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FIN219T FI302 EXAM 1 PRACTICE QUIZ CH1-5 QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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FIN219T FI302 EXAM 1 PRACTICE QUIZ CH1-5 QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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FIN219T FI302 EXAM 1 PRACTICE QUIZCH1-5 QUESTIONS AND ANSWERS WITH
SOLUTIONS 2024
Business finance includes determining which long-term assests a firm should purchase. A) True B) False -
ANSWER A) True
The board of directors has the power to act on behalf of the shareholders to hire and fire the operating
managers of the firm. In a legal sense, the directors are "principals" and the shareholders are "agent." A)
True B) False - ANSWER B) False
In capital budgeting the financial manager tries to identify investment opportunities that will increase
the value of the firm. A) True B) False - ANSWER A) True
Three advantages of the corporate form of organization are the ease of transfer of ownership, limited
liability for the shareholders and an unlimited life for the business entity. A) True B) False - ANSWER A)
True
The intent of the Sarbanes-Oxley Act of 2002 is to protect the public from accounting fraud and financial
malpractice. A) True B) False - ANSWER A) True
Financial managers are responsible for determining: I. how suppliers will be paid II. The appropriate level
of debt for a firm III. Which projects a firm should undertake IV. How to invest the firm's cash A) I and II
only B) II and III only C) I, II, and III only D) II, III, and IV only E) I, II,III, and IV - ANSWER E) I, II, III and IV
Ann is interested in purchasing Ted's factory. Since Ann is a poor negotiator, she hires Mary to negotiate
a purchase price. Identify the parties to this transaction. A) Mary is the principal and Ann is the agent. B)
Ted is the principal and Ann is the agent. C) Ted is the agent and Ann is the principal. D) Ann is the
principal and Mary is the agent. E) Mary is the principal and Ted is the agent - ANSWER D) Ann is the
principal and Mary is the agent.
Which of the following apply to dealer markets? I. over-the-counter trading II. Individuals buying and
selling for themselves, at their own risk III. A market with a physical location IV. The matching of buyers
with sellers A) I and II only B) II and III only C) III and IV only D) I, II, and IV only E) I and IV only - ANSWER
A) I and II only
, At least one of the owners has unlimited liability under which of the following forms of business
organization? I. sole proprietorship II. General partnership III. Limited partnership IV. Limited liability
company A) I and II only B) II and III only C) I, II, and IV only D) I, II, and III only E) I, II, III, and IV - ANSWER
D) I, II and III only
Tasks related to tax mangement, cost accounting, financial accounting, and data processing are the
responsibility of which corporate officer? A) treasurer B) chief executive officer C) controller D) chairman
of the board E) chief operations officer - ANSWER C) controller
All stocks that trade on the New York Stock Exchange are: A) over-the-counter securities B) primary
market securities C) AMEX securities D) listed securities E) privately placed securities - ANSWER D) listed
securities
Which of the following statements regarding agency problems and costs are correct? I. An agency
problem exists when there is a conflict of interest between the stockholders and the management of a
firm. II. An agency problem exists when there is conflict of interest between a principal and an agent. III.
An agency cost occurs when firm management avoids risky projects that would favorably affect the stock
price because the managers are worried about keeping their jobs. IV. An agency cost occurs when
mangement chooses an action that benefits the shareholders but reduces management compensation.
A) I and II only B) II and III only C) I, III, and IV only D) I,II, and III only E) II,III, and IV only - ANSWER D) I, II,
and III only
Which of the following are stakeholders in a firm? I. employees II. Customers III. Stockholders IV.
Government A) I and II only B) III only C) I and III only D) II and IV only E) I, II, and IV only - ANSWER E) I,
II, and IV only
Which one of the following statements concerning the financial markets is correct? A) There are about
three times as many companies lsited on NASDAQ as on the NYSE. B) The NYSE lists about 85 percent of
all firms that trade publicly. C) In genral, stocks listed on NASDAQ trade more actively than those listed
on the NYSE. D) All large firms, such as General Electric and Microsoft, trade on the NYSE. E) The trading
floor for NASDAQ is located in Chicago. - ANSWER A) There are about three times as many companies
listed on NASDAQ as on the NYSE.
Under which of the following forms of business organization are the losses to an owner limited to the
amount which he or she has invested in the organization? I. common stockholder II. Limited partner III.
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