Which of the following applies to minimize the disruptions to the continuation of business in a general partnership?
Which of the following forms of business organization has the greatest ability to attract new capital?
A) sole proprietorship
B) general partnership
D) none of the above
2) Which of the following forms of business organizations provide limited liability to all its owners?
A) limited partnership
B) general partnership
D) both B and C
3) Which of the following best describes the goal of the firm?
A) the maximization of the total market value of the firm’s common stock
B) risk minimization
C) profit maximization
D) All of the above are equally important.
4) Which of the following categories of owners have limited liability?
A) sole proprietors
B) shareholders of a corporation
C) general partners
D) both A and B
5) Which of the following applies to minimize the disruptions to the continuation of business in a general partnership?
A) the partnership can be extended only through the courts of law.
B) there is no way to accomplish this; that is the partnership dies when the partner dies or retires or withdraws.
C) No continuation is possible upon the death of a partner but only forcases of withdrawal of a partner and hence is rarely practiced.
D) the partnership can be extended through procedures specified in the partnership agreement.
6) If an investor is said to be risk averse then that investor
A) is not behaving in a typical manner.
B) will only take on the least risk possible.
C) will only take on additional risk if they expect to be compensated in the form of additional return.
D) will not be induced to take on any risk.
7) Maximization of shareholder wealth as a goal is superior to profit maximization because
A) it considers the time value of the money.
B) following the goal of shareholder wealth maximization will ensure high stock prices.
C) it considers uncertainty.
D) A and C
8) Which of the following is an advantage of the sole proprietorship?
A) easily transferred ownership
B) limited liability for its owners
C) no significant legal requirements for starting the business
D) double taxation for its owners
9) Which of the following is considered an advantage of the corporate form of business organization?
A) limited liability of owners
B) ability to raise large amounts of capital
C) ease of transferring ownership
D) all of the above
E) none of the above
10) Capital market transactions include which of the following?
A) common stock of a public corporation
B) all securities that are purchased in the open market
C) any security that is purchased from a brokerage firm that is well capitalized
D) U.S. Treasury bills
E) all of the above
11) The costs associated with issuing securities to the public can be high. Some types of securities have greater expenses associated with them than others. Which of the following is the most costly security to issue?
A) corporate bonds
B) preferred stock
C) common stock
D) All of the above are about equal in cost to issue.
12) When an investment-banking firm underwrites an issue of securities the firm is performing which of the following?
A) offering to purchase the securities from the firm thereby assuming the risk of resale to investors
B) giving legal advice to the firm that is issuing the securities
C) agreeing to provide insurance that the firm’s securities will sell for a price that is established by the firm
D) agreeing to market the securities to investors for a fee
13) Which of the following refers to all institutions and procedures that provide for transactions in short-term debt instruments generally issued by borrowers with very high credit ratings?
A) commercial banks
B) capital market
C) stock market
D) money market
14) Which of the following is an advantage of a private placement?
A) Every issue is standardized thus it is more efficient.
B) It is slower thus it is a less risky process.
C) Greater fees for the investment bankers.
D) None of the above are true.
15) The majority of public offerings of securities must be registered with the Securities and Exchange Commission a costly and time consuming process. Which of the following methods allows corporations with the ability to speed up the registration process?
A) File a secondary offering.
B) Offer a privileged subscription.
C) File a shelf registration.
D) Offer an underwriting.
16) Which of the following does require registration with the SEC?
A) issues sold entirely intrastate
B) public utility and railroad issues
C) public issues with proceeds of more than $1.5 million annually
D) issues with a maturity of 270 days or less
E) All of the above must be registered with the SEC.
17) Which of the following is not a benefit provided by the existence of organized security exchanges?
A) establishing and publicizing fair security prices
B) helping businesses raise new capital
C) standardization of all debt agreements
D) providing a continuous market
18) Which of the below does not belong on the asset side of a balance sheet?
A) accounts receivable
D) accumulated depreciation
19) Which of the below belongs in the liability section of a balance sheet?
A) accumulated depreciation
B) interest expense
C) accounts payable
D) preferred stock
20) Which of the below belongs on the asset side of a balance sheet?
A) common stock
C) accounts receivable
D) depreciation expense
21) Which of the following best describes free cash flow from an asset perspective?
A) cash flows generated from accruals and accounts payable
B) earnings before interest and taxes
C) cash available to common stockholders that have no cost to the firm
D) the after-tax cash flows generated from operations less the firm’s investments in operating working capital fixed and other assets
22) What information does a firm’s statement of cash flows provide to the viewing public?
A) a report of revenues and expenses for a defined period of time
B) a complete listing of all of a firm’s cash receipts and cash expenditures for a defined period of time
C) an itemization of all of a firm’s assets liabilities and equity for a defined period of time
D) a report of investments made and their cost for a specific period of time
23) Corporations are allowed to deduct specific expenses for income tax purposes. Several of these expenditures are deductible but they are not cash expenses. Which of the following is not a cash expenditure but is still deductible for income tax purposes?
A) depreciation expense
B) marketing expenses
C) wages and salaries
D) payroll tax payments
24) A Cash Flow Statement can be used to answer a variety of questions. Which of the following would this statement not be likely to answer?