Goals And Governance Of The Firm

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Question 1

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The liability of sole proprietors is limited to the amount of their investment in the company.

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Question 2

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General partners have limited personal liability for business debts in a limited partnership.

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Question 3

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The separation of ownership and management is one distinctive feature of corporations.

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Question 4

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A major disadvantage of partnerships is that they have double taxation of profits.

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Question 5

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Financial assets have value because they are claims on the firm's real assets and the cash that those assets will produce.

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Question 6

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Capital budgeting decisions are used to determine how to raise the cash necessary for investments.

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Question 7

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A successful investment is one that increases the value of the firm.

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Question 8

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Facebook's decision to spend $700 million to acquire Instagram is an investment decision.

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Question 9

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Boards of directors are generally appointed by the firm's senior officers.

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Question 10

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Financial analysts are involved in monitoring the risk associated with investment projects and financing decisions.

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Question 11

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The primary goal of any company should be to maximize current period profits.

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Question 12

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Maximizing profits is the same as maximizing the value of the firm.

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Question 13

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The Dodd-Frank financial reform law in 2010 granted shareholders a binding vote on executive compensation.

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Question 14

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Sole proprietorships face the same agency problems as those associated with corporations.

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Question 15

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Real assets can be intangible assets.

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Question 16

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Making good investment and financing decisions is the chief task of the financial manager.

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Question 17

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If a project's value is less than its required investment,then the project is financially attractive.

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Question 18

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GlaxoSmithKline's spending of $6 billion in 2012 on research and development of new drugs is a capital budgeting decision but not a financing decision.

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Question 19

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An IOU ("I owe you")from your brother-in-law is a financial asset.

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Question 20

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The separation of ownership and management is one distinctive feature of both corporations and sole proprietors.

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