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Capital budgeting includes the evaluation of which of the following?


A) Size of future cash flows only
B) Size and timing of future cash flows only
C) Timing and risk of future cash flows only
D) Risk and size of future cash flows only
E) Size, timing, and risk of future cash flows

F) A) and C)
G) C) and D)

Correct Answer

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If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which one of the following financial areas?


A) International finance
B) Private placements
C) Corporate finance
D) Capital management
E) Investments

F) C) and E)
G) A) and C)

Correct Answer

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A sole proprietorship:


A) provides limited financial liability for its owner.
B) involves significant legal costs during the formation process.
C) has an unlimited life.
D) has its profits taxed as personal income.
E) can generally raise significant capital from non-owner sources.

F) A) and E)
G) A) and C)

Correct Answer

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When conducting a financial analysis of a firm, financial analysts:


A) cannot use accounting information as it is historical.
B) rely solely on accounting information.
C) frequently use accounting information.
D) ignore accounting information but do use marketing information.
E) assume the future will be a repeat of the past as reflected in the firm's accounting reports.

F) A) and D)
G) A) and E)

Correct Answer

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Uptown Markets is financed with 45 percent debt and 55 percent equity.This mixture of debt and equity is referred to as the firm's:


A) capital structure.
B) capital budget.
C) asset allocation.
D) working capital.
E) risk structure.

F) A) and D)
G) A) and C)

Correct Answer

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Probably the least effective means of aligning management goals with shareholder interests is:


A) the potential for a proxy fight by an unhappy segment of shareholders.
B) basing all management bonuses on performance goals.
C) holding management salaries steady while increasing stock option grants.
D) the threat of a takeover of the firm.
E) automatically increasing management salaries on an annual basis.

F) C) and E)
G) D) and E)

Correct Answer

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Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis.Which type of entity did they create if they have no personal liability for the firm's debts?


A) Limited partnership
B) Corporation
C) Sole proprietorship
D) General partnership
E) Public company

F) C) and E)
G) B) and E)

Correct Answer

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Which one of the following functions is generally a responsibility assigned to the corporate treasurer?


A) Cost accounting
B) Data processing
C) Corporate taxes
D) Financial accounting
E) Capital expenditures

F) C) and D)
G) B) and D)

Correct Answer

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Which one of the following applies to a general partnership?


A) The firm's operations must be controlled by a single partner.
B) Any one of the partners can be held solely liable for all of the partnership's debt.
C) The profits of the firm are taxed as a separate entity.
D) Each partner's liability for the firm's debts is limited to each partner's investment in the firm.
E) The profits of a general partnership are taxed the same as those of a corporation.

F) C) and D)
G) C) and E)

Correct Answer

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What is the primary goal of financial management for a sole proprietorship?


A) Maximize net income given the current resources of the firm
B) Decrease long-term debt to reduce the risk to the owner
C) Minimize the tax impact on the proprietor
D) Maximize the market value of the equity
E) Minimize the reliance on fixed costs

F) C) and E)
G) B) and C)

Correct Answer

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Which one of the following statements is correct?


A) NASDAQ has more listed stocks than does the NYSE.
B) The NYSE is a dealer market.
C) NASDAQ is an auction market.
D) NASDAQ has the most stringent listing requirements of any U.S.exchange.
E) The trading floor for NASDAQ is located in Chicago.

F) D) and E)
G) B) and E)

Correct Answer

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The Sarbanes-Oxley Act:


A) require the corporate officers to personally attest that the financial statements are a fair representation of the company's financial results.
B) requires all corporations to fully disclose its financial dealings to the general public.
C) places the responsibility for a firm's financial statements solely on the chief financial officer.
D) requires that the board of directors be solely responsible for the firm's financial dealings.
E) places total responsibility for the financial statements of a firm on the auditor who certifies the statements.

F) None of the above
G) A) and C)

Correct Answer

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Maria is the sole proprietor of an antique store that is located in a rented warehouse.The store has an outstanding loan with the local bank but no other debt obligations.There are no specific assets pledged as security for the loan.Due to a sudden and unexpected downturn in the economy, the store is unable to generate sufficient funds to pay the loan payments due to the bank.Which of the following options does the bank have to collect the money it is owed? I.Sell the inventory and apply the proceeds to the debt II.Sell the lighting fixtures from the building and apply the proceeds to the debt III.Withdraw funds from Maria's personal account at the bank to pay the store's debt IV.Sell any assets Maria personally owns and apply the proceeds to the store's debt


A) I only
B) III only
C) I and II only
D) I, II, and III only
E) I, III, and IV only

F) B) and E)
G) B) and D)

Correct Answer

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Working capital management includes which one of the following?


A) Deciding which new projects to accept
B) Deciding whether to purchase a new machine or fix a currently owned machine
C) Determining which customers will be granted credit
D) Determining how many new shares of stock should be issued
E) Establishing the target debt-equity ratio

F) B) and D)
G) C) and D)

Correct Answer

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Will and Bill both enjoy sunshine, water, and surfboards.Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California.Will and Bill will equally share in the decision making and in the business profits or losses.Which type of business did they create if they both have full personal liability for the firm's debts?


A) Sole proprietorship
B) Limited partnership
C) Corporation
D) Joint stock company
E) General partnership

F) C) and E)
G) A) and D)

Correct Answer

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Security dealers:


A) match buyers with sellers.
B) buy and sell from their own inventory.
C) operate on a physical trading floor.
D) operate exclusively in auction markets.
E) are limited to trading non-listed stocks.

F) B) and C)
G) None of the above

Correct Answer

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Which one of the following is contained in the corporate bylaws?


A) Procedures for electing corporate directors
B) State of incorporation
C) Number of authorized shares
D) Intended life of the corporation
E) Business purpose of the corporation

F) A) and D)
G) B) and E)

Correct Answer

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Which one of the following statements is correct?


A) All of the major stock exchanges are U.S.based.
B) The NYSE was created by the National Association of Securities Dealers in the early 1930s.
C) The Chicago Stock Exchange is a dealer market.
D) OTC markets have a physical trading floor generally located in either New York City or Chicago.
E) The primary purpose of the NYSE is to match buyers with sellers.

F) None of the above
G) C) and E)

Correct Answer

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