Exam (elaborations) Test Bank For Fundamentals of Financial Management 13th Edition Eugene F Brigham

1. In most corporations, the CFO ranks under the CEO. a. True b. False (1-1) Role of finance F M Answer: b EASY 2. The Chairman of the Board must also be the CEO. a. True b. False (1-1) Role of finance F M Answer: a EASY 3. The board of directors is the highest ranking body in a corporation, and the chairman of the board is the highest ranking individual. The CEO generally works under the board and its chairman, and the board generally has the authority to remove the CEO under certain conditions. The CEO, however, cannot remove the board, but he or she can endeavor to have the board voted out and a new board voted in should a conflict arise. It is possible for a person to simultaneously serve as CEO and chairman of the board, though many corporate control experts believe it is bad to vest both offices in the same person. a. True b. False (1-3) Forms of organization F M Answer: a EASY 4. Partnerships and proprietorships generally have a tax advantage over corporations. a. True b. False (1-3) Forms of organization F M Answer: b EASY 5. A disadvantage of the corporate form of organization is that corporate stockholders are more exposed to personal liabilities in the event of bankruptcy than are investors in a typical partnership. a. True CHAPTER 1 AN OVERVIEW OF FINANCIAL MANAGEMENT Page 2 True/False Chapter 1: Overview b. False Full file at Fundamentals-of-Financial-Management,-13th-Edition-- -Eugene-F.-Brigham full file at (1-3) Forms of organization F M Answer: b EASY 6. An advantage of the corporate form of organization is that corporations are generally less highly regulated than proprietorships and partnerships. a. True b. False (1-3) Forms of organization F M Answer: a EASY 7. Some partners in a partnership may have different rights, privileges, and responsibilities than other partners. a. True b. False (1-3) Forms of organization F M Answer: b EASY 8. One advantage of the corporate form of organization is that it avoids double taxation. a. True b. False (1-3) Forms of organization F M Answer: a EASY 9. It is generally harder to transfer one’s ownership interest in a partnership than in a corporation. a. True b. False (1-3) Forms of organization F M Answer: a EASY 10. One danger of starting a proprietorship is that you may be exposed to personal liability if the business goes bankrupt. This problem would be avoided if you formed a corporation to operate the business. a. True b. False (1-3) Forms of organization F M Answer: a EASY 11. If a corporation elects to be taxed as an S corporation, then it can avoid the corporate tax. However, its stockholders will have to pay personal taxes on the firm's net income. a. True b. False (1-3) Forms of organization F M Answer: b EASY 12. If a corporation elects to be taxed as an S corporation, then both it and its stockholders can avoid all Federal taxes. This provision was put into the Federal Tax Code in order to encourage the formation of small businesses.