Identify a true statement about an S corporation

The income of an S corporation passes through the company to the owners.

Which of the following statements is true of earnings per share?

Earnings per share is often used as an indication of the firm's potential f

Which of the following is true of the greater concentration of ownership in non-U.S. firms than in U.S. firms?

Permits greater monitoring by individuals than dispersed ownership in U.S.

Which of the following statements is correct?

to limited liability & easy ownership transfer, corporations have less

Which of the following actions is consistent with social responsibility and is not necessarily inconsistentwith stockhol

Investing in a smokestack filter to reduce sulphur-dioxide emissions to dec

The 11 sections (titles) in the Sarbanes-Oxley Act of 2002

Establish standards in reporting financial information

Industrial groups that exist in foreign countries are

Orgs. That tie together all functions of production and sales, start to fin

Which of the following is true of shareholders in continental Europe?

Shareholders assign banks proxy votes for directors of companies

Because financial institutions in other countries are generally less regulated than those in the United States, they

can provide businesses a greater variety of services than U.S. banks can

Financial services refer to functions provided by organizations that

deal with the management of money

Identify the correct statement about business ethics

Good business ethics attract and keep employees of the highest caliber

Which of the following statements is correct?

The potential for agency problems is greatest when individual stockholders

Which is TRUE of financial services provided by persons working in banks, insurance companies, and brokerage firms?

Help people and companies determine how invest money to achieve their goals

Everything else equal, including firm size, dollar sales, type of product sold, and so forth, the primarydifference betw

a partnership has more owners than a proprietorship

Which of the following is true of corporations that operate in several different countries?

Nation may expropriate assets of multinational corporations w/o compensatio

Institutional investors can ensure that a corporation pursues goals that are in their best interest by

monitoring its financial performance to ensure that managers pursue the goa

2. Which of the following represents a difference between an S corporation and a limited liability company (LLC)?

S corporation no more than 100 stockholders, LLC more than 100 (members)

All else equal, in which of the following forms of business would the possibility of an agency problem bethe greatest?

