CH1: An agency problem is said to exist when there is a conflict of interest between a principal
and his or her agent.
True or False? - ANSWER True
CH2: Conceptually, capital cost allowance (CCA) is to tax like depreciation is to accounting.
