Exam 1 - Exam 1 Version 1 Key 1. Paul is the owner of...

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Unformatted text preview: Exam 1 Version 1 Key 1. Paul is the owner of Paul's Cabinets, which is a sole proprietorship. The firm cannot pay its bills because a large customer defaulted on payment. Which one of the following statements is correct given this situation? a. The creditors of Paul's Cabinets can only collect payment if Paul's Cabinets receives payment from its customer. b. The only course of action the creditors of Paul's Cabinets has is to sell the assets of Paul's Cabinets. c. The creditors of Paul's Cabinets can assume the assets of Paul's Cabinets but only in an amount that exceeds Paul's investment in the firm. D . Paul is personally liable for the entire debt of Paul's Cabinets. e. Paul is personally liable for the firm's debts but only to the extent of his investment in Paul's Cabinets. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross - Chapter 001 #24 SECTION: 1.3 TOPIC: SOLE PROPRIETORSHIP TYPE: CONCEPTS 2. The primary goal of financial management is to maximize the: a. current net income. b. net working capital. c. the number of shares outstanding. D . market value of the existing stock. e. revenue growth. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross - Chapter 001 #36 SECTION: 1.4 TOPIC: GOAL OF FINANCIAL MANAGEMENT TYPE: CONCEPTS 3. Which of the following are the key methods of aligning management goals with shareholder interests? I. increasing management salaries based on a nationally recognized inflation measure II. replacing management if shareholders' interests are not given top priority III. basing management salaries on the total revenues of the firm IV. tying management compensation to the market value of the firm's stock a. I and III only b. I and IV only C . II and IV only d. I, II, and III only e. II, III, and IV only BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: INTERMEDIATE Ross - Chapter 001 #45 SECTION: 1.5 TOPIC: AGENCY PROBLEM TYPE: CONCEPTS 4. The control of a corporation ultimately lies with the: a. chief financial officer. b. company president. C . company stockholders. d. chairman of the board. e. chief executive officer. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEVEL OF DIFFICULTY: BASIC Ross - Chapter 001 #46 SECTION: 1.5 TOPIC: CORPORATE CONTROL TYPE: CONCEPTS 5. The primary market is: A . the market where all new issues of debt and equity securities are sold to the public. b. the NYSE. c. a reference to any auction market. d. a reference to any dealer market. e. any large stock exchange accessible to the general public for trading either debt or equity securities. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEVEL OF DIFFICULTY: BASIC Ross - Chapter 001 #56 SECTION: 1.6 TOPIC: PRIMARY MARKET TYPE: CONCEPTS 6. Shareholders' equity includes which of the following?...
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This note was uploaded on 06/09/2008 for the course FNCE 3010 taught by Professor Donchez,ro during the Spring '07 term at Colorado.

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Exam 1 - Exam 1 Version 1 Key 1. Paul is the owner of...

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