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Chapter 1 Study Notes: Chapter 1 (Old Exam Conceptual Questions)

The document contains 15 multiple choice questions that appear to be from an old exam on corporate finance concepts. The questions cover topics such as the roles and responsibilities of different corporate officers, key differences between sole proprietorships, partnerships and corporations, components of capital structure and financial management, and characteristics of different types of financial markets.

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Dami Alalade
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76 views

Chapter 1 Study Notes: Chapter 1 (Old Exam Conceptual Questions)

The document contains 15 multiple choice questions that appear to be from an old exam on corporate finance concepts. The questions cover topics such as the roles and responsibilities of different corporate officers, key differences between sole proprietorships, partnerships and corporations, components of capital structure and financial management, and characteristics of different types of financial markets.

Uploaded by

Dami Alalade
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 1 Study Notes

Chapter 1 [Old exam conceptual questions]


1- The corporate officer generally responsible for tasks related to tax management, cost
accounting, financial accounting, and data processing is the:
A) Corporate Treasurer.
B) Director.
C) Corporate Controller.
D) Chairman of the Board.
E) Vice President of Operations

2- Ann is interested in purchasing Ted's factory. Since Ann is a poor negotiator, she hires Mary
to negotiate the 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) Mary is the agent while Ted and Ann together are principals.
D) Ann is the principal and Mary is the agent.
E) Ann is the principal and Ted is the agent.

3- The corporate officer generally responsible for tasks related to cash and credit management,
financial planning, and capital expenditures is the:
A) Corporate Treasurer.
B) Director.
C) Corporate Controller.
D) Chairman of the Board.
E) Vice President of Operations

4- Which of the following markets is considered a dealer market?


A) The Toronto Stock Exchange
B) The over-the-counter (OTC) market
C) The Ontario Securities Commission
D) New York Stock Exchange
E) None of the above

5- Which of the following are components of the Pay-at-Risk Compensation?


I. Salary
II. Restricted Stocks
III. Bonus
IV. Stock Options
A) I and II only
B) II and III only
C) I, III, and IV only
D) II, III, and IV only
E) I, II, III, and IV
6- A ________________ can lose, at most, what he/she has already invested in a firm.
I. common stockholder
II. limited partner
III. general partner
IV. sole proprietor
A) I only
B) I and II only
C) I, II, and IV only
D) II, III, and IV only
E) II and III only

7- Which of the following is an advantage of ownership of a corporation compared to that of a


sole proprietorship?
A) It is more difficult to transfer ownership in a corporation.
B) It is the simplest to start.
C) The owners of the corporation have unlimited liability for the firm's debts.
D) Dividends received by the corporation's shareholders are tax-exempt.
E) The corporation has an unlimited life.

8- Which of the following is considered a benefit of the corporate form of organization?


I. Ease of the transfer of ownership
II. Limited liability
III. Double taxation
A) I only
B) II only
C) I and II only
D) I and III only
E) I, II, and III

9- Capital structure refers to which of the following issues?


I. From whom should the firm borrow funds?
II. How much debt should the firm have in relation to its level of equity?
III. What level of current assets is required to maintain the firm's operational level?
IV. How much risk is associated with the future cash flows of a project?
A) II only
B) III only
C) I and II only
D) I, II, and III only
E) I, II, and IV only
10- Which one of the following statements concerning a partnership is true?
A) Under a general partnership, only the key partner is personally liable for the
business debts.
B) Limited partners in a limited partnership should be actively involved in
management decisions.
C) Income from a limited partnership is taxed as corporate income.
D) A primary advantage of a partnership is the ease of transferring ownership.
E) A partnership terminates at the death of any partner.

11- The Corporate Treasurer is in charge of:


A) Cost accounting.
B) Credit management.
C) Data processing.
D) Tax management.
E) Financial accounting.

12- Which of the following statements concerning auction markets are true?
I. The TSX is an auction market.
II. The OTC is an auction market.
III. The NYSE is an auction market.
IV. Auction markets have a physical location.
A) I and II only
B) II and III only
C) I, II, and IV only
D) I, III, and IV only
E) I, II, and III only

13- Which of the following is not considered one of the basic questions of financial
management?
A) What long-term investments should the firm choose.
B) At what rate of interest should a firm borrow.
C) Where will the firm get the long-term financing to pay for its investments.
D) What mixture of debt and equity should the firm use to fund its operations.
E) How should the firm manage its working capital, i.e., its everyday financial
activities.
14- The death of the firm's owner(s) does not effectively dissolve which type(s) of organization?
I. Sole proprietorship
II. Partnership
III. Corporation
A) I only
B) II only
C) III only
D) I and III only
E) II and III only

15- Two of the primary advantages of a sole proprietorship are the:


A) Ease of company formation and limited liability.
B) Ease of company formation and less regulation.
C) Ease of ownership transfer and less regulation.
D) Ease of ownership transfer and ease of company formation.
E) Ability to raise capital and less regulation.

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