Question 1

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 investing money into research and development, production, and marketing. Therefore, it falls under the category of an investment decision.

Question 2

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 primarily concerned with investment decisions, such as how to allocate resources and how to finance those investments. Maximizing profits and reducing risk are important considerations in finance, but they are not the sole focus. Understanding the impact of political, social, and economic forces is more related to macroeconomics and business strategy.

Question 3

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 have limited liability and are not responsible for managing the business. This is in contrast to general partners who have unlimited liability and are responsible for managing the business.

Question 4

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

Accepted Answer

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

Question 5

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 allows one or more partners to have limited liability (A), requires one or more of the partners to be a general partner to whom the privilege of limited liability does not apply (B), and prohibits the limited partners from participating in the management of the partnership (C).

Question 6

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 because it offers limited liability and the ability to buy and sell shares, spreading the risk among a larger pool of investors. Sole proprietorships, general partnerships, and limited partnerships offer less protection and potential for investors to lose their personal assets.

Question 7

What is the chief disadvantage of the sole proprietorship as a form of business organisation 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 as a form of business organisation when compared to the corporate form is that owners have unlimited liability. This means that the owner's personal assets are at risk if the business is sued or cannot pay its debts, unlike in a corporation where the liability is limited to the assets of the corporation.

Question 8

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

Long-term investment decisions deal with capital budgeting, which involves analyzing and selecting investment opportunities that will yield returns over an extended period of time. Capital structure refers to the way a company finances its operations, while working capital management deals with the management of short-term assets and liabilities. Financial strategy is a broad term that encompasses various aspects of financial planning and decision-making.

Question 9

Business financial decisions are fundamentally different from personal financial decisions.

Accepted Answer

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

Question 10

In terms of organisational costs,which of the following sequences are 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 and general partnership are the easiest and least expensive types of organisations to set up. Limited partnership and corporation are more complex and require more legal formalities, resulting in higher costs. Therefore, the sequence from lowest to highest cost would be: sole proprietorship, general partnership, limited partnership, corporation.

Question 11

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. This may include a mix of debt and equity financing to achieve a balance between risk and return.

Question 12

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 organisation would you choose?
A)Corporation
B)General Partnership
C)Sole proprietorship
D)Limited partnership

Accepted Answer

A corporation would be the best choice for a business that is expected to grow quickly and requires a lot of capital. Corporations are separate legal entities that can raise capital by issuing stock and can attract investors more easily. They also provide limited liability protection for shareholders, which can be beneficial in case of any legal issues. Additionally, corporations have the ability to retain earnings and reinvest them back into the business for growth, making them a suitable choice for businesses with high growth potential.

Question 13

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

Accepted Answer

Sole proprietorships and general partnerships typically do not have initial legal requirements like registration or incorporation, unlike corporations.

Question 14

Which one of the following categories of owners enjoys limited liability?
A)limited liability company general partners
B)corporation shareholders
C)sole proprietors
D)both A and B

Accepted Answer

Corporation shareholders enjoy limited liability, meaning that their personal assets are protected from the company's debts and legal actions. Limited liability company general partners may not have the same protection unless specified in the company's operating agreement. Sole proprietors have unlimited liability, meaning that their personal assets can be used to satisfy business debts and legal actions.

Question 15

Which of the following forms of organisation blends elements of partnerships and corporations?
A)managing partnerships
B)sole proprietorships
C)limited liability companies
D)general partnerships

Accepted Answer

Limited liability companies (LLCs) blend elements of partnerships and corporations by providing limited liability protection to its owners (like a corporation) while also allowing for flexible management and pass-through taxation (like a partnership).

Question 16

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 is an investment decision because it involves significant financial resources in terms of tuition fees, books, and other expenses. It also requires a significant amount of time and effort, which translates into opportunity costs. Therefore, an individual who decides to pursue a business degree should consider various factors such as the potential return on investment, career goals, and personal preferences. Social, ethical, and financing factors may also come into play, but they are secondary to the investment aspect.

Question 17

Financial management skills are not just needed by finance professionals,they are also needed by
A)marketing managers.
B)accountants.
C)management information systems professionals.
D)all of the above.

Accepted Answer

Financial management skills are essential for all types of professionals, regardless of their field. Marketing managers need these skills to make decisions related to budgets, pricing, and profit margins. Accountants use financial management skills to manage and analyze financial data. Management information systems professionals need financial management skills to evaluate the costs and benefits of information technology investments. Therefore, all of the above options are correct.

Question 18

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 is concerned with the day-to-day financial operations of a company, such as managing cash flows, inventory, accounts receivable, and accounts payable. It is not related to long-term financing decisions (A), investing in product development (C), or capital structure (D).

Question 19

Which of the following is true concerning a sole proprietorship?
A)It has limited liability for the owner.
B)The business survives the death of the owner.
C)It has only one owner.
D)Profits are taxed at the company tax rate.

Accepted Answer

A sole proprietorship is a type of business that is owned and operated by one person. This means that there is only one owner. The owner of a sole proprietorship is also personally liable for any debts or legal issues that arise from the business, which means there is no limited liability protection. Additionally, profits from a sole proprietorship are not taxed at the company tax rate. Instead, they are taxed as personal income for the owner. Finally, when the owner dies, the business typically does not survive unless it is passed on to a successor or sold.

Question 20

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

Accepted Answer

The true owners of a corporation are the common shareholders, as they hold ownership in the company through their ownership of common stock. While debt and preferred stockholders have financial claims on the company, they do not have ownership rights or control over the corporation's operations. The board of directors is responsible for making key decisions and overseeing the management team, but they do not own the corporation themselves.

Quiz 1: Getting Started-Principles of Finance

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

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

Which of the following is NOT true for limited partnerships?

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

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

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 organisation when compared to the corporate form?

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

Business financial decisions are fundamentally different from personal financial decisions.

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

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

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 organisation would you choose?

Which forms of organisation are free of initial legal requirements?

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

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

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

Financial management skills are not just needed by finance professionals,they are also needed by

Working capital management refers to

Which of the following is true concerning a sole proprietorship?

The true owners of a corporation are the