Fin 5805 - sample mid-term exam

Fin 5805 - sample mid-term exam - Fin 5805 Winter - Sample...

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Unformatted text preview: Fin 5805 Winter - Sample M id-Term Exam 1. Which of the following statements is CORRECT? a. I t is generally more expensive to form a proprietorship than a corporation because, with a proprietorship, extensive legal documents are required. b. Corporations face fewer regulations than sole proprietorships. c. One disadvantage of operating a business as a sole proprietorship is that the fi rm is subject to double taxation, at both the firm level and the owner level. d. One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a regular partnership. e. If a regular partnership goes bankrupt, each partner is exposed to liabilities only up to the amount of his or her investment in the business. 1 Fin 5805 Winter - Sample M id-Term Exam 2. Which of the following statements is CORRECT? a. While the distinctions are blurring, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties. b. A liquid security is a security whose value is derived from the price of some other underlying asset. c. Money market mutual funds usually invest most of their money in a well- diversified portfolio of liquid common stocks. d. Money markets are markets for long-term debt and common stocks. e. The NYSE operates as an auction market, whereas the Nasdaq is a dealer market. 3. The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to a. Maximize the stock price per share over the long run, which is the stocks intrinsic value. b. Maximize the firm's expected EPS. c. Minimize the chances of losses. d. Maximize the firm's expected total income. e. Maximize the stock price on a specific target date. 4. Which of the following statements is CORRECT? a. The four most important financial statements provided in the annual report are the balance sheet, income statement, cash budget, and the statement of stockholders equity. b. The balance sheet gives us a picture of the firms financial position at a point in time. c. The income statement gives us a picture of the firms financial position at a point in time. d. The statement of cash flows tells us how 2 Fin 5805 Winter - Sample M id-Term Exam 4. Which of the following statements is CORRECT? much cash the firm has in the form of currency and demand deposits. e. The statement of cash needs tells us how much cash the firm will require during some future period, generally a month or a year. 5. Which of the following statements is CORRECT? a. The focal point of the income statement is the cash account, because that account cannot be manipulated by accounting t ricks. b. The reported income of two otherwise identical firms cannot be manipulated by different accounting procedures provided the firms follow Generally Accepted Accounting Principles (GAAP) ....
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Fin 5805 - sample mid-term exam - Fin 5805 Winter - Sample...

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