A U.S. corporation in which individual stockholders own extremely small pro

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Finance Test 1 CH. ONE

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Answers

1
Identify a true statement about an S corporation
The income of an S corporation is taxed as capital gains to the owners
he income of an S corporation is taxed twice, at the corporate level and th
An S corporation is required to have more than one type of stock outstan
An S corporation is required to have more than 100 stockholders
The income of an S corporation passes through the company to the owners.
2
Which of the following statements is true of earnings per share?
A company can maximize its value by maximizing earnings per share
A company must pay tax on the earnings per share
high earnings per share in the current period results in lower future risk
Earnings per share is often used as an indication of the firm's potential f
Earnings per share can be maximized by changing from corporation to proprie
3
Which of the following is true of the greater concentration of ownership in non-U.S. firms than in U.S. firms?
Results in managers on short term goals rather than long term
Permits greater monitoring by individuals than dispersed ownership in U.S.
Easy to change managers in NON U.S. FIRMS
Reduces the involvement of stockholders in daily operations of non US firms
Difficult for NON U.S. firms to access credit
4
Identify the internal factor that influences the stock price of a firm
Conditions in the stock market
General level of economic activity
Tax laws
Legal constraints
Capital structure
5
Incentive compensation plans are used to attract and retain top managerial talent as well as to align theinterests of ma
False
True
6
Which of the following statements is correct?
Unlimited liability and limited life are two key advantages of the corporat
to limited liability & easy ownership transfer, corporations have less
A hostile takeover is the primary method of transferring ownership interest
The corporation is a legal entity created by the state and is a direct exte
stockholders of the corporation are insulated by limited legal liability, t
7
Which of the following actions is consistent with social responsibility and is not necessarily inconsistentwith stockhol
Taking over the competitor's business in an attempt to establish a monopoly
Making a large corporate donation to the local community for funding a recr
Dumping effluent discharge into a river, where it ruins the drinking water
Investing in a smokestack filter to reduce sulphur-dioxide emissions to dec
Selling a smokestack "scrubber" required by the firm's air pollution policy
8
The 11 sections (titles) in the Sarbanes-Oxley Act of 2002
require corporations to payout all the earnings as dividends
management to take actions resulting in gains to them and losses to stockho
allow management to use confidential information for personal gains
require stockholders to make capital structure decisions
Establish standards in reporting financial information
9
The accounting and tax departments are the responsibility of the ____
controller
vice president of finance
inventory manager
treasurer
director of capital budgeting
10
Industrial groups that exist in foreign countries are
owned and managed by the Securities and Exchange Commission
organizations that encompass firms involved in financing and marketing only
Private help companies and the stock of them are not traded publicly
led by the firm involved with manufacturing and distribution of products
Orgs. That tie together all functions of production and sales, start to fin
11
Which of the following functions deals with the management of money?
Human resources
Research and development
Marketing
information systems
Financial services
12
Which of the following is true of shareholders in continental Europe?
Shareholders of closed corporations not involved in firms daily operations
Shareholders in Europe are family units from universal banking in U.S.
Shareholders assign banks proxy votes for directors of companies
Stocks of corporations widely dispersed among different investors.
Banks are major shareholders of corporations in continental Europe.
13
Because financial institutions in other countries are generally less regulated than those in the United States, they
invest in less socially responsible companies than U.S. banks
are required to fulfill the regulations of the Sarbanes-Oxley Act
can provide businesses a greater variety of services than U.S. banks can
can provide investment opportunities in illegal business plans also
invest to minimize investment corporations’ losses
14
The treasurer of a company is a key subordinate of the
financial vice president
chief executive officer
credit manager
director of capital budgeting
controller
15
A financial manager's task is to make decisions concerning the acquisition and use of funds for the greatestbenefit of t
True
False
16
Financial services refer to functions provided by organizations that
recommend the most environment friendly method of operations to a corporati
deal with the most efficient management of the human resources
deal with the management of money
recommend the types of securities to be issued to finance plant expansions
ensure that regulations of the Sarbanes-Oxley Act are followed by public c
17
Identify the correct statement about business ethics
Good business ethics attract business from customers who appreciate and sup
Good business ethics reduce the economic viability of the communities where
Good business ethics decrease shareholders' trust in the company
Good business ethics result in recurring fines and legal expenses
Good business ethics attract and keep employees of the highest caliber
18
Paying Payroll Service (PPS) recently declared bankruptcy. The price of PPS's stock has dropped fromapproximately $10 pe
an agency problem
an appropriate use of the tax laws
an accounting glitch
acceptable, because it is obvious that the executives were trying to maximi
an appropriate action, because executive compensation should always be incr
19
No firm can take cost-increasing, responsible actions in a competitive marketplace and expect to continue to compete, ev
False
True
20
4. In the United States, the most common form of business is the , and the form of business that generates most sale is
Corporation, corporation
Proprietorship, partnership
Corporation, partnership
Proprietorship, corporation
Corporation, proprietorship
21
Which of the following statements is correct?
Given the multi-owner nature of most large corporations, the agency costs a
Managers may operate in the stockholders' best interests, but they may also
The potential for agency problems is greatest when individual stockholders
An agency relationship exists when one or more persons hire another person
Managers rule out any potential conflicts of interest with the shareholders
22
Which is TRUE of financial services provided by persons working in banks, insurance companies, and brokerage firms?
Help corporations fulfill regulations required by Sarbanes-Oxley Act.
Help people and companies determine how invest money to achieve their goals
Help public corporations follow environment-friendly practices
Help corporations in framing their bylaws
Help corporations decide the types of securities to issue to finance plant
23
Everything else equal, including firm size, dollar sales, type of product sold, and so forth, the primarydifference betw
he combined personal liability associated with a partnership is significant
many more businesses are formed as partnerships than proprietorships
a partnership has more owners than a proprietorship
the annual growth rate of a proprietorship is limited by law, whereas the g
a partnership is generally easier to form than a proprietorship
24
Which of the following is true of corporations that operate in several different countries?
Cash flows in multinational corporations are in one currency
Tax-Laws across nations result in coordination and control of subsidiaries
Multinational corporations have advantage of uniform attitudes from risk
Different legal systems of host nations make it easier for executives
Nation may expropriate assets of multinational corporations w/o compensatio
25
Institutional investors can ensure that a corporation pursues goals that are in their best interest by
binding the management with stockholder-sponsored proposals
compensating managers of the corporation on the basis of the firm's perform
monitoring its financial performance to ensure that managers pursue the goa
implementing policies that encourage management to make decisions that maxi
ensuring that the management is working toward maximizing current earnings
26
Industrial groups are organizations of companies in different industries with common ownershipinterests, which include f
False
True
27
2. Which of the following represents a difference between an S corporation and a limited liability company (LLC)?
S corporation can have more than one type of stock outstanding
S corporation no more than 100 stockholders, LLC more than 100 (members)
S corporation can choose to be taxed as a corporation or as a partnersh
S corporation income double taxation, LLC only taxed once
S corporation has unlimited liability and LLC has limited liability
28
Managers of firms that use alternative accounting techniques to inflate current earnings are likely togenerate long-term
True
False
29
All else equal, in which of the following forms of business would the possibility of an agency problem bethe greatest?
A U.S. corporation in which individual stockholders own extremely small pro
A U.S. corporation that gives company shares as incentives to its managers.
A foreign corporation with concentrated ownership; that is, it has relative
A proprietorship in which the owner is actively managing the business opera
A partnership in which all the partners share management and decision-makin
30
1. The term multinational corporation is used to describe a firm that operates in two or more countries
True
False

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