1) Which of the following is the best measure of profit
maximization? goal?
A. risk of the investment
B. timing of the returns
C. retained earnings
D. earnings per share
2) The tax liability of a corporation with ordinary income
of? $105,000 is? ________.
Range of taxable
income
Marginal rate
? $ 0 to? $ ? 50,000
?15%
50,000 to? 75,000
25
?75,000 to? 100,000
34
100,000 to ? 335,000
39
?335,000 to?
10,000,000
34
10,000,000 to? 15,000,000 35
A.
?$24,200
B. ?$23,950
C. ?$42,000
D. ?$35,700
3) The Sarbanesminus?Oxley Act of 2002 resulted in?
________.
A. delayed disclosure of stock sales by corporate executives
B. toughened penalties against overcompensated executives
C. tightened audit regulations and controls
D. lenient penalties against executives who commit corporate
fraud
4)Which of the following is an example of a? firm’s
stakeholder?
A. suppliers
B. media
C. Federal reserve
D. competitors
5) As the risk of a stock investment? increases, investors’?
________.
A. return will increase
B. return will decrease
C. required rate of return will increase.
D. required rate of return will decrease
6) Congress allows corporations to exclude from taxes 70 to
100 percent of dividends received from other corporations. Congress did this
to? ________.
A. lower the cost of equity financing for corporations
B. encourage corporations to invest in each other
C. eliminate most of the potential tax liability from the
dividends received by the second and any subsequent corporations
D. avoid double taxation on dividends
7) Government is typically a? ________.
A. net demander of funds because it saves more than it
borrows
B. net provider of funds because it borrows more than it
saves
C. net provider of funds because it can print money at will
D. net demander of funds because it borrows more than it
saves
8) Incentive plans usually tie management compensation to?
________.
A. coupon payments
B. share price
C. inventory turnover
D. dividends
9) Which of the following is one of the positive benefits of
an effective ethics? program?
A. reduce potential litigation and judgment costs
B. making sure violations are? penalized, while at the same
time not subjecting the employee to publicity
C. gain the? loyalty, commitment, and respect of the? firm’s
competitors
D. maintain and build competitor confidence
10) Corporate owners receive return? ________.
A. by realizing gains through increases in share price and
cash dividends
B. through interest earnings and earnings per share
C. through capital appreciation and retained earnings
D. by realizing gains through increases in share price and
interest earnings
?11) Recently, some branches of Donut? Shop, Inc., have
dropped the practice of allowing employees to accept tips. Customers who once? said, “Keep the?
change,” now have to get used to waiting for their nickels. Management even instituted a policy of
requiring that the change be thrown out if a customer drives off without
it. As a frequent customer who gets
coffee and doughnuts for the? office, you notice that the lines are longer and
that more mistakes are being made in your order. Explain why tips could be viewed as similar
to stock options and why the delays and incorrect orders could represent a case
of agency costs. If tips are gone?
forever, how could Donut Shop reduce these agency? costs?
12) The key variables in the owner wealth maximization
process are? ________.
A. risk ?free rate and share price
B. market risk premium and risk
C. cash flows and risk
D. total assets and risk
13) Which of the following is true of sole proprietorships
and? corporations?
A. Income from both forms of organizations are taxed only at
the corporate level.
B. It is difficult to transfer ownership of corporations
compared to that of sole proprietorships.
C. Both sole proprietorships and corporations are equally
scrutinized and regulated by government bodies.
D. In sole? proprietorships, owners have unlimited?
liability; whereas, in? corporations, owners have limited liability.
14) A major weakness of a partnership is? ________.
A. the double taxation of income
B. the difficulty in maintaining? owners’ control
C. its high organizational costs
D. the difficulty in liquidating or transferring ownership
15) Corporation A owns 15 percent of the stock of
corporation B. Corporation B pays corporation A? $100,000 in dividends in 2002.
Corporation A must pay tax on? ________.
A. $ 70,000 of capital gain
B. $ 70,000 of ordinary income
C.?$ 30,000 of ordinary income
D. $100,000 of ordinary income
16) The conflict between the goals of a? firm’s owners and
the goals of its non?owner managers is? ________.
A. the agency problem
B. the window?dressing
C. serious only when profits decline
D. incompatibility
17) Which of the following legal forms of organization is
most expensive to? organize?
A. limited partnership
B. sole proprietorships
C. partnerships
D. corporations
18) The? ________ has/have the ultimate responsibility in
guiding corporate affairs and carrying out policies.
A. stockholders
B. creditors
C. board of directors
D. chief financial officer
19) Investment banks are institutions that? ________.
A. are exempted from Securities and Exchange Commission
regulations
B. are only limited to capital market activities
C. perform all activities of commercial banks and retail
banks
D. engage in trading and market making activities
