Question 1

The personal decision to obtain a college degree in business is primarily a(n)________ decision.
A)social
B)investment
C)ethical
D)financing

Accepted Answer

Obtaining a college degree in business involves investing time and money to improve future career prospects, making it a primarily investment decision rather than social or ethical. Financing might be a factor in the decision-making process, but it is not the primary consideration.

Question 2

Working capital management refers to
A)long-term financing decisions.
B)the management of cash flows.
C)investing in product development.
D)capital structure.

Accepted Answer

Working capital management refers to the management of cash flows related to day-to-day operations of a business, including cash, accounts receivable, inventory, and accounts payable. It involves efficient management of these elements to ensure that there is enough cash on hand to meet operational expenses and short-term liabilities. Options A, C, and D refer to long-term financing decisions, investing in product development, and capital structure, respectively, which are not directly related to working capital management.

Question 3

Which one of the following categories of owners enjoys limited liability?
A)General partners in a limited partnership or limited liability company
B)Shareholders (common stock)of a corporation
C)Sole proprietors
D)Both A and B

Accepted Answer

Shareholders of a corporation have limited liability, meaning that they are only liable for the amount of their investment in the company and are not personally responsible for any debts or legal issues of the corporation. General partners in a limited partnership or limited liability company do not have limited liability unless they are designated as limited partners. Sole proprietors have unlimited liability, meaning that they are personally responsible for all debts and legal issues related to their business.

Question 4

Which of the following is a characteristic of a limited partnership?
A)It allows one or more partners to have limited liability.
B)It requires one or more of the partners to be a general partner to whom the privilege of limited liability does not apply.
C)It prohibits the limited partners from participating in the management of the partnership.
D)All of the above.

Accepted Answer

A limited partnership is a type of partnership agreement that allows one or more partners to have limited liability (choice A), but requires at least one general partner to whom the privilege of limited liability does not apply (choice B). Additionally, limited partners are prohibited from participating in the management of the partnership (choice C). Therefore, all of the above choices are characteristics of a limited partnership.

Question 5

Which forms of organization are free of initial legal requirements?
A)Sole proprietorship
B)General partnership
C)Corporation
D)Both A and B

Accepted Answer

Both sole proprietorship and general partnership are free of initial legal requirements, meaning they can be formed without any formal legal registration or documentation. This makes them a good choice for small businesses or individuals looking for a simple and easy-to-create business structure. However, it's important to note that both forms of organization have unlimited personal liability for the owners, which means that their personal assets are at risk if the business faces any legal or financial issues.

Question 6

Assume that you are starting a business.Further assume that the business is expected to grow very quickly and a great deal of capital will be needed soon.What type of business organization would you choose?
A)Corporation
B)General Partnership
C)Sole proprietorship
D)Limited partnership

Accepted Answer

Choosing a corporation for a business that is expected to grow quickly and requires a great deal of capital is the best option. This is because a corporation offers limited liability protection to its owners (shareholders), making it easier to raise capital by selling shares of stock. Also, corporations can issue bonds to raise money, and they can exist indefinitely regardless of changes in their ownership. Additionally, corporations offer opportunities for an initial public offering (IPO) to raise large amounts of capital quickly.

Question 7

Business financial decisions are fundamentally different from personal financial decisions.

Accepted Answer

The answer of Business financial decisions are fundamentally different from...

Question 8

Which of the following forms of organization blends elements of partnerships and corporations?
A)D.B.A.'s
B)Sole proprietorships
C)Limited liability companies (LLC's)
D)General partnership

Accepted Answer

Limited liability companies (LLC's) blend elements of partnerships (flexibility in management and taxation) and corporations (limited liability protection).

Question 9

The area of finance that deals with long-term investment decisions is known as
A)capital structure.
B)working capital management.
C)financial strategy.
D)capital budgeting.

Accepted Answer

Capital budgeting involves making decisions about long-term investments in projects and assets that will generate income or increase the value of a business. Capital structure refers to the way a company finances its operations through debt and equity, while working capital management involves managing a company's short-term assets and liabilities. Financial strategy is a broader concept that can include all aspects of financial management, including capital structure, capital budgeting, and working capital management.

Question 10

Capital structure refers to the financing of long-term investments.

Accepted Answer

Capital structure refers to the way a company finances its long-term investments through a mix of debt and equity. This includes decisions on the use of debt, equity, retained earnings, and other financing options to fund its operations and growth.

Question 11

The true owners of the corporation are the
A)holders of debt issues of the firm.
B)preferred stockholders.
C)board of directors of the firm.
D)common stockholders.

Accepted Answer

Common stockholders are the true owners of the corporation. They have a residual claim on the earnings and assets of the company, and have the right to vote for members of the board of directors. Debt holders and preferred stockholders have limited rights and do not have ownership rights in the company. The board of directors is elected by the shareholders and acts on their behalf, but they are not the owners of the company.

