Ch5 Exercise

Ch5 Exercise - FIN350 In Class Work No 1 First Name Last...

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FIN350 In Class Work No. 1 First Name_______ Last Name_______ 1. One common reason for partnerships to convert to a corporate form of organization is that the partnership: A) faces rapidly growing marketing requirements. B) wishes to avoid taxation of profits. C) has issued all of its partnerships. D) faces rapidly growing capital needs 2. Which of the following would be considered a capital budgeting decision? A) Planning to issue common stock rather than issuing preferred stock B) A decision to expand into a new line of products, at a cost of $5 million C) Repurchasing shares of common stock D) Issuing debt in the form of long-term bonds 3. Which of the following statements is true regarding the corporate form of organization compared to that of the sole proprietorship? A) The owners of the sole proprietorship have limited liability for the firm's debts. B) The sole proprietorship is the simplest business form to start-up. C) The corporation has a limited life. D) Dividends received by the corporation's shareholders are tax-exempt. E) It is more difficult to transfer ownership in a corporation. 4. The goal of a financial manager is to: A) Maximize sales B) Maximize profits C) Maximize the wealth of both bond holders and stock holders. D) Maximize the wealth of the shareholders E) Maximize the stock price on fiscal year end. 5. Which of the following is an example of agency problem in corporations? A) shirking B) empire building C) entrenchment D) excessive perks E) all of above 1
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6. In a corporation, creditor’s interest might be hurt when management take which of the following project? A) a very profitable project
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This note was uploaded on 09/20/2011 for the course FIN 350 taught by Professor Chen during the Spring '07 term at S.F. State.

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Ch5 Exercise - FIN350 In Class Work No 1 First Name Last...

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