MULTIPLE CHOICE
1.One of the tasks for financial managers when identifying projects that increase firm value is to identify those projects where
a.benefits are at least equal to the project’s costs.
b.taking the project will increase the book value of the firm’s common stock.
c.taking the project will decrease the book value of the firm’s debt outstanding.
d.none of the above
2.Which finance career classification involves analyzing a firm’s business processes and strategies as well as recommending a change in practice in order to make a firm more competitive?
a.corporate finance
b.commercial banking
c.investment banking
d.consulting
3.If you would like to work in finance by trading debt and equity securities for customers, then which finance career classification should you target?
a.corporate finance
b.commercial banking
c.investment banking
d.money management
4.Which form of invested capital is subject to most of the firm’s business and financial risk?
a.debt capital
b.equity capital
c.borrowed capital
d.intellectual capital
5.Which of the following is not a true capital-raising event for the firm?
a.primary market transaction
b.secondary market transaction
c.initial public offering
d.a corporate loan from a bank
6.Which of the following is not one of the five basic corporate finance functions?
a.external financing function
b.capital budgeting function
c.risk management
d.auditing
7.William and Theodore have decided to start a travel business called Excellent Adventures. Since their business primarily involves time-travel their clients may be harmed during a small but significant portion of the travels. Consequently, William and Theodore would like a business form that will shield their personal wealth from any legal claims that the firm might be subject to after one of the travel mishaps. If William and Theodore are the only investors in this U.S. domiciled firm, which legal form of organization would be best for Excellent Adventures to protect both William and Theodore?
a.sole proprietorship
b.partnership
c.limited partnership
d.corporation
8.Within a limited partnership context, what are the conditions on a limited partner?
a.There is a limit to the amount of capital that a limited partner can contribute, as mandated by law.
b.There is a limit to the number of limited partners that the firm may take on as investors.
c.The limited partner must remain a low level employee and cannot ever serve in a managerial role in the firm.
d.A limited partner may not take any active role in the operation of the business.
9.The rules dictating voting procedures and other aspects of corporate governance for a corporation are
a.the minutes of the board of directors meeting.
b.the corporate charter.
c.the Institute for Corporate Governance corporate governance procedures.
d.the Securities and Exchange Commission rules for corporate governance.
10.The ultimate owner(s) of an ongoing corporation are
a.the federal government.
b.the debt holders.
c.the equity holders.
d.the executive staff of the corporation.
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