1. Which of the following is a real asset?
a) A patent
b) A share of stock issued by Bank of New York
c) An IOU (“I owe you”) from your brother-in-law
d) A mortgage loan taken out to help pay for a new home
2. Capital budgeting decisions are used to determine how to raise
cash necessary for investments.
a. True
b. False
3. Which one of the following would correctly differentiate general
partners from limited partners in a limited partnership?
a. General partners have more job experience
b. General partners have an ownership interest
c. General partners are subject to double taxation
d. General partners have unlimited personal liability
4. Which form of organization provides limited liability for the firm
but yet allows the professionals working within that firm to be
sued personally?
a. Limited liability partnership
b. Limited liability company
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, c. Sole proprietorship
d. Professional corporation
5. Sole proprietorships face the same agency problems as those
associated with corporations.
a. True
b. False
6. When managers' compensation plans are tied in a meaningful
manner to the value of the firm, agency problems:
a. Can be reduced
b. Will be created
c. Are shifted to other stakeholders
d. Are eliminated entirely from the firm
7. A corporation is considered to be closely held when:
a. Only a few shareholders exist
b. The market value of shares is stable
c. It operations in a small geographic area
d. Management also serves as the board of directors
8. A mother in a developing country wants to borrow the equivalent
of $20 to enable her to start a small restaurant run by her family.
Which type of financing is she looking to obtain?
a. Public bond issue
b. IPO
c. Micro loan
d. Futures contract on a commodity
9. From June 2001 to June 2006, house prices in the United States
rose sharply.
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