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Principles of Finance

Multiple Choice

Principles of FinanceMultiple Choice

1 .
An S corporation _______________.
  1. is taxed in the same manner as a C corporation
  2. is eligible for more efficient financing in the face of company growth than a C corporation
  3. is usually more difficult to form than a C corporation
  4. is not taxed at the corporate level, unlike a C corporation
2 .
An important advantage of a sole proprietorship is that _______________.
  1. it is easier to raise capital under such a structure than under other organizational forms
  2. it allows for an unlimited life of the business
  3. it is relatively easy to create
  4. Both a and b are correct.
3 .
A shareholder is someone who _______________.
  1. sits on the audit committee of a firm
  2. is an ex-employee of a company
  3. profits from the favorable results of a company
  4. follows the company for an investment firm
4 .
Effective corporate governance includes all of the following EXCEPT _______________.
  1. fairness
  2. accountability
  3. objectivity
  4. higher share price
5 .
A stakeholder is someone who _______________.
  1. is required to read a company’s annual report
  2. answers to a board of directors
  3. has a vested interest in a company’s success
  4. is hired to do a specific job
6 .
“An effective business leader will recognize the social and environmental responsibilities of their business as well as the eventual goal of achieving long-term, sustainable global development.” This statement refers to _______________.
  1. employing an experienced environmental consulting firm
  2. the advantages of having an audit committee
  3. having a diversified and well-experienced board of directors
  4. practicing strong corporate governance
7 .
An important component of a strong board of directors (BOD) is having members who are _______________.
  1. former employees of the company
  2. able to write a strong corporate press release
  3. culturally diverse and experienced in the industry
  4. new to the industry and without preconceptions
8 .
Which of the following is NOT a reason why a company needs good corporate governance?
  1. to avoid mismanagement of the company
  2. to enable the company to raise capital more efficiently and mitigate financial and operational risk to stakeholders
  3. to analyze the company’s operations and systems of internal control in order to detect and prevent various forms of fraud and other accounting irregularities
  4. to increase the company’s overall accountability and prevent significant organizational problems
9 .
Who ultimately runs the company operations for a large corporation?
  1. shareholders
  2. board of directors
  3. external auditors
  4. stakeholders
10 .
One of the ways in which companies attempt to mitigate short-term managerial focus is by offering managers _______________.
  1. increased vacation time
  2. increased paid sick leave
  3. stock options
  4. comprehensive health insurance
11 .
Which of the following are used to ensure fiduciary responsibility?
  1. audits
  2. press releases
  3. end-of-year financial ledgers
  4. a letter from the board of directors
12 .
Which of the following is NOT one of the roles of an audit committee?
  1. reviewing the work of the internal audit
  2. reviewing systems of internal control.
  3. ensuring that appropriate resources are used in company operations
  4. launching special investigations of employees, company practices, or procedures
13 .
Which of the following is a major issue addressed in corporate governance?
  1. improving banking relations
  2. ethics and its implementation
  3. improving profits for shareholders
  4. expanding operations internationally
14 .
Agency problems are essentially _______________.
  1. conflicts of interest
  2. problems with the IRS
  3. fraudulent business activities
  4. nepotism
15 .
The term ESG, when used in the context of corporate governance, refers to which of the following?
  1. earnings, shareholders, and governance
  2. earnings, social, and general profit
  3. environmental, social, and goals
  4. environmental, social, and governance
16 .
Which of the following is the best method to ensure that shareholders are well informed of corporate policies and financial results?
  1. self-evaluation and training for members of the board of directors
  2. hiring a prestigious independent public accounting firm
  3. ensuring cultural diversity and public speaking eloquence of the senior management team
  4. conducting well-organized shareholder meetings and conference calls with the investment community
17 .
The Securities and Exchange Commission (SEC) requires that public corporations file which of the following financial reports on a quarterly basis?
  1. Form 10-K
  2. Form 8-Q
  3. Form 10-Q
  4. Form Q
18 .
Investor relations has substantially more _______________.
  1. regulatory obligations than standard public relations because of government-mandated financial and legal requirements
  2. personnel within a company dedicated to its function compared to other corporate departments
  3. interpretations regarding its effective implementation and use than other managerial and financial disciplines
  4. documented historical cases of corporate failure than other managerial and financial disciplines
19 .
The corporate press release is _______________.
  1. no longer an important component of modern investor relations strategy
  2. not yet a thing of the past, though it is highly likely to be replaced by social media in the near future
  3. written by the chief financial officer in conjunction with the audit committee
  4. best written to be easy to understand, free of corporate jargon, and as concise as possible
20 .
International firms are _______________.
  1. headquartered in a non-US country but have homogeneous profit centers with little differentiation in product or service
  2. based in the United States but operate through the use of heavy investments outside the country via multinational profit centers
  3. larger and more complex than their domestic counterparts
  4. more likely to be formed as partnerships or sole proprietorships than as corporations
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