Chapter 01 Test Bank – Static Key
1.
The liability of sole proprietors is limited to the amount of their investment in the company.
2.
General partners have limited personal liability for business debts in a limited partnership.
3.
The separation of ownership and management is one distinctive feature of corporations.
4.
A major disadvantage of partnerships is that they have double taxation of profits.
5.
Financial assets have value because they are claims on the firm’s real assets and the cash that those assets will produce.
6.
Capital budgeting decisions are used to determine how to raise the cash necessary for investments.
7.
A successful investment is one that increases the value of the firm.
8.
Facebook’s decision to spend $700 million to acquire Instagram is an investment decision.
9.
Boards of directors are generally appointed by the firm’s senior officers.
10.
Financial analysts are involved in monitoring the risk associated with investment projects and financing decisions.
11.
The primary goal of any company should be to maximize current period profits.
12.
Maximizing profits is the same as maximizing the value of the firm.
13.
The Dodd-Frank financial reform law in 2010 granted shareholders a binding vote on executive compensation.
14.
Sole proprietorships face the same agency problems as those associated with corporations.
15.
Real assets can be intangible assets.
16.
Making good investment and financing decisions is the chief task of the financial manager.
17.
If a project’s value is less than its required investment, then the project is financially attractive.
18.
GlaxoSmithKline’s spending of $6 billion in 2012 on research and development of new drugs is a capital budgeting decision
but not a financing decision.
19.
Volkswagen’s issuance of a 2.5 billion euro convertible bond is a financing decision.
20.
An IOU (“I owe you”) from your brother-in-law is a financial asset.
21.
The separation of ownership and management is one distinctive feature of both corporations and sole proprietors.
22.
Shareholders welcome higher short-term profits even when they damage long-term profits.
23.
A well-designed compensation package can help a firm achieve its goal of maximizing market value.
24.
While control of large public companies in the United States is exercised through the board of directors and pressure from
the stock market, in many other countries the stock market is less important and control shifts to major stockholders,
typically banks and other companies.
25.
Established firms can create value by developing long–term relationships and maintaining a good reputation.
26.
Which one of these is a disadvantage of the corporate form of business?
27.
Which one of the following gives a corporation its permanence?
28.
In a partnership form of organization, income tax liability, if any, is incurred by:
29.
Which one of the following would correctly differentiate general partners from limited partners in a limited partnership?
30.
Which form of organization provides limited liability for the firm but yet allows the professionals working within that firm to
be sued personally?
31.
Which of the following is least likely to be discussed in the articles of incorporation?
32.
When a corporation fails, the maximum that can be lost by an individual shareholder is:
33.
Which of the following is a disadvantage to incorporating a business?
34.
Unlimited liability is faced by the owners of:
35.
Which one of these statements correctly applies to a limited partnership?
36.
In the case of a limited liability partnership, ________ has/have limited liability.
37.
A board of directors is elected as a representative of the corporation’s:
38.
The legal “life” of a corporation is:
39.
When the management of a business is conducted by individuals other than the owners, the business is most likely to be a:
40.
“Double taxation” refers to:
41.
A corporation is considered to be closely held when:
42.
Corporations are referred to as public companies when their:
43.
A common problem for closely held corporations is:
44.
Corporate managers are expected to make corporate decisions that are in the best interest of:
45.
Which one of the following is a financial asset?
46.
Which of the following statements best distinguishes the difference between real and financial assets?
47.
Which one of the following is a real asset?
48.
Which one of these is not considered to be a security?
49.
Corporations that issue financial securities such as stock or debt obligations to the public do so primarily to:
50.
Which one of the following would be considered a capital budgeting decision?
51.
Which one of these is a capital budgeting decision?
52.
The best criterion for success in a capital budgeting decision would be to: