1
Principles of Finance Chapter 1-3
2026 Questions and Answers (100%
Correct Answers) Already Graded A+
proprietorship— Ans: An unincorporated business owned by
one individual.
corporate charter— Ans: A document filed with the secretary
© 2026 Assignment
of the state in which a business is incorporated that provides
information about the company, including its name, address,
directors, and amount of capital stock.
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Expert
bylaws— Ans: A set of rules drawn up by the founders of the
corporation that indicates how the company is to be governed;
includes procedures for electing directors, rights of
stockholders, and how to change the bylaws when necessary.
partnership— Ans: An unincorporated business owned by two
or more persons.
corporation— Ans: A legal entity created by a state, separate
and distinct from its owners and managers, having unlimited
life, easy transferability of ownership, and limited liability.
Identify a true statement about financial institutions.— Ans:
Financial institutions are an integral part of the general
financial services marketplace
One of the major functions of the investments area of finance
is to _____.— Ans: determine the optimal mix of securities that
should be held in a portfolio of investments
, 2
To be successful, a financial institution is required to _____.—
Ans: understand the cause of rise and fall of interest rates
The financial service function performed by a financial
institution refers to the ___— Ans: investment of money to
help individuals and companies achieve their financial goals
Coordination of the finance function and the marketing
function is critical to the success of a company, especially a
small, newly formed firm because _____.— Ans: it is necessary
to ensure that sufficient cash is generated to survive
© 2026 Assignment
The _____ has direct responsibility for managing the firm's
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cash and marketable securities, planning how the firm is
Expert
financed and when funds are raised.— Ans: treasurer
The controller is responsible for _____.— Ans: the activities of
the accounting and tax departments
The three principal forms of business organization are _____.—
Ans: proprietorship, partnership, and corporation
How many owners does a proprietorship have?— Ans: 1
The primary difference between a proprietorship and a
partnership as a form of business is _____.— Ans: a partnership
has more owners than a proprietorship
An S corporation can have no more than _____ stockholders.—
Ans: 100
In terms of numbers, 70-75 percent of businesses in the United
States are operated as _____.— Ans: proprietorships
, 3
If any partner is unable to meet his or her pro rata claim in the
event the partnership goes bankrupt, _____.— Ans: the
remaining partners must make good on the unsatisfied claims
Identify a true statement about a corporation.— Ans: A
corporation offers its owners limited liability.
Which of the following specify the rules about the governance
of a corporation?— Ans: Bylaws
© 2026 Assignment
Identify a true statement about the membership in a limited
liability company.— Ans: A limited liability company (LLC) can
have a single owner.
Guru01 - Stuvia
Expert
Which of the following must be filed by a limited liability
company (LLC) with the state in which the business is set up?—
Ans: Articles of organization
Which of the following statements is true of a limited liability
partnership (LLP)?— Ans: A limited liability partnership (LLP)
permits persons to invest in partnerships without exposure to
the personal liability.
Which of the following is true of the liability of a limited
partner in a limited liability partnership?— Ans: The limited
partner's liability is limited to the amount of his/her
investment in the business.
A domestic corporation that has no more than _____ type(s) of
stock outstanding can elect to file taxes as an S corporation.—
Ans: one
The primary goal of the financial manager of a firm should be
to _____.— Ans: maximize stockholder wealth (stock price)
, 4
_____ are more likely when managers make decisions that are
in their own best interests rather than the best interests of the
owners of a firm.— Ans: Takeovers
Investors purchase the stock of a corporation because _____.—
Ans: they expect to earn an acceptable return on the money
they invest
The primary goal of the management of a corporation is
stockholder wealth maximization, which translates into
_____.— Ans: maximizing the price of its common stock
© 2026 Assignment
Which of the following is a reason for profit-motivated, free-
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enterprise economies to be more successful than socialistic
Expert
and communistic economic systems?— Ans: Actions that help
a firm in a profit-motivated economy to increase the price of
its stock are also beneficial to the society at large
The value of an investment in the stocks of a corporation is
based on _____.— Ans: the cash flows the asset is expected to
generate during its life
Which of the following statements is true of risk averse
stockholders?— Ans: They are willing to invest in corporations
with more certain future cash flows.
A firm's value is ultimately a function of _____.— Ans: the cash
flows it is expected to generate in the future and the rate of
return demanded by investors
Alpha Inc. has an earnings per share of $12.50 and has 25,000
outstanding shares of common stock. Alpha Inc.'s net income
for the current financial year is _____.— Ans: $312,500
Principles of Finance Chapter 1-3
2026 Questions and Answers (100%
Correct Answers) Already Graded A+
proprietorship— Ans: An unincorporated business owned by
one individual.
corporate charter— Ans: A document filed with the secretary
© 2026 Assignment
of the state in which a business is incorporated that provides
information about the company, including its name, address,
directors, and amount of capital stock.
Guru01 - Stuvia
Expert
bylaws— Ans: A set of rules drawn up by the founders of the
corporation that indicates how the company is to be governed;
includes procedures for electing directors, rights of
stockholders, and how to change the bylaws when necessary.
partnership— Ans: An unincorporated business owned by two
or more persons.
corporation— Ans: A legal entity created by a state, separate
and distinct from its owners and managers, having unlimited
life, easy transferability of ownership, and limited liability.
Identify a true statement about financial institutions.— Ans:
Financial institutions are an integral part of the general
financial services marketplace
One of the major functions of the investments area of finance
is to _____.— Ans: determine the optimal mix of securities that
should be held in a portfolio of investments
, 2
To be successful, a financial institution is required to _____.—
Ans: understand the cause of rise and fall of interest rates
The financial service function performed by a financial
institution refers to the ___— Ans: investment of money to
help individuals and companies achieve their financial goals
Coordination of the finance function and the marketing
function is critical to the success of a company, especially a
small, newly formed firm because _____.— Ans: it is necessary
to ensure that sufficient cash is generated to survive
© 2026 Assignment
The _____ has direct responsibility for managing the firm's
Guru01 - Stuvia
cash and marketable securities, planning how the firm is
Expert
financed and when funds are raised.— Ans: treasurer
The controller is responsible for _____.— Ans: the activities of
the accounting and tax departments
The three principal forms of business organization are _____.—
Ans: proprietorship, partnership, and corporation
How many owners does a proprietorship have?— Ans: 1
The primary difference between a proprietorship and a
partnership as a form of business is _____.— Ans: a partnership
has more owners than a proprietorship
An S corporation can have no more than _____ stockholders.—
Ans: 100
In terms of numbers, 70-75 percent of businesses in the United
States are operated as _____.— Ans: proprietorships
, 3
If any partner is unable to meet his or her pro rata claim in the
event the partnership goes bankrupt, _____.— Ans: the
remaining partners must make good on the unsatisfied claims
Identify a true statement about a corporation.— Ans: A
corporation offers its owners limited liability.
Which of the following specify the rules about the governance
of a corporation?— Ans: Bylaws
© 2026 Assignment
Identify a true statement about the membership in a limited
liability company.— Ans: A limited liability company (LLC) can
have a single owner.
Guru01 - Stuvia
Expert
Which of the following must be filed by a limited liability
company (LLC) with the state in which the business is set up?—
Ans: Articles of organization
Which of the following statements is true of a limited liability
partnership (LLP)?— Ans: A limited liability partnership (LLP)
permits persons to invest in partnerships without exposure to
the personal liability.
Which of the following is true of the liability of a limited
partner in a limited liability partnership?— Ans: The limited
partner's liability is limited to the amount of his/her
investment in the business.
A domestic corporation that has no more than _____ type(s) of
stock outstanding can elect to file taxes as an S corporation.—
Ans: one
The primary goal of the financial manager of a firm should be
to _____.— Ans: maximize stockholder wealth (stock price)
, 4
_____ are more likely when managers make decisions that are
in their own best interests rather than the best interests of the
owners of a firm.— Ans: Takeovers
Investors purchase the stock of a corporation because _____.—
Ans: they expect to earn an acceptable return on the money
they invest
The primary goal of the management of a corporation is
stockholder wealth maximization, which translates into
_____.— Ans: maximizing the price of its common stock
© 2026 Assignment
Which of the following is a reason for profit-motivated, free-
Guru01 - Stuvia
enterprise economies to be more successful than socialistic
Expert
and communistic economic systems?— Ans: Actions that help
a firm in a profit-motivated economy to increase the price of
its stock are also beneficial to the society at large
The value of an investment in the stocks of a corporation is
based on _____.— Ans: the cash flows the asset is expected to
generate during its life
Which of the following statements is true of risk averse
stockholders?— Ans: They are willing to invest in corporations
with more certain future cash flows.
A firm's value is ultimately a function of _____.— Ans: the cash
flows it is expected to generate in the future and the rate of
return demanded by investors
Alpha Inc. has an earnings per share of $12.50 and has 25,000
outstanding shares of common stock. Alpha Inc.'s net income
for the current financial year is _____.— Ans: $312,500
