Finance Questions

Which one of the following statements is correct concerning the organizational structure of a corporation?A) The vice president of finance reports to the chairman of the board.B) The chief operations officer reports to the chief executive officer.C) The controller reports to the president.D) The treasurer reports to the chief executive officer.E) The chief operations officer reports to the vice president of production.

Which position is generally directly responsible for financial planning and capital expenditures?A) ControllerB) TreasurerC) DirectorD) Chairman of the boardE) Chief operations officer

Which type of business is the easiest and cheapest to form?A) Limited partnershipB) Limited liability companyC) General partnershipD) CorporationE) Sole proprietorship

Net working capital is best defined asA) excess cash on hand.B) a firm's current assets.C) current assets minus current liabilities.D) total assets minus total liabilities.E) cash and near-cash assets.

The key difference between the responsibilities of the controller and those of the treasurer is best defined as the separation of duties betweenA) managing assets versus managing debt and equity.B) processing tax records versus accounting records.C) national versus international operations.D) production versus marketing.E) cash control versus accounting records.

8) The treasurer and the controller of a corporation generally report to theA) president.B) board of directors.C) chief executive officer.D) chief financial officer.E) chairman of the board.

Short-term financeA) ensures sufficient equipment is available to produce the daily amount of product desired.B) ensures that long-term debt is acquired at the lowest possible cost.C) ensures that dividends are paid to all stockholders on an annual basis.D) balances the amount of company debt to the amount of available equity.E) is concerned with managing net working capital.

Which one of the following best describes the primary advantage of being a limited partner rather than a general partner?A) No potential financial lossB) Entitlement to a larger portion of the partnership's incomeC) Liability for firm debts limited to the capital investedD) Greater management responsibilityE) Ability to manage the day-to-day affairs of the business

Sole proprietorshipsA) are expensive to set up.B) create unlimited liability for their owners.C) are faced with double taxation of profits.D) can have multiple owners.E) provide limited liability to owners.

The division of profits and losses among the members of a partnership is formalized in theA) indemnity clause.B) partnership agreement.C) statement of purpose.D) indenture contract.E) group charter.

Which one of the following statements concerning a sole proprietorship is correct?A) The life of the firm is limited to the life span of the owner.B) The owner can generally raise large sums of capital quite easily.C) A formal charter is required to form a new proprietorship.D) The company must pay separate taxes from those paid by the owner.E) The legal costs to form a sole proprietorship are quite substantial

Which one of these is an intangible asset?A) BuildingB) MachineryC) VehicleD) LoanE) Trademark

Which one of the following is a capital budgeting decision?A) Deciding whether or not to open a new storeB) Determining how much inventory to keep on handC) Determining how much debt should be borrowed from a particular lenderD) Deciding if stock shares should be repurchasedE) Determining how much cash to keep on hand

The value of a firm is best defined as theA) sum of all of the firm's future cash flows.B) current year's cash flow times (1 + g).C) current year's cash flow divided by r.D) total present value of all of the firm's future cash flows.E) current year's cash flows divided by (g- r).

Which one of these is the best indicator that acquiring a firm is a good idea?A) The firm has a positive NPV at an appropriate discount rate.B) The firm has a negative NPV at all positive discount rates.C) The firm has a positive NPV at the riskless rate of return.D) The firm has increasing cash inflows.E) The firm is growing on an annual basis.

Given a firm with positive annual cash flows, which one of the following will increase the current value of that firm?A) Increasing the annual growth rate of the cash flowsB) Increasing the discount rateC) Decreasing the amount of each cash flowD) Decreasing the life of the firmE) Increasing either the growth rate of the cash flows or the discount rate

Which statement is correct regarding amortized loans with equal payments?A) If you pay more than the scheduled amount, the additional payment will reduce the total interest paid over the life of the loan.B) The final loan payment will all be applied to the outstanding principal balance.C) The interest is paid only at loan maturity.D) If you pay more than the scheduled amount, the additional payment will increase the remaining principal balance.E) The principal portion of each payment will decrease over time.

An annuityA) has greater value than a comparable perpetuity.B) is either an equal or an unequal stream of payments that occur in equal time periods for a finite period of time.C) is a stream of payments that fluctuate with current market interest rates.D) is a stream of equal payments that occur in equal periods of time for a finite period.E) has a longer life span than a perpetuity.

An annuity stream where the payments occur forever is called a(n)A) annuity due.B) indemnity.C) perpetuity.D) amortized cash flow stream.E) ordinary annuity.

Which type(s) of loan can be repaid with annuity payments?A) Pure discount loanB) Both pure discount and interest-only loansC) Amortized loanD) Both interest-only and amortized loansE) Interest-only loan