BA 2900
Introduction to Business
MIDTERM EXAM
Q&S
©2024/2025
,1. Multiple Choice: Which of the following is a key characteristic of
a corporation?
a) Limited liability for shareholders
b) Unlimited life
c) Transferability of shares
d) All of the above
Correct Answer: d) All of the above
Rationale: A corporation is a legal entity that is separate from its
owners, providing limited liability to its shareholders, an unlimited
life that does not end with the death or withdrawal of its
shareholders, and transferability of shares, which allows for the easy
exchange of ownership.
2. Fill-in-the-Blank: The process of planning, directing, and
controlling a company's financial activities is known as
____________.
Correct Answer: Financial Management
Rationale: Financial management is crucial for making decisions
that will ensure the company's financial health, such as budgeting,
forecasting, and investments.
©2024/2025
, 3. True/False: The primary goal of financial management is to
maximize current dividends per share.
Correct Answer: False
Rationale: The primary goal of financial management is to
maximize shareholder wealth, which is often achieved by increasing
the value of the company's stock and long-term growth, not just
focusing on current dividends.
4. Multiple Response: Which of the following are considered to be
advantages of debt financing?
a) Tax-deductible interest
b) No dilution of ownership
c) Increased financial leverage
d) Fixed repayment schedule
Correct Answers: a) Tax-deductible interest, b) No dilution of
ownership, c) Increased financial leverage
Rationale: Debt financing has several advantages, including tax-
deductible interest, which can lower the company's taxable income,
no dilution of ownership, meaning shareholders retain control, and
increased financial leverage, which can potentially increase returns
on equity.
5. Multiple Choice: In the context of business, the term 'leverage'
refers to:
a) The use of borrowed funds to finance assets
©2024/2025
Introduction to Business
MIDTERM EXAM
Q&S
©2024/2025
,1. Multiple Choice: Which of the following is a key characteristic of
a corporation?
a) Limited liability for shareholders
b) Unlimited life
c) Transferability of shares
d) All of the above
Correct Answer: d) All of the above
Rationale: A corporation is a legal entity that is separate from its
owners, providing limited liability to its shareholders, an unlimited
life that does not end with the death or withdrawal of its
shareholders, and transferability of shares, which allows for the easy
exchange of ownership.
2. Fill-in-the-Blank: The process of planning, directing, and
controlling a company's financial activities is known as
____________.
Correct Answer: Financial Management
Rationale: Financial management is crucial for making decisions
that will ensure the company's financial health, such as budgeting,
forecasting, and investments.
©2024/2025
, 3. True/False: The primary goal of financial management is to
maximize current dividends per share.
Correct Answer: False
Rationale: The primary goal of financial management is to
maximize shareholder wealth, which is often achieved by increasing
the value of the company's stock and long-term growth, not just
focusing on current dividends.
4. Multiple Response: Which of the following are considered to be
advantages of debt financing?
a) Tax-deductible interest
b) No dilution of ownership
c) Increased financial leverage
d) Fixed repayment schedule
Correct Answers: a) Tax-deductible interest, b) No dilution of
ownership, c) Increased financial leverage
Rationale: Debt financing has several advantages, including tax-
deductible interest, which can lower the company's taxable income,
no dilution of ownership, meaning shareholders retain control, and
increased financial leverage, which can potentially increase returns
on equity.
5. Multiple Choice: In the context of business, the term 'leverage'
refers to:
a) The use of borrowed funds to finance assets
©2024/2025
