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FINA3313-031 Business Finance, Spring 2006 Homework 1 Due by February 10, 2006. Instructor: Bing Y. Du I Please mark your answers on the SCANTRON (form 882) correspondingly and only submit the scantron. s Please write your name, last 4 digits of SSN, and Homework1 on your scantorn. P Late submission will not be accepted. Homework 1 CH1 Firm and Financial Manager (Question 1-19) 1. The liability of general partner is limited to the amount of their investment in the company. A. True B. False. 2. Agency problem in corporate business organization is generated by the separation of management and ownership. A. True B. False. 3. A successful investment is worth more than its cost. A. True B. False. 4. General Motors new opening of an assembly line in Arlington is a financing decision. A. True B. False. 5. A partnership business is a legal entity, thus it is double taxed. A. True B. False. 6. Agency problems will be an obstacle to achieving a firms goal. A. True B. False. Page 1 7. Lenders such as banks or insurance companies are involved in monitoring and controlling the risk associated with investment projects and financing decisions. A. True B. False. 8. Both Patents and trade marks are financial assets. A. True B. False. 9. The goal of the firm is to maximize the profits. A. True B. False. 10. One common reason for partnerships to convert to a corporate form of organization is that the partnership: A) faces rapidly growing financing requirements. B) wishes to avoid double taxation of profits. C) has issued all of its allotted shares. D) agreement expires after ten years of use. 11. When a sole proprietorship business fails, the maximum that can lost by an investor is: A) the amount of the initial investment. B) the amount of the profit on the investment. C) the amount necessary to pay the corporation's debts. D) the amount of the investor's personal wealth. 12. The legal life of a corporation is: A) coincident with that of its CEO. B) equal to the life of the Board of Directors. C) permanent, as long as shareholders don't change. D) permanent, regardless of current ownership. 13. Which of the following would not be considered a financial asset? A) A 10 years corporation bond issued by GM B) A promissory note C) A patent D) Your savings deposits in Bank of America 14. A financial manager facing a financing decision must decide whether to: A) Keep an assembly line idle for another three months. B) use the money market or capital market. C) Build a new plant in Mexico. D) buy new machinery or repair the old. 15. The term capital structure refers to: A) the manner in which a firm obtains its long-term sources of funding. B) the length of time needed to repay debt. ... View Full Document

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