Author: Lawrence J. Gitman BAM 513 Financial Management Text: Principles of Managerial Finance 12th Edition, 2009 ISBN: 0321524136 Publisher: Pearson Education a. b. Multiple Choice Questions (Enter your answers on the enclosed answer sheet) 1)Which of the following legal forms of organization is characterized by limited liability? c.Professional partnership d.Sole proprietorsh i p e.Corporation f.Partnership 2) The financial manager may be responsible for any of the following EXCEPT a.keepi ng track of quarterly tax payments. b.analyzing quarterly budget and performance reports. c.analyzing the effects of more debt on the firm’s capital structure. d.determining whether to accept or reject a capital asset acquisition. 3) The financial manager’s financing decisions determine a.both the mix and the type of assets found on the firm’s balance sheet. b.both the mix and the type of assets and liabilities found on the firm’s balance sheet. c.the most appropriate mix of short-term and long-term financing. d.the proportion of the firm’s earnings to be paid as dividend. 4) Wealth maximization as the goal of the firm implies enhancing the wealth of a.the firm’s stockholders. b.the Board of Directors. c.the firm’s employees. d.the federal government. 5)The amount earned during the accounting period on each outstanding share of common stock is called a.common stock dividend. b.net profits after taxes. c.earn i ngs per share. d.net income. 6)Cash flow and risk are the key determinants in share price. Increased cash flow results in , other things remaining the same. a.an unchanged share price b.a lower share price c.an undetermined share price d.a higher share price 1 g. 2 7)A more recent issue that is causing major problems in the business commu- nity is a.short-term versus long-term financial goals of management. b.the privatization of ownership. c.ethical problems. d.environmental concerns. 8) The implementation of a pro-active ethics program is expected to result in a.a positive corporate image and increased respect, but is not expected to af- fect cash flows. b.a positive corporate image and increased respect, but is not expected to af- fect share price. c.an increased share price resulting from a decrease in risk, but is not expected to affect cash flows. d.a positive corporate image and increased respect, a reduction in risk, and en- hanced cash flow resulting in an increase in share price. 9) The Sarbanes-Oxley Act of 2002 was passed in response to a.the decline in tech nology stocks. b.insider trading activities. c.false disclosures in financial reporting. d.all of the above 10)The key participants in financial transactions are individuals, businesses, and governments. Individuals are net of funds, and businesses are net of funds. a.demanders; suppliers b.purchasers; sellers c.suppliers; demanders d.users; providers 11) The over-the-counter (OTe) market is a.an intangible market for unlisted securities. b.a place where securities are bought and sold. c.the New York Stock Exchange. d.an organized stock exchange. 12) The two key financial markets are a.primary market and secondary market. b.capital market and secondary market. c.primary market and money market. d.money market and capital market. 13)Securities exchanges create efficient markets that do all of the following EXCEPT a.ensure a market in which the price reflects the true value of the security. b.control the supply and demand for securities through price. c.allocate funds to the most productive uses. d.allow the price to be determined by supply and demand of securities. 14)The tax deductibility of various expenses such as general and administrative expenses their after-tax cost. a.reduces b.has no effect on c.has an undetermined effect on d.increases 15)The dividend exclusion for corporations receiving dividends from another corporation has resulted in a.stock investments being relatively less attractive, relative to bond investments made by one corporation in …
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