Chapter 1 Quiz, Finance and the Financial Manager
1.
Generally, a corporation is owned by its:
A.
Managers
B.
Board of Directors
C.
Shareholders
D.
All of the above.
2.
Limited liability is an important feature of:
A.
Sole proprietorships
B.
Partnerships
C.
Corporations
D.
All of the above
3.
The following are examples of real assets except:
A.
Machinery
B.
Common stock
C.
Office buildings
D.
Patents
4.
A firm's investment decision is also called the:
A.
Financing decision
B.
Capital budgeting decision
C.
Liquidity decision
D.
None of the above
5.
The treasurer usually oversees the following functions of a corporation except:
A.
Preparation of financial statements
B.
Investor relationships
C.
Cash management
D.
Obtaining finances
6.
The treasurer is usually responsible the following functions of a corporation except:
A.
Raising new capital
B.
Cash management
C.
Banking relationships
D.
Internal accounting
7.
The following are advantages of separation of ownership and management of corporations except:
A.
Corporations can exist forever.
B.
Facilitate transfer of ownership without affecting the operations of the firm.
C.
Hire professional managers
D.
Incur agency costs
8.
The financial goal of a corporation is to:
A.
Maximize sales
B.
Maximize profits
C.
Maximize the value of the firm to the shareholders
D.
Maximize managers' benefits
9.
Agency costs are:
A.
Costs incurred resulting in conflicts of interest between the shareholders and the managers of a corporation.
B.
Costs of monitoring the managers' actions
C.
Both A and B
D.
None of the above
10.
According to the complex web of contracts (nexus of contracts) approach, written contracts are always:
A.
Complete and absolute
B.
Incomplete
C.
Supplemented by understandings
D.
B and C
11.
Financial institutions facilitate individuals and firms in:
A.
Borrowing
B.
Lending
C.
Pooling of risks
D.
All of the above
12.
Generally, a corporation is owned by its shareholders.
A.
True
B.
False
13.
The following are examples of real assets except:
A.
Machinery
B.
Common stock
C.
Office buildings
D.
Patents
14.
The financial goal of a corporation is to:
A.
Maximize sales
B.
Maximize profits
C.
Maximize the value of the firm to the shareholders
D.
Maximize managers' benefits
15.
Agency costs are:
A.
Costs incurred resulting in conflicts of interest between the shareholders and the managers of a corporation.
B.
Costs of monitoring the managers' actions
C.
Both A and B
D.
None of the above
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