Question 12

From a financial point of view,a company that decides to develop new product is making
A)a financing decision.
B)an investment decision.
C)a capital structure decision.
D)a cash flow decision.

Accepted Answer

Developing a new product requires a significant amount of investment in research and development, manufacturing, and marketing. Therefore, deciding to develop a new product is an investment decision, as it involves allocating resources towards a project that is expected to generate future returns.

Question 13

Which of the following types of business forms is least risky to investors?
A)Sole proprietorship
B)Limited partnership
C)General partnership
D)A public corporation

Accepted Answer

A public corporation is the least risky to investors as it offers limited liability, can raise large amounts of capital easily, and is subject to more regulatory oversight and transparency. In contrast, sole proprietorships, general partnerships, and limited partnerships offer little to no limited liability protection, exposing investors to significant risk.

Question 14

What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form?
A)Sole proprietorships are subject to double taxation of profits.
B)The cost of formation.
C)Inadequate profit sharing.
D)Owners have unlimited liability.

Accepted Answer

The chief disadvantage of the sole proprietorship is that the owner has unlimited liability, meaning they are personally responsible for all the debts and liabilities of the business. In the corporate form, shareholders have limited liability, which means they are only liable for the amount of their investment in the company. This protects their personal assets in the event the company faces financial difficulties. Therefore, the best choice is D.

Question 15

What are the three basic questions addressed by the study of investments?

Accepted Answer

The answer of What are the three basic questions addressed...

Question 16

In terms of organizational costs,which of the following sequences is generally correct,moving from lowest to highest cost?
A)General partnership,sole proprietorship,limited partnership,corporation
B)Sole proprietorship,general partnership,limited partnership,corporation
C)Corporation,limited partnership,general partnership,sole proprietorship
D)Sole proprietorship,general partnership,corporation,limited partnership

Accepted Answer

Sole proprietorship typically has the lowest organizational costs as it requires minimal legal formalities. General partnership and limited partnership have slightly higher costs as they require partnership agreements and registration. Corporation has the highest organizational costs as it requires incorporation fees, legal and accounting fees, and compliance with corporate regulations. Therefore, the correct sequence moving from lowest to highest cost is sole proprietorship, general partnership, limited partnership, and corporation.

Question 17

Which of the following statements best represents what finance is about?
A)How political,social,and economic forces affect corporations
B)Maximizing profits
C)The study of how people and businesses make investment decisions and how to finance those decisions
D)Reducing risk

Accepted Answer

Finance is the study of how individuals, businesses, and organizations make investment decisions and how they finance those decisions, taking into account risks and returns. Maximizing profits and reducing risk are important elements of finance, but they are not the only focus. The statement about political, social, and economic forces affecting corporations is more representative of the study of economics.

Question 18

Finance managers need to interact constantly with
A)marketing managers.
B)accounting staff.
C)management information systems staff.
D)all of the above.

Accepted Answer

Finance managers need to interact constantly with marketing managers to understand sales trends and consumer behavior, with accounting staff to maintain accurate financial records, and with management information systems staff to ensure effective data analysis and reporting. Therefore, all of the above options are correct.

Question 19

Which of the following is NOT an advantage of the sole proprietorship?
A)Limited liability
B)No time limit imposed on its existence
C)No legal requirements for starting the business
D)None of the above

Accepted Answer

Limited liability is not an advantage of sole proprietorship. In fact, sole proprietors have unlimited personal liability for the debts and obligations of their business. The other options, B and C, are advantages of sole proprietorship.

Question 20

Which of the following is NOT true for limited partnerships?
A)Limited partners can only manage the business.
B)One general partner must exist who has unlimited liability.
C)Only the name of general partners can appear in the name of the firm.
D)Limited partners may sell their interest in the company.

Accepted Answer

Limited partners are not allowed to manage the business. They are only passive investors and have limited liability for the company's debts and obligations.

Quiz 1: Getting Started-Principles of Finance

The personal decision to obtain a college degree in business is primarily a(n) ________ decision.

Working capital management refers to

Which one of the following categories of owners enjoys limited liability?

Which of the following is a characteristic of a limited partnership?

Which forms of organization are free of initial legal requirements?

Assume that you are starting a business.Further assume that the business is expected to grow very quickly and a great deal of capital will be needed soon.What type of business organization would you choose?

Business financial decisions are fundamentally different from personal financial decisions.

Which of the following forms of organization blends elements of partnerships and corporations?

The area of finance that deals with long-term investment decisions is known as

Capital structure refers to the financing of long-term investments.

The true owners of the corporation are the

From a financial point of view,a company that decides to develop new product is making

Which of the following types of business forms is least risky to investors?

What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form?

What are the three basic questions addressed by the study of investments?

In terms of organizational costs,which of the following sequences is generally correct,moving from lowest to highest cost?

Which of the following statements best represents what finance is about?

Finance managers need to interact constantly with

Which of the following is NOT an advantage of the sole proprietorship?

Which of the following is NOT true for limited partnerships?