FINANCIAL MANAGEMENT MIDTERM
EXAM WITH QUESTIONS AND
CORRECT ANSWERS /GRADED A+
Which one of the following statements correctly applies to a sole
proprietorship?
a.) The business entity has an unlimited life.
b.) The ownership can easily be transferred to another individual.
c.) The owner enjoys limited liability for the firm's debts.
d.) Debt financing is easy to arrange in the firm's name.
e.) Obtaining additional equity is dependent on the owner's
personal finances. Correct Answer Obtaining additional equity is
dependent on the owner's personal finances.
A corporation:
a.) is ultimately controlled by its board of directors.
b.) is a legal entity separate from its owners.
c.) is prohibited from entering into contractual agreements.
d.) has its identity defined by its bylaws.
e.) has its existence regulated by the rules set forth in its charter.
Correct Answer is a legal entity separate from its owners.
The primary goal of financial management is to maximize:
a.) current profits.
b.) market share.
c.) current dividends.
d.) the market value of existing stock.
e.) revenue growth. Correct Answer the market value of existing
stock.
,An agency issue is most apt to develop when:
a.) a firm encounters a period of stagnant growth.
b.) a firm downsizes.
c.) the control of a firm is separated from the firm's ownership.
d.) the firm's owner is also its key manager.
e.) a firm is structured as a general partnership. Correct Answer
the control of a firm is separated from the firm's ownership.
You contacted your stock broker this morning and placed an order
to sell 300 shares of a stock that trades on the NYSE. This sale
will occur in the:
a.) dealer market.
b.) over-the-counter market.
c.) secondary market.
d.) primary market.
e.) tertiary market. Correct Answer secondary market.
The issuer of a security must be involved in all _____ transactions
involving that security.
a.)exchange-listed
b.)secondary market
c.)over-the-counter
d.)dealer market
e.)primary market Correct Answer primary market
Which one of the following parties can sell shares of ABC stock in
the primary market?
a.) ABC company
b.) Any corporation, other than the ABC Company
c.) Any institutional shareholder
d.) Any private individual shareholder
e.) Only officers and directors of ABC Company Correct Answer
ABC company
According to GAAP, when is income reported?
, when cash payment is received
when it is first anticipated
whenever the firm decides to report it
when it is earned or accrued Correct Answer when it is earned or
accrued
In the long run, costs may be considered as ______.
all variable
some fixed and some variable
all fixed Correct Answer all variable
Costs incurred during a particular time period that might be
reported as selling, general, and administrative expenses are also
known as ______.
fixed costs
product costs
variable costs
period costs Correct Answer period costs
Period costs are the costs that are allocated to a specific ______.
type of service
product
interval of time
production run Correct Answer interval of time
Marginal tax rates are the most important tax rates because:
a) financial decisions are usually based on new cash flows.
b) because the IRS says so.
c) incremental cash flows are taxed at marginal tax rates.
EXAM WITH QUESTIONS AND
CORRECT ANSWERS /GRADED A+
Which one of the following statements correctly applies to a sole
proprietorship?
a.) The business entity has an unlimited life.
b.) The ownership can easily be transferred to another individual.
c.) The owner enjoys limited liability for the firm's debts.
d.) Debt financing is easy to arrange in the firm's name.
e.) Obtaining additional equity is dependent on the owner's
personal finances. Correct Answer Obtaining additional equity is
dependent on the owner's personal finances.
A corporation:
a.) is ultimately controlled by its board of directors.
b.) is a legal entity separate from its owners.
c.) is prohibited from entering into contractual agreements.
d.) has its identity defined by its bylaws.
e.) has its existence regulated by the rules set forth in its charter.
Correct Answer is a legal entity separate from its owners.
The primary goal of financial management is to maximize:
a.) current profits.
b.) market share.
c.) current dividends.
d.) the market value of existing stock.
e.) revenue growth. Correct Answer the market value of existing
stock.
,An agency issue is most apt to develop when:
a.) a firm encounters a period of stagnant growth.
b.) a firm downsizes.
c.) the control of a firm is separated from the firm's ownership.
d.) the firm's owner is also its key manager.
e.) a firm is structured as a general partnership. Correct Answer
the control of a firm is separated from the firm's ownership.
You contacted your stock broker this morning and placed an order
to sell 300 shares of a stock that trades on the NYSE. This sale
will occur in the:
a.) dealer market.
b.) over-the-counter market.
c.) secondary market.
d.) primary market.
e.) tertiary market. Correct Answer secondary market.
The issuer of a security must be involved in all _____ transactions
involving that security.
a.)exchange-listed
b.)secondary market
c.)over-the-counter
d.)dealer market
e.)primary market Correct Answer primary market
Which one of the following parties can sell shares of ABC stock in
the primary market?
a.) ABC company
b.) Any corporation, other than the ABC Company
c.) Any institutional shareholder
d.) Any private individual shareholder
e.) Only officers and directors of ABC Company Correct Answer
ABC company
According to GAAP, when is income reported?
, when cash payment is received
when it is first anticipated
whenever the firm decides to report it
when it is earned or accrued Correct Answer when it is earned or
accrued
In the long run, costs may be considered as ______.
all variable
some fixed and some variable
all fixed Correct Answer all variable
Costs incurred during a particular time period that might be
reported as selling, general, and administrative expenses are also
known as ______.
fixed costs
product costs
variable costs
period costs Correct Answer period costs
Period costs are the costs that are allocated to a specific ______.
type of service
product
interval of time
production run Correct Answer interval of time
Marginal tax rates are the most important tax rates because:
a) financial decisions are usually based on new cash flows.
b) because the IRS says so.
c) incremental cash flows are taxed at marginal tax rates.
