FIN 304 QUIZ 2 TEST

1. Partnerships and proprietorships generally do not have a tax advantage over corporations. (Points : 2)

 

 

Question 2. 2. An advantage of the corporate form of organization is that corporate stockholders are not exposed to personal liabilities in the event of bankruptcy. (Points : 2)

 

 

Question 3. 3. A disadvantage of the corporate form of organization is that corporations are generally more highly regulated than proprietorships and partnerships. (Points : 2)

 

Question 4. 4. One advantage of the corporate form of organization is that it avoids double taxation. (Points : 2)

 

Question 5. 5. It is generally harder to transfer one’s ownership interest in a partnership than in a corporation. (Points : 2)

 

 

Question 6. 6. One danger of starting a proprietorship is that you may be exposed to personal liability if the business goes bankrupt.  This problem would be avoided if you formed a corporation to operate the business. (Points : 2)

 

Question 7. 7. If a corporation elects to be taxed as an S corporation, then it can avoid the corporate tax.  However, its stockholders will have to pay personal taxes on the firm’s net income. (Points : 2)

 

Question 8. 8. Organizing as a corporation makes it easier for the firm to raise capital.  This is because corporations’ stockholders are not subject to personal liabilities if the firm goes bankrupt and also because it is easier to transfer shares of stock than partnership interests. (Points : 2)

 

Question 9. 9. In order to maximize its shareholders’ value, a firm’s management must attempt to maximize the expected profits and/or EPS. (Points : 2)

 

Question 10. 10. In order to maximize its shareholders’ value, a firm’s management must attempt to maximize the stock price in the long run, or the stock’s “intrinsic value.” (Points : 2)

 

 

Question 11. 11. Globalization of business has been facilitated by improvements in information technology. (Points : 2)

 

 

Question 12. 12.

According to Mr. Wheeler, Accountants look through the rear view mirror and the Finance team looks through the windshield.

(Points : 2)

 

Question 13. 13. A stock’s market price would equal its intrinsic value if all investors had all the information that is available about the stock.  In this case the stock’s market price would equal its intrinsic value. (Points : 2)

 

 

Question 14. 14. If a lower level person in a firm does something illegal, like “cooking the books” to understate costs and thereby increase profits above the correct profits because he or she was told to do so by a superior, the lower level person cannot be prosecuted but the superior can be prosecuted. (Points : 2)

 

 

Question 15. 15. If a firm’s board of directors wants to maximize value for its stockholders in general (as opposed to some specific stockholders), it should design an executive compensation system whose goal is to maximize the stock’s intrinsic value rather than the stock’s current market price. (Points : 2)

 

 

Question 16. 16. According to Thomas Laughlin, which type of organizations represent “the cheapest insurance you will ever buy”? (Points : 2)

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Question 17. 17.

According to Mr. Wheeler, what is the primary thing that must happen in business for everything to function properly?

(Points : 2)

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Question 18. 18. The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to (Points : 2)

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Question 19. 19. Which of the following statements is CORRECT? (Points : 2)

 

 

Question 20. 20. The primary operating goal of a publicly-owned firm trying to best serve its stockholders should be to (Points : 2)

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Question 21. 21. With which of the following statements would most people in business agree? (Points : 2)

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Question 22. 22. Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and bondholders? (Points : 2)

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Question 23. 23. Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and managers? (Points : 2)

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Question 24. 24. Which of the following mechanisms would be most likely to help motivate managers to act in the best interests of shareholders? (Points : 2)

 

 

Question 25. 25. Which of the following actions would be likely to encourage a firm’s managers to make decisions that are in the best interests of shareholders? (Points : 2)

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