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Introduction to Corporate Finance________ 1. Determining the mix of debt and equity to be used to finance a firm is a:
a. capital budgeting decision.
b. working capital management decision.
c.capital structure decision.
________ 2. Which one of the following correctly describes the management structure of a firm as presented
in the
textbook?
a.the data processing manager reports to the treasurer
b. the treasurer reports to the controller
c.the cash manager reports to the treasurer
d. the treasurer reports to the president
________ 3. The owner of a sole proprietorship:
a. has unlimited legal liability only if he or she is actively involved in the daily operations of the
business.
b. is personally liable for all of the company’s debts.
c.has created an organization with an unlimited life.
d. suffers from double taxation.
________ 4. Which one of the following statements concerning partnerships is correct?
a.All partners enjoy limited liability if they create a general partnership of equal shares.
b. A limited partner actively participates in running the partnership on a daily basis.
c.A general partnership terminates whenever one general partner decides to sell her share of the
business.
d. A general partnership has an unlimited life while a limited partnership has a limited
life.
________ 5. Which one of the following statements concerning corporations is correct?
a.The rules describing how a corporation regulates its own existence are set forth in the bylaws.
b. The procedures to be followed for electing corporate directors are included in the
articles of incorporation.
c.Corporate income is taxed only when the corporate earnings are distributed to shareholders.
d. A corporation is the easiest form of business entity to create.
________ 6. A corporation borrows money using:
a.its own name. b. the names of its directors. c. the name of its CEO.
________ 7. Owners prefer that LLCs be taxed like a:
a. sole proprietorship. b. partnership. c. corporation.
________ 8. The goal of financial management is to maximize the current:
a.net income of the firm.
b. dividends per share.
c.resources of the firm.
d. value of the existing stock.
________ 9. Financial managers are concerned with which of the following aspects of future cash flows?
a. timing only
b. risk only
c. risk and size only
d. timing, risk, and size
________ 10. Which one of the following statements concerning the financial markets is correct?
a.Shareholders exchange shares with each other in the primary market.
b. The New York Stock Exchange is an auction market.
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