FIN 3403 CHAPTER 1 REVIEW QUESTIONS
WITH VERIFIED SOLUTIONS
Which one of the following terms is defined as the management of a firm's long-term
investments?
Working capital management.
Financial allocation.
Agency cost analysis.
Capital budgeting.
Capital structure.
Capital Budgeting
Which one of the following terms is defined as the mixture of a firm's debt and equity
financing?
Working capital management.
Cash management.
Cost analysis.
Capital budgeting.
Capital structure.
Capital structure
Which one of the following is defined as a firm's short-term assets and its short-term
liabilities?
Working capital.
Debt.
Investment capital.
Net capital.
Capital structure.
Working capital
A business owned by a solitary individual who has unlimited liability for its debt is called a:
Corporation.
Sole proprietorship.
General partnership.
Limited partnership.
Limited liability company.
Sole proprietorship.
A business formed by two or more individuals who each have unlimited liability for all of
the firm's business debts is called a:
Corporation.
Sole proprietorship.
,General partnership.
Limited partnership.
Limited liability company.
General partnership.
A business partner whose potential financial loss in the partnership will not exceed his or
her investment in that partnership is called a:
General partner.
Sole proprietor.
Limited partner.
Corporate shareholder.
Zero partner.
Limited partner.
A business created as a distinct legal entity and treated as a legal "person" is called a:
Corporation.
Sole proprietorship.
General partnership.
Limited partnership.
Unlimited liability company.
Corporation.
Which one of the following terms is defined as a conflict of interest between the corporate
shareholders and the corporate managers?
Articles of incorporation.
Corporate breakdown.
Agency problem.
Bylaws.
Legal liability.
Agency problem
A stakeholder is:
A person who owns shares of stock.
Any person who has voting rights based on stock ownership of a corporation.
A person who initially founded a firm and currently has management control over that
firm.
A creditor to whom a firm currently owes money.
Any person or entity other than a stockholder or creditor who potentially has a claim on
the cash flows of a firm.
, Any person or entity other than a stockholder or creditor who potentially has a claim on the cash
flows of a firm.
Which of the following questions are addressed by financial managers?
I. How should a product be marketed?
II. Should customers be given 30 or 45 days to pay for their credit purchases?
III. Should the firm borrow more money?
IV. Should the firm acquire new equipment?
A. I and IV only.
B. II and III only.
C. I, II, and III only.
D. II, III, and IV only.
E. I, II, III, and IV.
II, III, and IV only
Which one of the following functions should be the responsibility of the controller rather
than the treasurer?
Daily cash deposit.
Income tax returns.
Equipment purchase analysis.
Customer credit approval.
Payment to a vendor.
Income tax returns
The controller of a corporation generally reports directly to the:
Board of directors.
Chairman of the board.
Chief executive officer.
President.
Vice president of finance.
Vice president of finance
Which one of the following correctly defines the upward chain of command in a typical
corporate organizational structure?
The vice president of finance reports to the chairman of the board.
The chief executive officer reports to the president.
The controller reports to the president.
The treasurer reports to the vice president of finance.
The chief operations officer reports to the vice president of production.
WITH VERIFIED SOLUTIONS
Which one of the following terms is defined as the management of a firm's long-term
investments?
Working capital management.
Financial allocation.
Agency cost analysis.
Capital budgeting.
Capital structure.
Capital Budgeting
Which one of the following terms is defined as the mixture of a firm's debt and equity
financing?
Working capital management.
Cash management.
Cost analysis.
Capital budgeting.
Capital structure.
Capital structure
Which one of the following is defined as a firm's short-term assets and its short-term
liabilities?
Working capital.
Debt.
Investment capital.
Net capital.
Capital structure.
Working capital
A business owned by a solitary individual who has unlimited liability for its debt is called a:
Corporation.
Sole proprietorship.
General partnership.
Limited partnership.
Limited liability company.
Sole proprietorship.
A business formed by two or more individuals who each have unlimited liability for all of
the firm's business debts is called a:
Corporation.
Sole proprietorship.
,General partnership.
Limited partnership.
Limited liability company.
General partnership.
A business partner whose potential financial loss in the partnership will not exceed his or
her investment in that partnership is called a:
General partner.
Sole proprietor.
Limited partner.
Corporate shareholder.
Zero partner.
Limited partner.
A business created as a distinct legal entity and treated as a legal "person" is called a:
Corporation.
Sole proprietorship.
General partnership.
Limited partnership.
Unlimited liability company.
Corporation.
Which one of the following terms is defined as a conflict of interest between the corporate
shareholders and the corporate managers?
Articles of incorporation.
Corporate breakdown.
Agency problem.
Bylaws.
Legal liability.
Agency problem
A stakeholder is:
A person who owns shares of stock.
Any person who has voting rights based on stock ownership of a corporation.
A person who initially founded a firm and currently has management control over that
firm.
A creditor to whom a firm currently owes money.
Any person or entity other than a stockholder or creditor who potentially has a claim on
the cash flows of a firm.
, Any person or entity other than a stockholder or creditor who potentially has a claim on the cash
flows of a firm.
Which of the following questions are addressed by financial managers?
I. How should a product be marketed?
II. Should customers be given 30 or 45 days to pay for their credit purchases?
III. Should the firm borrow more money?
IV. Should the firm acquire new equipment?
A. I and IV only.
B. II and III only.
C. I, II, and III only.
D. II, III, and IV only.
E. I, II, III, and IV.
II, III, and IV only
Which one of the following functions should be the responsibility of the controller rather
than the treasurer?
Daily cash deposit.
Income tax returns.
Equipment purchase analysis.
Customer credit approval.
Payment to a vendor.
Income tax returns
The controller of a corporation generally reports directly to the:
Board of directors.
Chairman of the board.
Chief executive officer.
President.
Vice president of finance.
Vice president of finance
Which one of the following correctly defines the upward chain of command in a typical
corporate organizational structure?
The vice president of finance reports to the chairman of the board.
The chief executive officer reports to the president.
The controller reports to the president.
The treasurer reports to the vice president of finance.
The chief operations officer reports to the vice president of production.
