syllabi
Towson University
Department of Finance
Principles of Financial Management (FIN331)
Spring 2010
Exam I
Name_____________________________
ID#_________________
1. Which of the following statements is CORRECT?
a. One of the advantages of the corporate form of organization is that it avoids double taxation.
b. It is easier to transfer one’s ownership interest in a partnership than in a corporation.
c. One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.
d. One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., “one person, one vote.”
e. Corporations of all types are subject to the corporate income tax.
Answer: c
2. Which of the following is NOT to address the agency conflict between shareholders and managers? a. Maximize sales
b. Monitor managers’ activities
c. Give incentives based on performance d. Offer stock shares or stock options e. Hostile takeover threat Answer: a
3. What is the main advantage of S-corp relative to C-corp? a. Profit margin
b. Single taxation
c. Limited liability
d. Dividend policy
e. Capital structure
Answer: b
S-corp Distribution is taxed only once at personal income tax rate. In other words, a single taxation
4. Which of the following mechanisms would be most likely to help motivate managers to act in the best interests of shareholders?
a. Decrease the use of restrictive covenants in bond agreements.
b. Take actions that reduce the possibility of a hostile takeover.
c. Elect a board of directors that allows managers greater freedom of action.
d. Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries.
e. Eliminate a requirement that members of the board of directors have a
Department of Finance
Principles of Financial Management (FIN331)
Spring 2010
Exam I
Name_____________________________
ID#_________________
1. Which of the following statements is CORRECT?
a. One of the advantages of the corporate form of organization is that it avoids double taxation.
b. It is easier to transfer one’s ownership interest in a partnership than in a corporation.
c. One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.
d. One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., “one person, one vote.”
e. Corporations of all types are subject to the corporate income tax.
Answer: c
2. Which of the following is NOT to address the agency conflict between shareholders and managers? a. Maximize sales
b. Monitor managers’ activities
c. Give incentives based on performance d. Offer stock shares or stock options e. Hostile takeover threat Answer: a
3. What is the main advantage of S-corp relative to C-corp? a. Profit margin
b. Single taxation
c. Limited liability
d. Dividend policy
e. Capital structure
Answer: b
S-corp Distribution is taxed only once at personal income tax rate. In other words, a single taxation
4. Which of the following mechanisms would be most likely to help motivate managers to act in the best interests of shareholders?
a. Decrease the use of restrictive covenants in bond agreements.
b. Take actions that reduce the possibility of a hostile takeover.
c. Elect a board of directors that allows managers greater freedom of action.
d. Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries.
e. Eliminate a requirement that members of the board of directors have a