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Multiple Choice QuestionsLECTURE 1: INTRODUCTION TO CORPORATE FINANCE True / False Questions 1. The liability of sole proprietors is limited to the amount of their investment in the company. 2. The separation of ownership and management is one distinctive feature of corporations. 3. A major disadvantage of partnerships is that they have "double taxation" of profits. 4. Financial assets have value because they are claims on the firm's real assets and the cash that those assets will produce. 5. Capital budgeting decisions are used to determine how to raise the cash necessary for investments. 6. A successful investment is one that increases the value of the firm. 7. Boards of directors are often portrayed as active supporters of top management. 8. Financial analysts are involved in monitoring and controlling the risk associated with investment projects and financing decisions. 9. The primary goal of any company should be to maximize current period profit. 10. Maximizing profits is the same as maximizing the value of the firm. 11. Ethical decision making in business can be viewed as a long-term investment in reputation. 12. Real assets can be intangible assets. 13. Making good investment and financing decisions is the chief task of the financial manager. 14. Pfizer's spending of $7.6 billion in 2006 on research and development of new drugs is a capital budgeting decision but not a financing decision. 15. LVMH's Issuance of a 7-year bond in 2005, raising 600 million euros is a financing decision. 16. The separation of ownership and management is one distinctive feature of both corporations and sole proprietors.
Multiple Choice Questions 17. The stockholders in a sole proprietorship are represented by: 18. Which of the following would be considered an advantage of the sole proprietorship form of organization? 19. One common reason for partnerships to convert to a corporate form of organization is that the partnership: 20. Which of the following is not an advantage to incorporating a business? 21. Unlimited liability is faced by the owners of: 22. Which of the following would not be considered a real asset? 23. Which of the following statements best distinguishes the difference between real and financial assets? 24. Financial markets are used for trading: 25. Which of the following would be considered a capital budgeting decision? 26. A financial manager facing a capital budgeting decision must decide whether to: 27. The best criterion for success in a capital budgeting decision would be to: 28. An example of a firm's financing decision would be: 29. Which of the following is NOT a financing decision? 30. The term "capital structure" refers to: 31. The term "capital structure" refers to: 32. A firm decides to pay for a small investment project through a $1 million increase in short-term bank loans. This is best described as an example of a(n): 33. The short-term decisions of financial managers are comprised of: 34. Which of the following represents a financing decision? 35. The primary goal of corporate management should be to: Essay Questions 36. What general factors may influence the decision of whether to organize as a sole proprietorship, a partnership, or a corporation? 37. Discuss why corporations typically exhibit separation of ownership and management, as distinguished from sole proprietorships or partnerships. 38. Why is limited liability such an important aspect to investors? 39. Distinguish between a firm's capital budgeting decision and financing decision. 40. Discuss the interrelationship between a firm's financing and capital structure decisions. 41. Who are the financial managers in large corporations? 42. What does "real asset" mean? 43. Who is the financial manager? 44. Why does it make sense for corporations to maximize their market value? 45. Is value maximization always ethical?
Date: 2015-12-11; view: 3451
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