Finance Management Overview
CHAPTER 1
AN OVERVIEW OF FINANCIAL MANAGEMENT
Forms of business organization Answer: c
[i]. Which of the following could explain why a business might choose to organize as a corporation rather than as a sole proprietorship or a partnership?
a. Corporations generally face fewer regulations. b. Corporations generally face lower taxes. c. Corporations generally find it easier to raise capital. d. Corporations enjoy unlimited liability. e. Statements c and d are correct.
Firm organization Answer: a
[ii]. Which of the following statements is most correct?
a. One advantage of forming a corporation is that you have limited liability. b. Corporations face fewer regulations than sole proprietorships. c. One disadvantage of being a sole proprietor is that you have to pay corporate taxes, even though you don’t realize the benefits of being a corporation. d. Statements b and c are correct. e. None of the statements above is correct.
Firm organization Answer: c
[iii]. Which of the following statements is most correct?
a. Corporations generally face fewer regulations than sole proprietor-ships do. b. Corporate shareholders have unlimited liability. c. It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. d. All of the above statements are correct. e. None of the above statements is correct.
Goal of firm Answer: d
[iv]. The primary goal of a publicly-owned firm interested in serving its stockholders should be to
a. Maximize expected total corporate profit. b. Maximize expected EPS. c. Minimize the chances of losses. d. Maximize the stock price per share. e. Maximize expected net income.
Agency Answer: d
[v]. Which of the following statements is most correct?
a. Compensating managers with stock can reduce the agency problem between
AN OVERVIEW OF FINANCIAL MANAGEMENT
Forms of business organization Answer: c
[i]. Which of the following could explain why a business might choose to organize as a corporation rather than as a sole proprietorship or a partnership?
a. Corporations generally face fewer regulations. b. Corporations generally face lower taxes. c. Corporations generally find it easier to raise capital. d. Corporations enjoy unlimited liability. e. Statements c and d are correct.
Firm organization Answer: a
[ii]. Which of the following statements is most correct?
a. One advantage of forming a corporation is that you have limited liability. b. Corporations face fewer regulations than sole proprietorships. c. One disadvantage of being a sole proprietor is that you have to pay corporate taxes, even though you don’t realize the benefits of being a corporation. d. Statements b and c are correct. e. None of the statements above is correct.
Firm organization Answer: c
[iii]. Which of the following statements is most correct?
a. Corporations generally face fewer regulations than sole proprietor-ships do. b. Corporate shareholders have unlimited liability. c. It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. d. All of the above statements are correct. e. None of the above statements is correct.
Goal of firm Answer: d
[iv]. The primary goal of a publicly-owned firm interested in serving its stockholders should be to
a. Maximize expected total corporate profit. b. Maximize expected EPS. c. Minimize the chances of losses. d. Maximize the stock price per share. e. Maximize expected net income.
Agency Answer: d
[v]. Which of the following statements is most correct?
a. Compensating managers with stock can reduce the agency problem between