Exam (elaborations)
Essentials of Corporate Finance 9th Edition Ross - Test Bank
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, Chapter 01 Test Bank - StaticStudent: ___________________________________________________________________________
1. Jenna has been promoted and is now in charge of all external financing. In other words, she is in charge
of:
A. capital structure management.
B. asset allocation.
C. risk management.
D. capital budgeting.
E. working capital management.
2. Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity
is referred to as the firm's:
A. capital structure.
B. capital budget.
C. asset allocation.
D. working capital.
E. risk structure.
3. Theo’s BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these
accounts are referred to as:
A. capital structure decisions.
B. capital budgeting decisions.
C. working capital management.
D. operating management.
E. fixed account structure.
4. Margie opened a used bookstore and is both the 100 percent owner and the store's manager. Which
type of business entity does Margie own if she is personally liable for all the store's debts?
A. Sole proprietorship
B. Limited partnership
C. Corporation
D. Joint stock company
E. General partnership
5. Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a
business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will
equally share in the decision making and in the business profits or losses. Which type of business did they
create if they both have full personal liability for the firm's debts?
A. Sole proprietorship
,B. Limited partnership
C. Corporation
D. Joint stock company
E. General partnership
6. Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a
75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?
A. Limited partnership
B. Corporation
C. Sole proprietorship
D. General partnership
E. Public company
7. The potential conflict of interest between a firm's owners and its managers is referred to as which type of
conflict?
A. Organizational
B. Structural
C. Formative
D. Agency
E. Territorial
8. An employee has a claim on the cash flows of Martin’s Machines. This claim is defined as a claim by one
of the firm's:
A. residual owners.
B. shareholders.
C. financiers.
D. provisional partners.
E. stakeholders.
9. The shareholders of Weil’s Markets would benefit if the firm were to be acquired by Better Foods.
However, Weil’s board of directors rejects the acquisition offer. This is an example of:
A. a corporate takeover.
B. a capital structure issue.
C. a working capital decision.
D. an agency conflict.
E. a compensation issue.
10. When conducting a financial analysis of a firm, financial analysts:
A. cannot use accounting information as it is historical.
B. rely solely on accounting information.
C. frequently use accounting information.
D. ignore accounting information but do use marketing information.
E. assume the future will be a repeat of the past as reflected in the firm’s accounting reports.
, 11. Jamie is employed as a currency trader in the Japanese yen market. Her job falls into which one of the
following areas of finance?
A. International finance
B. Financial institutions
C. Corporate finance
D. Capital management
E. Personal finance
12. If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in
which one of the following financial areas?
A. International finance
B. Private placements
C. Corporate finance
D. Capital management
E. Investments
13. Which one of the following occupations best fits into the corporate area of finance?
A. Mortgage broker
B. Treasury bill analyst
C. Chief financial officer
D. Insurance risk manager
E. Local bank manager
14. Which one of the following functions is generally a responsibility assigned to the corporate treasurer?
A. Cost accounting
B. Data processing
C. Corporate taxes
D. Financial accounting
E. Capital expenditures
15. Which one of the following functions should be assigned to the corporate treasurer rather than to the
controller?
A. Data processing
B. Cost accounting
C. Tax management
D. Cash management
E. Financial accounting
16. Which one of the following correctly defines a common chain of command within a corporation?
A. The controller reports directly to the corporate treasurer.
B. The treasurer reports directly to the board of directors.
C. The chief financial officer reports directly to the board of directors.
D. The credit manager reports directly to the controller.
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