FIN 534 MIDTERM EXAM
This exam consist of 25 multiple choice questions and covers the material in Chapters 1 through 7.
Results Displayed Submitted Answers, Correct
Answers, Feedback
false
Question 1
4 out of 4 points
Which of the following statements is NOT CORRECT?
Selected e.
Answer:
"Going public" establishes a firm's true intrinsic value, and it also insures that a
highly liquid market will always exist for the firm's shares.
Correct e.
Answer:
"Going public" establishes a firm's true intrinsic value, and it also insures that a
highly liquid market will always exist for the firm's shares.
Question 2
4 out of 4
points
Cheers Inc. operates as a partnership. Now the partners have decided to convert the business into a
regular corporation. Which of the following statements is CORRECT?
Selected Answer: a.
Cheers' shareholders (the ex-partners) will now be exposed to less liability.
Correct Answer: a.
Cheers' shareholders (the ex-partners) will now be exposed to less liability.
Question 3
,4 out of 4 points
Which of the following statements is CORRECT?
Selected e.
Answer:
The corporate charter is concerned with things like what business the company will
engage in, whereas the bylaws are concerned with things like procedures for electing
the board of directors.
Correct e.
Answer:
The corporate charter is concerned with things like what business the company will
engage in, whereas the bylaws are concerned with things like procedures for electing
the board of directors.
Question 4
4 out of 4 points
Which of the following could explain why a business might choose to operate as a corporation
rather than as a sole proprietorship or a partnership?
Selected b.
Answer:
Corporate shareholders escape liability for the firm's debts, but this factor may be
offset by the tax disadvantages of the corporate form of organization.
Correct b.
Answer:
Corporate shareholders escape liability for the firm's debts, but this factor may be
offset by the tax disadvantages of the corporate form of organization.
Question 5
4 out of 4
points
, Money markets are markets for
Selected Answer: d.
Short-term debt securities.
Correct Answer: d.
Short-term debt securities.
Question 6
4 out of 4 points
Swinnerton Clothing Company's balance sheet showed total current assets of $2,250, all of which
were required in operations. Its current liabilities consisted of $575 of accounts payable, $300 of
6% short-term notes payable to the bank, and $145 of accrued wages and taxes. What was its net
operating working capital that was financed by investors?
Selected Answer: a.
$1,530
Correct Answer: a.
$1,530
Response Rationale:
Feedback:
Current assets $2,250
Accounts payable $575
Accrued wages and taxes $145
Net operating working capital $1,530
Note that NOWC represents the current assets required in operations that are
financed by investors, given that payables and accruals are generated
spontaneously by operations and are thus "free."
Question 7
This exam consist of 25 multiple choice questions and covers the material in Chapters 1 through 7.
Results Displayed Submitted Answers, Correct
Answers, Feedback
false
Question 1
4 out of 4 points
Which of the following statements is NOT CORRECT?
Selected e.
Answer:
"Going public" establishes a firm's true intrinsic value, and it also insures that a
highly liquid market will always exist for the firm's shares.
Correct e.
Answer:
"Going public" establishes a firm's true intrinsic value, and it also insures that a
highly liquid market will always exist for the firm's shares.
Question 2
4 out of 4
points
Cheers Inc. operates as a partnership. Now the partners have decided to convert the business into a
regular corporation. Which of the following statements is CORRECT?
Selected Answer: a.
Cheers' shareholders (the ex-partners) will now be exposed to less liability.
Correct Answer: a.
Cheers' shareholders (the ex-partners) will now be exposed to less liability.
Question 3
,4 out of 4 points
Which of the following statements is CORRECT?
Selected e.
Answer:
The corporate charter is concerned with things like what business the company will
engage in, whereas the bylaws are concerned with things like procedures for electing
the board of directors.
Correct e.
Answer:
The corporate charter is concerned with things like what business the company will
engage in, whereas the bylaws are concerned with things like procedures for electing
the board of directors.
Question 4
4 out of 4 points
Which of the following could explain why a business might choose to operate as a corporation
rather than as a sole proprietorship or a partnership?
Selected b.
Answer:
Corporate shareholders escape liability for the firm's debts, but this factor may be
offset by the tax disadvantages of the corporate form of organization.
Correct b.
Answer:
Corporate shareholders escape liability for the firm's debts, but this factor may be
offset by the tax disadvantages of the corporate form of organization.
Question 5
4 out of 4
points
, Money markets are markets for
Selected Answer: d.
Short-term debt securities.
Correct Answer: d.
Short-term debt securities.
Question 6
4 out of 4 points
Swinnerton Clothing Company's balance sheet showed total current assets of $2,250, all of which
were required in operations. Its current liabilities consisted of $575 of accounts payable, $300 of
6% short-term notes payable to the bank, and $145 of accrued wages and taxes. What was its net
operating working capital that was financed by investors?
Selected Answer: a.
$1,530
Correct Answer: a.
$1,530
Response Rationale:
Feedback:
Current assets $2,250
Accounts payable $575
Accrued wages and taxes $145
Net operating working capital $1,530
Note that NOWC represents the current assets required in operations that are
financed by investors, given that payables and accruals are generated
spontaneously by operations and are thus "free."
Question 7
