Question 1

Two key limitations of the proprietorship form of business involve potential difficulty in raising the necessary capital and the presence of unlimited personal liability for business debts.

Accepted Answer

Proprietorships are businesses owned by a single individual, meaning that the owner is personally responsible for all business debts and obligations. This can be a significant risk, as it means that the owner's personal assets could be used to pay off any outstanding debts. Additionally, because proprietors do not have access to the same sources of capital as larger corporations, they may face difficulty in raising the necessary funds to start or grow their businesses.

Question 2

Which of the following is true of the Sarbanes-Oxley Act of 2002?

Accepted Answer

The Sarbanes-Oxley Act of 2002 requires a publicly-traded corporation to hire an external auditing firm that renders an unbiased opinion concerning the firm's financial statements. Option A is incorrect because there is no provision that mandates a specific percentage of businesses to be formed as S corporations. Option B is incorrect because a limited liability company (LLC) is not required to have a committee of inside directors to oversee audits. Option C is incorrect because an LLC is taxed like a partnership or a corporation, depending on how it chooses to be taxed. Option D is incorrect because an S corporation is required to have 100 or fewer stockholders (members) and only one type of stock.

Question 3

The finance function is relatively independent of most other corporate functions. Marketing decisions, for example, might affect the firm's need for funds but are not affected by conditions in financial markets or other financing issues.

Accepted Answer

The statement is false. The finance function is closely dependent on other corporate functions such as marketing, operations, and strategy. Marketing decisions can affect the firm's financial needs and financial markets can impact the company's marketing decisions. Financing issues can also influence operational decisions and strategic planning.

Question 4

Which of the following statements is correct?

Accepted Answer

Financial institutions in other countries are often less regulated than in the United States, which has a comprehensive regulatory framework.

Question 5

Which of the following is a reason for a company to go international?

Accepted Answer

The high production costs in the home country could drive a company to go international in order to find lower cost alternatives for production.

Question 6

Which of the following is true of corporations that operate in several different countries?

Accepted Answer

A nation may expropriate the assets of multinational corporations without compensation, which is a risk that multinational corporations face when operating in different countries.

Question 7

Which of the following is true of a firm that tries to coordinate and control the worldwide operations of its subsidiaries?

Accepted Answer

If a firm tries to coordinate and control its worldwide operations, it can face challenges with coordinating financial transactions across different countries where its subsidiaries are located. Thus, the cash flows in different subsidiaries might be denominated in different currencies, which creates complexities in financial management. The other answer choices do not apply to the situation described in the question.

Question 8

Which of the following statements is true of the concentrated organizational structures of non-U.S. firms?

Accepted Answer

Concentrated organizational structures in non-U.S. firms often result from universal banking relationships, which are more common outside the United States. These relationships can lead to more centralized control and influence by banks over firms.

Question 9

Which of the following is true of stockholders in continental Europe?

Accepted Answer

The answer of Which of the following is true of...

Question 10

The corporate charter is a document filed with the secretary of the state in which a firm is incorporated that provides information about the corporation, including its name, address, directors, and amount of capital stock.

Accepted Answer

The statement accurately defines what a corporate charter is.

Question 11

The prices at which the currency of one country can be converted into the currencies of other countries are known as _____.

Accepted Answer

Exchange rates refer to the prices at which the currency of one country can be converted into the currencies of other countries. Procurement prices refer to the cost of acquiring goods or services, political risk costs refer to the cost of potential political instability or uncertain geopolitical conditions, conversion costs refer to the cost of converting currency from one form to another, and transfer prices refer to the internal prices for goods or services transferred between different departments or units within the same company.

Question 12

Industrial groups that exist in foreign countries are _____.

Accepted Answer

Industrial groups in foreign countries often integrate all functions of production and sales, managing the entire process from start to finish.

Question 13

In many countries, the terms under which companies compete, the actions that must be taken or avoided, and the terms of trade of various transactions are determined by _____.

Accepted Answer

The answer of In many countries, the terms under which...

Question 14

Which of the following is true of the greater concentration of ownership in non-U.S. firms than in U.S. firms?

Accepted Answer

Greater concentration of ownership in non-U.S. firms permits greater monitoring and control by individuals or groups than the more dispersed ownership structures of U.S. firms. This is because with fewer shareholders, it is easier to reach a consensus and exert control over decision-making.

Question 15

A proprietorship is an unincorporated business owned by one individual and the owner benefits from the limited liability for business, which limits personal losses to what the proprietor has invested in the company.

Accepted Answer

A proprietorship does not offer limited liability, meaning the owner is personally responsible for all losses and debts of the business.

Question 16

Because financial institutions in other countries are generally less regulated than those in the United States, they generally _____.

Accepted Answer

Because they are less regulated, financial institutions in other countries can provide a greater variety of services to businesses than U.S. banks can.

Question 17

In general, the role of a financial manager is to plan for the acquisition and use of funds so as to maximize the value of the firm.

Accepted Answer

The role of a financial manager is to plan for the acquisition and use of funds so as to maximize the value of the firm.

Question 18

Which of the following statements is true?

Accepted Answer

Institutional differences among countries, such as differences in legal systems, accounting standards, and cultural norms, can make it difficult to coordinate the operations of subsidiaries in multinational corporations. A, B, and D are not true statements as currency values do fluctuate, cash flows can be denominated in different currencies, and nations may place constraints on the transfer of corporate resources. E is also not true as different countries even within the same geographic region can have varying cultural heritages that shape values and influence the role of business.

Question 19

The disadvantages associated with a proprietorship are similar to those of a partnership. A major difference between these two forms of business organization is that a partnership requires a legal agreement that commits the partners' personal assets, which means that partnerships have little difficulty raising large amounts of capital (similar to corporations).

Accepted Answer

The statement is incorrect. Proprietorships and partnerships both lack the legal protection of personal assets that corporations have, which makes it difficult to raise large amounts of capital. Proprietorships do not require a legal agreement between multiple parties, as they are solely owned and operated by one individual.

Question 20

Which of the following statements concerning the complexity of the manager's task in a multinational corporation is correct?

Accepted Answer

The fluctuation of currency values in different countries where a multinational corporation operates can complicate the manager's task. This can lead to issues with exchange rates and currency conversion when conducting financial transactions. The other options are not necessarily true and do not directly relate to the complexity of the manager's task.

Quiz 1: An Overview of Managerial Finance