Quiz for Corporate Finance Foundation

FM - Foundation of Corporate Financial Management

Please wait while the activity loads.
If this activity does not load, try refreshing your browser. Also, this page requires javascript. Please visit using a browser with javascript enabled.

If loading fails, click here to try again

This quiz is designed for studying purposes and contains questions that are different from examination.

Start

Congratulations - you have completed FM - Foundation of Corporate Financial Management.

You scored %%SCORE%% out of %%TOTAL%%.

Your performance has been rated as %%RATING%%

Your answers are highlighted below.

Question 1

Which one of the following best describes the primary advantage of being a limited partner rather than a general partner?

A	Greater management responsibility.
B	Liability for firm debts limited to the capital invested.
C	Entitlement to a larger portion of the partnership’s income.
D	Ability to manage the day-to-day affairs of the business.

Question 1 Explanation:

Liability for firm debts limited to the capital invested is the primary advantage.

Question 2

Which of the following questions are addressed by financial managers?

I. How long will it take to produce a product?
II. How long should customers be given to pay for their credit purchases?
III. Should the firm borrow more money?
IV. Should the firm build a new factory?

A	I, II, and III only
B	II and III only
C	I, II, III, and IV
D	II, III, and IV only

Question 2 Explanation:

Financial managers are responsible for planning and managing financial areas of the business; time and schedule of the production is a direct responsibility of operations.

Question 3

What type of businesses is formed by two or more individuals who each has unlimited liability for business debts?

A	Limited Liability partnership.
B	Corporation.
C	Limited partnership.
D	General partnership.

Question 3 Explanation:

A business that formed by two or more individuals who each have unlimited liability for business debts called general partnership.

Question 4

Working capital management _____:

A	ensures that long-term debt is acquired at the lowest possible cost.
B	balances the amount of company debt to the amount of available equity.
C	Ensures that sufficient equipment is available to produce the amount of product desired on a daily basis.
D	is concerned with having sufficient funds to operate the business on a daily basis.

Question 4 Explanation:

Working capital management is concerned with having sufficient funds to operate the business on a daily basis.

Question 5

What type of the businesses is owned by a single individual?

A	business that owned by a single individual
B	Sole proprietorship.
C	Partnership.
D	Limited liability company.
E	Corporation.

Question 5 Explanation:

A business that owned by a single individual called sole proprietorship.

Question 6

What is the primary goal of financial management?

A	Minimize operational costs and maximize firm efficiency.
B	Maintain steady growth in both sales and net earnings.
C	Maximize current dividends per share of the existing stock.
D	Maximize the current value per share of the existing stock.

Question 6 Explanation:

Maximizing the current value per share of the existing stock is the primary goal of financial management

Question 7

When considering a capital budgeting project the financial manager should consider _____.

A	The timing of the project cash flows only.
B	The size, timing, and risk of the project cash flows.
C	The risk of the project cash flows only.
D	Only the size and timing of the project cash flows.

Question 7 Explanation:

As for any other projects, the size, timing, and risk of the project cash flows should be considered.

Question 8

What of the following refers to the original sale of securities by governments and corporations to the general public?

A	Liquidation market.
B	Primary market.
C	Secondary market.
D	Private placement market.

Question 8 Explanation:

The original sale of securities by governments and corporations to the general public called primary market.

Question 9

Who is a company stakeholder?

A	Any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.
B	A person who initially started a firm and currently has management control over the cash flows of the firm due to his/her current ownership of company stock.
C	Any person or entity that has voting rights based on stock ownership of a corporation.
D	Any person or entity that owns shares of stock of a corporation.

Question 9 Explanation:

Any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.

Question 10

What corporate document sets forth the business purpose of a firm?

A	Corporate bylaws.
B	Indenture contract.
C	Business plan.
D	Articles of incorporation.

Question 10 Explanation:

What is the corporate document that sets forth the business purpose of a firm.

Question 11

Which document represents the rules by which corporations govern themselves?

A	Partnership agreement.
B	Articles of incorporation.
C	Charter agreement.
D	Bylaws.

