Finance 320 All Quiz Exam
with Correct Answers
What is fhe most important type of decision that the financial manager makes? - Correct Answers: The
financial manager's most important job is to make the firm's investment decisions.
A ___ is when a rich individual or organization purchases a large fraction of the stock of a poorly
performing firm and in doing so gets enough votes to replace the board of directors and the CEO. -
Correct Answers: hostile takeover
What are the main advantages of organizing a firm as a corporation? - Correct Answers: 1. There is no
limit to the number of owners a corporation may have, thus allowing the corporation to raise substantial
amounts of capital
2. The life of the business can continue beyond the death of any of the owners.
3. The liability of the owners is limited to the amount of their investment in the firm
What are the main disadvantages of organizing a firm as a corporation? - Correct Answers: 1. Income to
a corporation is subject to double taxation, once at the corporate level and again when received by the
owners in the form of a dividend
2. The corporation is more complicated and more expensive to set up than other business entities
What is the difference between a public and private corporation? - Correct Answers: The shares of a
public corporation are traded on an exchange while the shares of a private corporation are not traded
on a public exchange.
Which of the following is NOT a role of financial institutions?
A. Printing money for borrowers
B. Moving funds from savers to borrowers
C. Spreading out risk-bearing
D. Moving funds through time - Correct Answers: Printing money for borrowers
, What does the phrase limited liability mean in a corporate context? - Correct Answers: Owner's liability
is limited to the amount they invested in the firm. Stockholders are not responsible for any
encumbrances of the firm; in particular, they cannot be required to pay back any debts incurred by the
firm.
True/ False: Partnerships are the most common types of business firms in the world. - Correct Answers:
False
What is GAAP and who oversees it? - Correct Answers: GAAP stands for Generally Accepted Accounting
Principles.
GAAP was established by the Financial Accounting Standards Board and is the format required by the
SEC when companies submit their quarterly and annual reports
True/False: The balance sheet shows the assets, liabilities, and stockholder's equity of a firm over a
given length of time. - Correct Answers: False
A company's after-tax profits measured per unit of common stock are known as _____. - Correct
Answers: earnings per share
A consensus estimate of future earnings by individuals that are not employees of the firm is known as
_____. - Correct Answers: Analysts's estimates
Earnings are an important measure to financial managers because investors use earnings to make
forecasts about a company's _________ and ultimately stock price. - Correct Answers: Cash Flows
Which of the following is NOT one of the financial statements that must be produced by a public
company?
A. The Balance Sheet
B. The Statement of Cash Flows
C. The Statement of Activities
D. The Income Statement - Correct Answers: C. The Statement of Activities
with Correct Answers
What is fhe most important type of decision that the financial manager makes? - Correct Answers: The
financial manager's most important job is to make the firm's investment decisions.
A ___ is when a rich individual or organization purchases a large fraction of the stock of a poorly
performing firm and in doing so gets enough votes to replace the board of directors and the CEO. -
Correct Answers: hostile takeover
What are the main advantages of organizing a firm as a corporation? - Correct Answers: 1. There is no
limit to the number of owners a corporation may have, thus allowing the corporation to raise substantial
amounts of capital
2. The life of the business can continue beyond the death of any of the owners.
3. The liability of the owners is limited to the amount of their investment in the firm
What are the main disadvantages of organizing a firm as a corporation? - Correct Answers: 1. Income to
a corporation is subject to double taxation, once at the corporate level and again when received by the
owners in the form of a dividend
2. The corporation is more complicated and more expensive to set up than other business entities
What is the difference between a public and private corporation? - Correct Answers: The shares of a
public corporation are traded on an exchange while the shares of a private corporation are not traded
on a public exchange.
Which of the following is NOT a role of financial institutions?
A. Printing money for borrowers
B. Moving funds from savers to borrowers
C. Spreading out risk-bearing
D. Moving funds through time - Correct Answers: Printing money for borrowers
, What does the phrase limited liability mean in a corporate context? - Correct Answers: Owner's liability
is limited to the amount they invested in the firm. Stockholders are not responsible for any
encumbrances of the firm; in particular, they cannot be required to pay back any debts incurred by the
firm.
True/ False: Partnerships are the most common types of business firms in the world. - Correct Answers:
False
What is GAAP and who oversees it? - Correct Answers: GAAP stands for Generally Accepted Accounting
Principles.
GAAP was established by the Financial Accounting Standards Board and is the format required by the
SEC when companies submit their quarterly and annual reports
True/False: The balance sheet shows the assets, liabilities, and stockholder's equity of a firm over a
given length of time. - Correct Answers: False
A company's after-tax profits measured per unit of common stock are known as _____. - Correct
Answers: earnings per share
A consensus estimate of future earnings by individuals that are not employees of the firm is known as
_____. - Correct Answers: Analysts's estimates
Earnings are an important measure to financial managers because investors use earnings to make
forecasts about a company's _________ and ultimately stock price. - Correct Answers: Cash Flows
Which of the following is NOT one of the financial statements that must be produced by a public
company?
A. The Balance Sheet
B. The Statement of Cash Flows
C. The Statement of Activities
D. The Income Statement - Correct Answers: C. The Statement of Activities
