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Chapter01-IntroductiontoCorporateFinance1-1Chapter01IntroductiontoCorporateFinanceAnswerKeyMultipleChoiceQuestions1.Thepersongenerallydirectlyresponsibleforoverseeingthetaxmanagement,costaccounting,financialaccounting,andinformationsystemfunctionsisthe:A.treasurer.B.director.C.controller.D.chairmanoftheboard.E.chiefexecutiveofficer.Difficultylevel:EasyTopic:CONTROLLERType:DEFINITIONS2.Thepersongenerallydirectlyresponsibleforoverseeingthecashandcreditfunctions,financialplanning,andcapitalexpendituresisthe:A.treasurer.B.director.C.controller.D.chairmanoftheboard.E.chiefoperationsofficer.Chapter01-IntroductiontoCorporateFinance1-23.Theprocessofplanningandmanagingafirm'slong-terminvestmentsiscalled:A.workingcapitalmanagement.B.financialdepreciation.C.agencycostanalysis.D.capitalbudgeting.E.capitalstructure.Difficultylevel:EasyTopic:CAPITALBUDGETINGType:DEFINITIONS4.Themixtureofdebtandequityusedbyafirmtofinanceitsoperationsiscalled:A.workingcapitalmanagement.B.financialdepreciation.C.costanalysis.D.capitalbudgeting.E.capitalstructure.5.Themanagementofafirm'sshort-termassetsandliabilitiesiscalled:A.workingcapitalmanagement.B.debtmanagement.C.equitymanagement.D.capitalbudgeting.E.capitalstructure.Chapter01-IntroductiontoCorporateFinance1-36.Abusinessownedbyasingleindividualiscalleda:A.corporation.B.soleproprietorship.C.generalpartnership.D.limitedpartnership.E.limitedliabilitycompany.7.Abusinessformedbytwoormoreindividualswhoeachhaveunlimitedliabilityforbusinessdebtsiscalleda:A.corporation.B.soleproprietorship.C.generalpartnership.D.limitedpartnership.E.limitedliabilitycompany.8.Thedivisionofprofitsandlossesamongthemembersofapartnershipisformalizedinthe:A.indemnityclause.B.indenturecontract.C.statementofpurpose.D.partnershipagreement.E.groupcharter.9.Abusinesscreatedasadistinctlegalentitycomposedofoneormoreindividualsorentitiesiscalleda:A.corporation.B.soleproprietorship.C.generalpartnership.D.limitedpartnership.E.unlimitedliabilitycompany.Difficultylevel:EasyTopic:CORPORATIONType:DEFINITIONSChapter01-IntroductiontoCorporateFinance1-410.Thecorporatedocumentthatsetsforththebusinesspurposeofafirmisthe:A.indenturecontract.B.statetaxagreement.C.corporatebylaws.D.debtcharter.E.articlesofincorporation.11.Therulesbywhichcorporationsgovernthemselvesarecalled:A.indentureprovisions.B.indemnityprovisions.C.charteragreements.D.bylaws.E.articlesofincorporation.12.Abusinessentityoperatedandtaxedlikeapartnership,butwithlimitedliabilityfortheowners,iscalleda:A.limitedliabilitycompany.B.generalpartnership.C.limitedproprietorship.D.soleproprietorship.E.corporation.13.Theprimarygoaloffinancialmanagementisto:A.maximizecurrentdividendspershareoftheexistingstock.B.maximizethecurrentvaluepershareoftheexistingstock.C.avoidfinancialdistress.D.minimizeoperationalcostsandmaximizefirmefficiency.E.maintainsteadygrowthinbothsalesandnetearnings.14.Aconflictofinterestbetweenthestockholdersandmanagementofafirmiscalled:A.stockholders'liability.B.corporatebreakdown.C.theagencyproblem.D.corporateactivism.E.legalliability.Chapter01-IntroductiontoCorporateFinance1-515.Agencycostsreferto:A.thetotaldividendspaidtostockholdersoverthelifetimeofafirm.B.thecoststhatresultfromdefaultandbankruptcyofafirm.C.corporateincomesubjecttodoubletaxation.D.thecostsofanyconflictsofinterestbetweenstockholdersandmanagement.E.thetotalinterestpaidtocreditorsoverthelifetimeofthefirm.16.Astakeholderis:A.anypersonorentitythatownssharesofstockofacorporation.B.anypersonorentitythathasvotingrightsbasedonstockownershipofacorporation.C.apersonwhoinitiallystartedafirmandcurrentlyhasmanagementcontroloverthecashflowsofthefirmduetohis/hercurrentownershipofcompanystock.D.acreditortowhomthefirmcurrentlyowesmoneyandwhoconsequentlyhasaclaimonthecashflowsofthefirm.E.anypersonorentityotherthanastockholderorcreditorwhopotentiallyhasaclaimonthecashflowsofthefirm.17.TheSarbanesOxleyActof2002isintendedto:A.protectfinancialmanagersfrominvestors.B.nothaveanyeffectonforeigncompanies.C.reducecorporaterevenues.D.protectinvestorsfromcorporateabuses.E.decreaseauditcostsforU.S.firms.18.Thetreasurerandthecontrollerofacorporationgenerallyreporttothe:A.boardofdirectors.B.chairmanoftheboard.C.chiefexecutiveofficer.D.president.E.chieffinancialofficer.19.Whichoneofthefollowingstatementsiscorrectconcerningtheorganizationalstructureofacorporation?A.Thevicepresidentoffinancereportstothechairmanoftheboard.B.Thechiefexecutiveofficerreportstotheboardofdirectors.C.Thecontrollerreportstothepresident.D.Thetreasurerreportstothechiefexecutiveofficer.E.Thechiefoperationsofficerreportstothevicepresidentofproduction.Difficultylevel:MediumTopic:ORGANIZATIONALSTRUCTUREType:CONCEPTSChapter01-IntroductiontoCorporateFinance1-620.Whichoneofthefollowingisacapitalbudgetingdecision?A.determininghowmuchdebtshouldbeborrowedfromaparticularlenderB.decidingwhetherornottoopenanewstoreC.decidingwhentorepayalong-termdebtD.determininghowmuchinventorytokeeponhandE.determininghowmuchmoneyshouldbekeptinthecheckingaccount21.TheSarbanesOxleyActw