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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