Question 1

The first Nobel Prizes given to finance professors were for their contributions to capital structure theory and portfolio theories of risk and return.

Accepted Answer

A) True 
 B)False

Question 2

The Sarbanes Oxley Act reduced agency conflicts by giving corporate managers greater flexibility to select their preferred candidates to the Board of Directors.

Accepted Answer

A) True 
 B)False

Question 3

In the past, the study of finance has included

Accepted Answer

A)   mergers and acquisitions.
B)   raising capital.
C)   bankruptcy.
D)   all of these.

Question 4

Corporate restructuring has been one result of more institutional ownership. Restructuring can cause

Accepted Answer

A)   changes in the assets and liabilities of the firm.
B)   the sale of low-profit margin divisions.
C)   the removal of current management and/or large reductions in the workforce.
D)   all of these.

Question 5

A limited partnership limits the profits partners may receive.

Accepted Answer

A) True 
 B)False

Question 6

There are some serious problems with the financial goal of maximizing the earnings of the firm.

Accepted Answer

A) True 
 B)False

Question 7

A major focus of the Sarbanes Oxley Act is to make sure that publicly traded companies accurately present their assets, liabilities and income in their financial statements.

Accepted Answer

A) True 
 B)False

Question 8

The issues of corporate governance are really agency problems.

Accepted Answer

A) True 
 B)False

Question 9

The Sarbanes-Oxley Act set up the Public Company Accounting Oversight Board with the responsibility for all of the following except

Accepted Answer

A)   auditing standards within companies.
B)   controlling the quality of audits.
C)   Certifying the competence of financial executives.
D)   setting rules and standards for the independence of auditors.

Question 10

Companies that perform well

Accepted Answer

A)   can sell their stock for a lower price
B)   can minimize dilution when issuing new shares
C)   can issue debt at a lower interest rate
D)   two of the above

Question 11

The increase in the internationalization of financial markets has led to

Accepted Answer

A)   companies searching the global financial markets for low cost funds.
B)   an increase in American Depository Receipts (ADRs)  on the New York Stock Exchange.
C)   an increase in debt obligations denominated in foreign currency on U.S. corporate balance sheets.
D)   all of these.

Question 12

Profits of a Subchapter S corporation are taxed at corporate tax rates.

Accepted Answer

A) True 
 B)False

Question 13

Many companies have cross-listed their stock on multiple international stock exchanges and more than several hundred foreign companies have listed their shares on the New York Stock Exchange.

Accepted Answer

A) True 
 B)False

Question 14

As mergers, acquisitions, and restructuring have increased in importance, agency theory has become more important in assessing whether

Accepted Answer

A)   a stock repurchase should be undertaken.
B)   shareholder goals are truly being achieved by managers in the long run.
C)   managers are actually agents or only employees of the firm.
D)   managers and owners are actually the same people with the same interests.

Question 15

Higher return always induces stockholders to invest in a company.

Accepted Answer

A) True 
 B)False

Question 16

One advantage of the corporate form of organization is that income received by stockholders is not taxable since the corporation already paid taxes on the income distributed.

Accepted Answer

A) True 
 B)False

Question 17

The sole proprietorship represents single-person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs.

Accepted Answer

A) True 
 B)False

Question 18

The entity that is responsible for establishing the allocation and cost of capital is

Accepted Answer

A)   the corporation
B)   the economy
C)   investors
D)   customers

Question 19

What is the primary goal of financial management?

Accepted Answer

A)   Increased earnings
B)   Maximizing cash flow
C)   Maximizing shareholder wealth
D)   Minimizing risk of the firm

Question 20

Match the following with the questions below:

Accepted Answer

The answer of Match the following with the questions below:
...

Exam 1: The Goals and Functions of Financial Management

Many companies have cross-listed their stock on multiple international stock exchanges and more than several hundred foreign companies have listed their shares on the New York Stock Exchange.

Correct AnswerverifiedShow Answer

Match the following with the questions below:

Correct AnswerverifiedShow Answer

Higher return always induces stockholders to invest in a company.

Correct AnswerverifiedShow Answer

Profits of a Subchapter S corporation are taxed at corporate tax rates.

Correct AnswerverifiedShow Answer

One advantage of the corporate form of organization is that income received by stockholders is not taxable since the corporation already paid taxes on the income distributed.

Correct AnswerverifiedShow Answer

Companies that perform well

Correct AnswerverifiedShow Answer

The issues of corporate governance are really agency problems.

Correct AnswerverifiedShow Answer

The sole proprietorship represents single-person ownership and offers the advantages of simplicity of decision making and low organizational and operating costs.

Correct AnswerverifiedShow Answer

The Sarbanes Oxley Act reduced agency conflicts by giving corporate managers greater flexibility to select their preferred candidates to the Board of Directors.

Correct AnswerverifiedShow Answer

The first Nobel Prizes given to finance professors were for their contributions to capital structure theory and portfolio theories of risk and return.

Correct AnswerverifiedShow Answer

The Sarbanes-Oxley Act set up the Public Company Accounting Oversight Board with the responsibility for all of the following except

Correct AnswerverifiedShow Answer

There are some serious problems with the financial goal of maximizing the earnings of the firm.

Correct AnswerverifiedShow Answer

In the past, the study of finance has included

Correct AnswerverifiedShow Answer

The increase in the internationalization of financial markets has led to

Correct AnswerverifiedShow Answer

What is the primary goal of financial management?

Correct AnswerverifiedShow Answer

A limited partnership limits the profits partners may receive.

Correct AnswerverifiedShow Answer

As mergers, acquisitions, and restructuring have increased in importance, agency theory has become more important in assessing whether

Correct AnswerverifiedShow Answer

A major focus of the Sarbanes Oxley Act is to make sure that publicly traded companies accurately present their assets, liabilities and income in their financial statements.

Correct AnswerverifiedShow Answer

The entity that is responsible for establishing the allocation and cost of capital is

Correct AnswerverifiedShow Answer

Corporate restructuring has been one result of more institutional ownership. Restructuring can cause

Correct AnswerverifiedShow Answer

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