Question 11 Explanation:

Bylaws is the document that represents the rules by which corporations govern themselves.

Question 12

What is the type of a market where dealers buy and sell securities for themselves, at their own risk?

A	Secondary market.
B	Dealer market.
C	Liquidation market.
D	Primary market.

Question 12 Explanation:

A market where dealers buy and sell securities for themselves, at their own risk called dealer market.

Question 13

Which one of the following statements is correct concerning the organizational structure of a corporation?

A	The controller reports to the president.
B	The treasurer reports to the chief executive officer.
C	The vice president of finance reports to the chairman of the board.
D	The chief executive officer reports to the board of directors.

Question 13 Explanation:

The chief executive officer reports to the board of directors.

Question 14

Which one of the following statements concerning a sole proprietorship is correct?

A	The legal costs to form a sole proprietorship are quite substantial.
B	The ownership of the firm is easy to transfer to another individual.
C	The life of the firm is limited to the life span of the owner.
D	The owner can generally raise large sums of capital quite easily.

Question 14 Explanation:

The life of the firm is limited to the life span of the owner.

Question 15

What type of the market supports transactions when one shareholder sells stock directly to another?

A	Primary market.
B	OTC market.
C	Secondary market.
D	Dealer market.

Question 15 Explanation:

Secondary market supports transactions directly between shareholders.

Question 16

What is the name of a market where trading takes place directly between buyers and sellers?

A	Liquidation market.
B	Auction market.
C	Primary market.
D	Dealer market.

Question 16 Explanation:

A market where trading takes place directly between buyers and sellers called auction market.

Question 17

The treasurer and the controller of a corporation generally report to the _____.

A	Chief of Executive Officer.
B	Vice President of finance.
C	Prosident.
D	Board of Directors.

Question 17 Explanation:

The treasurer and the controller of a corporation generally report to the Vice President of finance.

Question 18

Who is generally directly responsible for overseeing the tax management, cost accounting, financial accounting, and appropriate data processing functions?

A	Auditor.
B	Controller.
C	Director.
D	Treasurer.

Question 18 Explanation:

Controller is the role that normally directly responsible for overseeing the tax management, cost accounting, financial accounting, and appropriate data processing functions.

Question 19

Which one of the following is a capital budgeting decision?

A	Deciding whether or not to open a new store.
B	Determining how much debt should be borrowed from a particular lender.
C	Deciding when to repay a long-term debt.
D	Determining how much money should be kept in the checking account.

Question 19 Explanation:

Whether or not to open a new store is a capital budgeting decision.

Question 20

The process of planning and managing a firm’s long-term investments is called:

A	Working capital management.
B	Capital budgeting.
C	Capital structure.
D	Financial modeling.

Question 20 Explanation:

Capital budgeting is the process of planning and managing a firm’s long-term investments.

Question 21

What is the management of a firm’s short-term assets and liabilities?

A	Assets management.
B	Capital structure management.
C	Working capital management.
D	Capital budgeting.

Question 21 Explanation:

Management of a firm’s short-term assets and liabilities called working capital management.

Question 22

How a conflict of interest between the stockholders and management of a firm is called?

A	Corporate breakdown.
B	Legal liability.
C	The agency problem.
D	Stockholders’ liability.

Question 22 Explanation:

A conflict of interest between the stockholders and management of a firm is called the agency problem.

Question 23

Who is generally directly responsible for overseeing the cash and credit functions, financial planning, and capital expenditures?

A	Treasurer.
B	President.
C	Controller.
D	Director.

Question 23 Explanation:

Treasurer is the role generally directly responsible for overseeing the cash and credit functions, financial planning, and capital expenditures.

Question 24

What type of the businesses created as a distinct legal entity composed of one or more individuals or entities?

A	General partnership.
B	Limited liability partnership.
C	Corporation.
D	Sole proprietary.

Question 24 Explanation:

Corporation is the business created as a distinct legal entity composed of one or more individuals or entities.

Question 25

Capital structure decisions include consideration of the _____.

I. Amount of long-term debt to assume.
II. Cost of acquiring funds.
III. Current assets and liabilities.
IV. Net working capital.

