FIN 310 Stewart Exam 1 Questions with
100% Correct Answers | Latest Version
2024 | Verified
The financial manager must execute his or her duties independent of the other activities of the firm in
order to properly maximize the value of the firm.
T/F - ✔✔F
Deciding upon the form of organization for a business is an important financial decision with potentially
significant consequences for the future wealth of the owners.
T/F - ✔✔T
The proper goal of the financial manager should be to maximize the firm's expected profit (or net
income), since this will add the most wealth to each of the individual shareholders (owners) of the firm.
T/F - ✔✔F
Maximizing Earnings Per Share (EPS) is an example of maximizing shareholder wealth.
T/F - ✔✔F
An agency relationship between stockholders and managers.
T/F - ✔✔T
An agency relationship exists when one or more persons hire another person to perform some service
but withhold decision-making authority from that person.
T/F - ✔✔F
Which of the following is not one of the things that causes a corporation to have a significant advantage
over a partnership or a proprietorship?
a. Limited liability
, b. Ease of transfer of ownership interest
c. Unlimited life
d. Elimination of double taxation
e. Ability to retain earnings and thus convert income from personal income to capital gains - ✔✔d.
elimination of double taxation
Which of the following statements is true?
a. One of the benefits of incorporating your business is that you are entitled to receive unlimited liability.
b. Sole proprietorships are subject to more regulations than corporations are subject to.
c. Sole proprietorships do not have to pay corporate tax.
d. All of the above are correct.
e. None of the answers above is correct. - ✔✔c. sole proprietorships do not have to pay corporate tax
Which of the following mechanisms is not used by shareholders to get managers to act in shareholders'
best interests?
a. Threat of firing
b. Properly structured managerial compensation
c. Higher cash salaries
d. Threat of takeover
e. Answers b and c above - ✔✔c. higher cash salaries
Which of the following statements is most correct?
a. A good goal for a corporate manager is maximization of expected EPS.
b. Most business in the U.S. is conducted by corporations; corporations' popularity results primarily from
their favorable tax treatment.
c. A good example of an agency relationship is the one between stockholders and managers.
d. Corporations and partnerships have an advantage over proprietorships because a sole proprietor is
subject to unlimited liability but investors in the other types of business are not.
e. Firms in highly competitive industries find it easier to exercise "social responsibility" than do firms in
less competitive industries. - ✔✔c. a good example of an agency relationship is the one between
stockholders and managers
100% Correct Answers | Latest Version
2024 | Verified
The financial manager must execute his or her duties independent of the other activities of the firm in
order to properly maximize the value of the firm.
T/F - ✔✔F
Deciding upon the form of organization for a business is an important financial decision with potentially
significant consequences for the future wealth of the owners.
T/F - ✔✔T
The proper goal of the financial manager should be to maximize the firm's expected profit (or net
income), since this will add the most wealth to each of the individual shareholders (owners) of the firm.
T/F - ✔✔F
Maximizing Earnings Per Share (EPS) is an example of maximizing shareholder wealth.
T/F - ✔✔F
An agency relationship between stockholders and managers.
T/F - ✔✔T
An agency relationship exists when one or more persons hire another person to perform some service
but withhold decision-making authority from that person.
T/F - ✔✔F
Which of the following is not one of the things that causes a corporation to have a significant advantage
over a partnership or a proprietorship?
a. Limited liability
, b. Ease of transfer of ownership interest
c. Unlimited life
d. Elimination of double taxation
e. Ability to retain earnings and thus convert income from personal income to capital gains - ✔✔d.
elimination of double taxation
Which of the following statements is true?
a. One of the benefits of incorporating your business is that you are entitled to receive unlimited liability.
b. Sole proprietorships are subject to more regulations than corporations are subject to.
c. Sole proprietorships do not have to pay corporate tax.
d. All of the above are correct.
e. None of the answers above is correct. - ✔✔c. sole proprietorships do not have to pay corporate tax
Which of the following mechanisms is not used by shareholders to get managers to act in shareholders'
best interests?
a. Threat of firing
b. Properly structured managerial compensation
c. Higher cash salaries
d. Threat of takeover
e. Answers b and c above - ✔✔c. higher cash salaries
Which of the following statements is most correct?
a. A good goal for a corporate manager is maximization of expected EPS.
b. Most business in the U.S. is conducted by corporations; corporations' popularity results primarily from
their favorable tax treatment.
c. A good example of an agency relationship is the one between stockholders and managers.
d. Corporations and partnerships have an advantage over proprietorships because a sole proprietor is
subject to unlimited liability but investors in the other types of business are not.
e. Firms in highly competitive industries find it easier to exercise "social responsibility" than do firms in
less competitive industries. - ✔✔c. a good example of an agency relationship is the one between
stockholders and managers
