FIN301 Exam 1 Questions with Verified
Answers
Which of the following is a stakeholder of a firm?
-Taxpayers
-Central bank
-The firm's competitor
-Employees - Answer-employees
The audit committee reports directly to the - Answer-board of directors
Which of the following is an example of frivolous agency costs?
-Excessive perks.
-Investment in Land & Buildings.
-Providing lunch for the employees.
-Hiring external auditors to certify accounting statements despite having internal
auditors. - Answer-excessive perks
A stakeholder is: - Answer-someone who has a claim on the cash flows of the firm.
Which of the following is a stakeholder?
-An employee
-A lender
-The IRS
-All of the above - Answer-all of the above
What is NOT a characteristic of a shareholder?
-Expects to receive dividends.
-Expects to receive a capital gain on their investment.
-Expects to receive interest.
-Expects to have rights as defined in the corporation's charter and bylaws. - Answer-
expects to receive interest
The cash remaining with the firm after paying its operating expenses, making payments
to creditors, and taxes is called: - Answer-residual cash flow.
Current liabilities are liabilities that: - Answer-must be paid within a year
The capital budgeting decision process can be described as - Answer-which productive
assets a firm should purchase.
Capital budgeting decisions generally have the most effect on: - Answer-the asset
portion of the balance sheet.
, Financial markets in which equity and debt instruments with maturities greater than one
year are traded are called: - Answer-capital markets
The profitability of a firm can be negatively affected by: - Answer-either too much
inventory or too little inventory
Which of the following business organizational forms create(s) a tax liability on income
at the personal income tax rate? - Answer-Both Sole proprietorship and Partnership
Which of the following types of owners is protected by limited liability? - Answer-owner
of a corporation
Which form(s) of business organization generate(s) the majority of business revenues
and profits in the United States? - Answer-corporation
Which of the following organizational forms is subject to the Securities and Exchange
Commission (SEC) regulations? - Answer-public corporation
Which of the following is considered a hybrid organizational form? - Answer-limited
liability partnership
If a firm has had an agency conflict which is reflected by a poor performing stock for a
long period of time, then the firm may become a target of: - Answer-a corporate raider.
Who among the following is the "principal" in the agency relationship of a corporation? -
Answer-A stockholder holding 10% or more of any class of voting stock
From the owner's perspective, which of the following should be the primary focus of
managers?
-None of the above should be the primary focus.
-COGS Minimization
-Revenue maximization
-Profit maximization - Answer-None of the above should be the primary focus.
Within a financial system, money flows indirectly through: - Answer-financial institutions.
Underwriting is the process by which an investment banker - Answer-helps a company
sell its new security issue.
Which of the following statements is incorrect? - Answer-The retail individual investor is
a common direct participant in the direct financial markets
A primary market is a market for - Answer-companies to sell new securities directly to
investors.
Answers
Which of the following is a stakeholder of a firm?
-Taxpayers
-Central bank
-The firm's competitor
-Employees - Answer-employees
The audit committee reports directly to the - Answer-board of directors
Which of the following is an example of frivolous agency costs?
-Excessive perks.
-Investment in Land & Buildings.
-Providing lunch for the employees.
-Hiring external auditors to certify accounting statements despite having internal
auditors. - Answer-excessive perks
A stakeholder is: - Answer-someone who has a claim on the cash flows of the firm.
Which of the following is a stakeholder?
-An employee
-A lender
-The IRS
-All of the above - Answer-all of the above
What is NOT a characteristic of a shareholder?
-Expects to receive dividends.
-Expects to receive a capital gain on their investment.
-Expects to receive interest.
-Expects to have rights as defined in the corporation's charter and bylaws. - Answer-
expects to receive interest
The cash remaining with the firm after paying its operating expenses, making payments
to creditors, and taxes is called: - Answer-residual cash flow.
Current liabilities are liabilities that: - Answer-must be paid within a year
The capital budgeting decision process can be described as - Answer-which productive
assets a firm should purchase.
Capital budgeting decisions generally have the most effect on: - Answer-the asset
portion of the balance sheet.
, Financial markets in which equity and debt instruments with maturities greater than one
year are traded are called: - Answer-capital markets
The profitability of a firm can be negatively affected by: - Answer-either too much
inventory or too little inventory
Which of the following business organizational forms create(s) a tax liability on income
at the personal income tax rate? - Answer-Both Sole proprietorship and Partnership
Which of the following types of owners is protected by limited liability? - Answer-owner
of a corporation
Which form(s) of business organization generate(s) the majority of business revenues
and profits in the United States? - Answer-corporation
Which of the following organizational forms is subject to the Securities and Exchange
Commission (SEC) regulations? - Answer-public corporation
Which of the following is considered a hybrid organizational form? - Answer-limited
liability partnership
If a firm has had an agency conflict which is reflected by a poor performing stock for a
long period of time, then the firm may become a target of: - Answer-a corporate raider.
Who among the following is the "principal" in the agency relationship of a corporation? -
Answer-A stockholder holding 10% or more of any class of voting stock
From the owner's perspective, which of the following should be the primary focus of
managers?
-None of the above should be the primary focus.
-COGS Minimization
-Revenue maximization
-Profit maximization - Answer-None of the above should be the primary focus.
Within a financial system, money flows indirectly through: - Answer-financial institutions.
Underwriting is the process by which an investment banker - Answer-helps a company
sell its new security issue.
Which of the following statements is incorrect? - Answer-The retail individual investor is
a common direct participant in the direct financial markets
A primary market is a market for - Answer-companies to sell new securities directly to
investors.
