Question 1

High cash flow is generally associated with a higher share price whereas higher risk tends to result in a lower share price.

Accepted Answer

This statement is generally true as investors are more attracted to companies with a strong cash flow as it indicates financial stability and potential for growth. On the other hand, companies with higher risk may have a lower valuation and therefore a lower share price as investors are less willing to take on that risk. However, there may be exceptions to this general trend depending on various factors such as investor sentiment and market conditions.

Question 2

Corporations are the most common form of business organization.

Accepted Answer

Sole proprietorships are the most common form of business organization, not corporations.

Question 3

Financial service

Accepted Answer

Financial service involves the design and delivery of financial products and advice to clients. This may include investment management, retirement planning, and insurance services. The other options (A, B, and D) do not fully capture the scope of financial services.

Question 4

In __________, owners have limited liability with regard to the business-they are not personally liable for other owners' malpractice.

Accepted Answer

In a limited partnership, there are two types of partners - general partners and limited partners. The general partners manage the business and are personally liable for its debts and obligations. However, the limited partners have limited liability and are only liable up to the amount of their investment in the partnership. Therefore, in a limited partnership, owners have limited liability with regard to the business.

Question 5

In a limited partnership, partners' liabilities are limited to their investment in the partnership.

Accepted Answer

The answer of In a limited partnership, partners' liabilities are...

Question 6

Making financing decisions includes all of the following EXCEPT

Accepted Answer

Analyzing quarterly budget and performance reports is a part of financial planning and analysis, not financing decisions. Financing decisions involve selecting the appropriate sources of funding for the company's operations and determining the optimal mix of short-term and long-term financing.

Question 7

Agency costs are the reduction in shareholders' wealth when managers act to maximize their ownwealth instead of shareholder wealth.

Accepted Answer

This is the definition of agency costs.

Question 8

Managerial finance is concerned with the design and delivery of advice and financial products toindividuals, businesses, and government.

Accepted Answer

Managerial finance focuses on the financial management of an organization, including budgeting, forecasting, and investment decisions, rather than providing financial advice and products.

Question 9

The treasurer's focus tends to be more external, while the controller's focus is more internal.

Accepted Answer

The treasurer is typically responsible for managing a company's financial relationships with external stakeholders, such as investors, lenders, and regulators. The controller, on the other hand, focuses on internal financial reporting, budgeting, and control.

Question 10

The controller is the officer responsible for the firm's financial activities such as financial planning and fund raising, making capital expenditure decisions, and managing cash, credit, the pension fund, and foreign exchange.

Accepted Answer

The controller is typically responsible for accounting-related functions, while the treasurer handles financial planning, fund raising, and managing cash, credit, and other financial activities.

Question 11

The treasurer is the officer responsible for the firm's accounting activities, such as corporateaccounting, tax management, financial accounting, and cost accounting.

Accepted Answer

The treasurer is typically responsible for managing the firm's finances, including cash management, capital structure, and financial risk management, while accounting activities are usually overseen by the controller.

Question 12

Financial services is concerned with the duties of the financial manager.

Accepted Answer

The answer of Financial services is concerned with the duties...

Question 13

The difference between the cost of funds used to finance an investment and its after-tax operatingprofits is called

Accepted Answer

The difference between the cost of funds used to finance an investment and its after-tax operating profits is called economic value added (EVA). EVA is a measure of financial performance that takes into account the cost of capital. It is calculated by subtracting the cost of capital from the after-tax operating profits. This measure helps to determine whether an investment is creating value for a company or not.

Question 14

The financial manager must look beyond financial statements to obtain insight into developing or existing problems since the accrual accounting data do not fully describe the circumstances of a firm.

Accepted Answer

Accrual accounting data only show a snapshot of a company's financial position at a specific point in time and may not reflect underlying issues. Therefore, financial managers must gather additional information to understand the full picture and identify potential problems.

Question 15

Which of the following legal forms of organization is characterized by limited liability?

Accepted Answer

A corporation is characterized by limited liability, meaning that the owners or shareholders are not personally responsible for the debts or liabilities of the corporation. The other options do not have limited liability.

Question 16

Corporate owners receive a realizable return through

Accepted Answer

Corporate owners receive a realizable return through an increase in share price, which can be realized by selling the shares at a higher price than they were purchased, and through cash dividends, which are direct payments made to shareholders from the company's profits.

Question 17

The separation of ownership and liability make the option of incorporating a private business very appealing.

Accepted Answer

Incorporation allows for the separation of ownership and liability which protects the personal assets of an owner from the debts and liabilities of the business. This is a major advantage of incorporating a private business.

Question 18

If a manager's compensation is based on a performance measure such as earnings per share, he/she has an incentive plan.

Accepted Answer

The answer of If a manager's compensation is based on...

Question 19

Which of the following is a career opportunity in managerial finance?

Accepted Answer

Capital Expenditures Management involves making decisions about investing in long-term assets such as buildings, machinery and equipment. This requires expertise in finance and accounting and is generally a career opportunity in managerial finance. Investment, Personal Financial Planning, Real Estate and Insurance are also areas of finance but may not necessarily fall under the category of managerial finance.

Question 20

The treasurer is commonly responsible for

Accepted Answer

The treasurer is primarily responsible for making capital expenditures, such as purchasing equipment or investing funds. While they may have oversight responsibilities in other areas such as cost accounting and tax preparation, those tasks are typically handled by different departments or professionals. Data processing would typically fall under the responsibilities of an IT department.

Quiz 1: Overview of Corporate Finance