A	I, II, and IV only
B	II and III only
C	III and IV only
D	I and II only

Question 25 Explanation:

Capital structure decisions include consideration of the amount of long-term debt to assume and cost of acquiring funds.

Question 26

A partnership _____.

A	allows for easy transfer of interest from one general partner to another.
B	is taxed the same as a corporation.
C	agreement defines whether the business income will be taxed like a partnership or a corporation.
D	terminates at the death of any general partner.

Question 26 Explanation:

A partnership terminates at the death of any general partner.

Question 27

What is the mixture of debt and equity used by a firm to finance its operations?

A	Capital budgeting.
B	Capital structure.
C	Working capital management.
D	Assets and liabilities.

Question 27 Explanation:

Capital structure is the mixture of debt and equity used by a firm to finance its operations.

Question 28

What type of business entities is operated and taxed like a partnership, but with limited liability for the owners?

A	Sole proprietorship.
B	Limited liability company.
C	Corporation.
D	General partnership.

Question 28 Explanation:

Limited liability company is the business entity that is operated and taxed like a partnership, but with limited liability for the owners.

Question 29

Working capital management includes decisions concerning which of the following?

I. Accounts payable.
II. Long-term debt.
III. Accounts receivable.
IV. Inventory.

A	I, III, and IV only
B	I and III only
C	II and IV only
D	I, II, and III only

Question 29 Explanation:

Working capital management includes decisions concerning accounts payable, accounts receivable, and inventory because, which means managing the short-term assets and liabilities.

Question 30

The decision of which lender to use and which type of long-term loan is best for a project is part of:

A	Working capital management.
B	Capital budgeting.
C	The net working capital decision.
D	The capital structure decision.

Question 30 Explanation:

This is a capital structure decision because it is made based on analysis of the mixture of debt and equity that used by a company to finance its operations.

Question 31

Which one of the following statements concerning a sole proprietorship is correct?

A	The owner of a sole proprietorship may be forced to sell his/her personal assets to pay company debts.
B	A sole proprietorship is often structured as a limited liability company.
C	A sole proprietorship is the least common form of business ownership.
D	The owners of a sole proprietorship share profits as established by the partnership agreement.

Question 31 Explanation:

Owner of a sole proprietorship business has unlimited liability where personal assets considered as business equity.

Question 32

What an agency costs refers to?

A	The total dividends paid to stockholders over the lifetime of a firm.
B	Corporate income subject to double taxation.
C	The costs of any conflicts of interest between stockholders and management.
D	The costs that result from default and bankruptcy of a firm.

Question 32 Explanation:

An agency costs refers to the costs of any conflicts of interest between stockholders and management.

Question 33

A general partner _____.

A	Has more management responsibility than a limited partner.
B	Has less legal liability than a limited partner.
C	Cannot lose more than the amount of his/her equity investment.
D	Is the term applied only to corporations which invest in partnerships.

Question 33 Explanation:

Has more management responsibility than a limited partner.

Question 34

What document formalizes the division of profits and losses among the members of a partnership?

A	Articles of incorporation.
B	Financial plan.
C	Business plan.
D	Partnership agreement.

Question 34 Explanation:

Partnership agreement is the document that formalized the division of profits and losses among the members of a partnership.

Once you are finished, click the button below. Any items you have not completed will be marked incorrect. Get Results

There are 34 questions to complete.

←

List

→

Return

Shaded items are complete.

1	2	3	4	5
6	7	8	9	10
11	12	13	14	15
16	17	18	19	20
21	22	23	24	25
26	27	28	29	30
31	32	33	34	End

Return

1	2	3	4	5
6	7	8	9	10
11	12	13	14	15
16	17	18	19	20
21	22	23	24	25
26	27	28	29	30
31	32	33	34	End

1	2	3	4	5
6	7	8	9	10
11	12	13	14	15
16	17	18	19	20
21	22	23	24	25
26	27	28	29	30
31	32	33	34	End

1	2	3	4	5
6	7	8	9	10
11	12	13	14	15
16	17	18	19	20
21	22	23	24	25
26	27	28	29	30
31	32	33	34	End