Question 1
pts
Which of the following statements is CORRECT?
In most corporations, the CFO ranks above the CEO.
By law in most states, the chairman of the board must also be the CEO.
The CFO generally reports to the firm's chief accounting officer, who is normally the
controller.
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.
The CFO is responsible for raising capital and for making sure that capital expenditures
are desirable, but he or she is not responsible for the validity of the financial statements,
as the controller and the auditors have that responsibility.
Question 2
pts
Which of the following statements is CORRECT?
There are many types of unethical business behavior. One example is where executives
provide information that they know is incorrect to outsiders. It is illegal to provide such
information to federally regulated banks, but it is not illegal to provide it to stockholders
because they are the owners of the firm.
,If a lower level person in a firm does something illegal, like "cooking the books," to
understate costs and thereby artificially increase profits because he or she was ordered
to do so by a superior, the lower level person cannot be prosecuted but the superior can
be prosecuted.
If someone deliberately understates costs and thereby causes reported profits to
increase, this can cause the stock price to rise above its intrinsic value. The stock will
probably fall in the future. Both those who participated in the fraud and the firm itself can
be prosecuted.
Ethical behavior is not influenced by training and auditing procedures. People are either
ethical or they are not, and this is what determines ethical behavior in business.
Ethics is not an important consideration in business and in business schools.
Question 3
pts
Which of the following statements is CORRECT?
Corporations and partnerships have an advantage over proprietorships because a
proprietor is exposed to unlimited liability, but the liability of all investors in the other
types of businesses is more limited.
Most business in the U.S. is conducted by corporations, and corporations' popularity
results primarily from their favorable tax treatment.
For a stock to be in equilibrium, its intrinsic value must be greater than the actual market
price.
A good goal for a firm's management is the maximization of expected EPS.
, Conflicts can exist between stockholders and managers, but potential conflicts are
reduced by the possibility of hostile takeovers.
Question 4
pts
Multiple Choice: Conceptual
Please note that some of the answer choices, or answers that are very close, are used in different
questions. This has caused us no difficulties, but please take this into account when you make up exams.
Which of the following statements is CORRECT?
In any partnership, every partner has the same rights, privileges, and liability exposure
as every other partner.
Proprietorships are subject to more regulations than corporations.
Corporations of all types are subject to the corporate income tax.
One of the disadvantages of incorporating your business is that you could become
subject to the firm's liabilities in the event of bankruptcy.
Proprietorships and partnerships generally have a tax advantage over corporations.
Rationale:
Some corporations (S corporations) are able to avoid the corporate income tax.
Proprietorships and partnerships pay personal income tax, but they avoid the corporate
income tax.
pts
Which of the following statements is CORRECT?
In most corporations, the CFO ranks above the CEO.
By law in most states, the chairman of the board must also be the CEO.
The CFO generally reports to the firm's chief accounting officer, who is normally the
controller.
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.
The CFO is responsible for raising capital and for making sure that capital expenditures
are desirable, but he or she is not responsible for the validity of the financial statements,
as the controller and the auditors have that responsibility.
Question 2
pts
Which of the following statements is CORRECT?
There are many types of unethical business behavior. One example is where executives
provide information that they know is incorrect to outsiders. It is illegal to provide such
information to federally regulated banks, but it is not illegal to provide it to stockholders
because they are the owners of the firm.
,If a lower level person in a firm does something illegal, like "cooking the books," to
understate costs and thereby artificially increase profits because he or she was ordered
to do so by a superior, the lower level person cannot be prosecuted but the superior can
be prosecuted.
If someone deliberately understates costs and thereby causes reported profits to
increase, this can cause the stock price to rise above its intrinsic value. The stock will
probably fall in the future. Both those who participated in the fraud and the firm itself can
be prosecuted.
Ethical behavior is not influenced by training and auditing procedures. People are either
ethical or they are not, and this is what determines ethical behavior in business.
Ethics is not an important consideration in business and in business schools.
Question 3
pts
Which of the following statements is CORRECT?
Corporations and partnerships have an advantage over proprietorships because a
proprietor is exposed to unlimited liability, but the liability of all investors in the other
types of businesses is more limited.
Most business in the U.S. is conducted by corporations, and corporations' popularity
results primarily from their favorable tax treatment.
For a stock to be in equilibrium, its intrinsic value must be greater than the actual market
price.
A good goal for a firm's management is the maximization of expected EPS.
, Conflicts can exist between stockholders and managers, but potential conflicts are
reduced by the possibility of hostile takeovers.
Question 4
pts
Multiple Choice: Conceptual
Please note that some of the answer choices, or answers that are very close, are used in different
questions. This has caused us no difficulties, but please take this into account when you make up exams.
Which of the following statements is CORRECT?
In any partnership, every partner has the same rights, privileges, and liability exposure
as every other partner.
Proprietorships are subject to more regulations than corporations.
Corporations of all types are subject to the corporate income tax.
One of the disadvantages of incorporating your business is that you could become
subject to the firm's liabilities in the event of bankruptcy.
Proprietorships and partnerships generally have a tax advantage over corporations.
Rationale:
Some corporations (S corporations) are able to avoid the corporate income tax.
Proprietorships and partnerships pay personal income tax, but they avoid the corporate
income tax.
