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Created by: Wendell Licon Test Bank Created on: October 14, 2014

Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
Chapter 1
The Financial (ana)er and the Fir#
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVE AND BLOOMS TA!ONOMY
Item LO BT Item LO BT Item LO BT
TrueFalse Statements
1. 1 K 12. 2 K 23. 5 C
2. 1 K 13. 2 K 24. 5 C
3. 1 C 14. 2 K 25. 6 C
4. 1 C 15. 2 K
5. 1 K 16. 2 K
6. 1 K 17. 2 K
7. 1 C 18. 2 K
8. 1 K 19. 2 K
9. 1 C 20. 3 K
10. 1 K 21. 3 K
11. 1 K 22. 4 K
Multiple-Choice Questions
26. 1 C 54. 3 K
27. 1 K 55. 3 K
28. 1 C 56. 3 K
29. 1 C 57. 3 K
30. 1 C 58. 4 K
31. 1 C 59. 4 C
32. 1 K 60. 5 K
33. 1 K 61. 5 K
34. 1 K 62. 5 K
35. 1 K 63. 5 C
36. 1 K 64. 5 C
37. 1 K 65. 5 K
38. 1 K 66. 5 K
39. 1 K 67. 5 C
40. 1 K 68. 5 K
41. 1 K 69. 5 K
42. 2 K 70. 5 K
43. 2 K 71. 5 K
44. 2 K 72. 5 K
45. 2 K 73. 6 K
46. 2 K 74. 6 K
47. 2 K 75. 6 K
"
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
48. 2 K 76. 6 C
49. 2 K 77. 6 K
50. 2 K 78. 6 K
51. 2 K 79. 6 K
52. 2 C 80. 6 C
53. 2 K
Essay Questions
81. 4 C
82. 5 A
83. 6 C
SUMMA! OF LEA"I"# OB$ECTI%ES B! QUESTIO" T!&E
LO ' LO ( LO ) LO * LO + LO ,
Item Type Item Type Item Type Item Type Item Type Item Type
1 TF 12 TF 20 TF 22 TF 23 TF 25 TF
2 TF 13 TF 21 TF 58 MC 24 TF 73 MC
3 TF 14 TF 54 MC 59 MC 60 MC 74 MC
4 TF 15 TF 55 MC 81 ESS 61 MC 75 MC
5 TF 16 TF 56 MC 62 MC 76 MC
6 TF 17 TF 57 MC 63 MC 77 MC
7 TF 18 TF 64 MC 78 MC
8 TF 19 TF 65 MC 79 MC
9 TF 42 MC 66 MC 80 MC
10 TF 43 MC 67 MC 83 ESS
11 TF 44 MC 68 MC
26 MC 45 MC 69 MC
27 MC 46 MC 70 MC
28 MC 47 MC 71 MC
29 MC 48 MC 72 MC
30 MC 49 MC 82 ESS
31 MC 50 MC
32 MC 51 MC
33 MC 52 MC
34 MC 53 MC
35 MC
36 MC
37 MC
38 MC
39 MC
40 MC
41 MC
#
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
LEA"I"# OB$ECTI%ES
1* +denti$, the ke, $inancial decisions $acin) the $inancial #ana)er o$ an, b"siness
$ir#*
In r$nn%n& a b$'%ne''( t)e *%nan+%a, -ana&er *a+e' t)ree ba'%+ de+%'%on': ."/ 0)%+) 1rod$+t%2e
a''et' ')o$,d t)e *%r- b$y .+a1%ta, b$d&et%n&/( .#/ )o0 ')o$,d t)e *%r- *%nan+e t)e 1rod$+t%2e
a''et' 1$r+)a'ed .*%nan+%n& de+%'%on/( and .3/ )o0 ')o$,d t)e *%r- -ana&e %t' day4to4day
*%nan+%a, a+t%2%t%e' .0or5%n& +a1%ta, de+%'%on'/6 T)e *%nan+%a, -ana&er ')o$,d -a5e t)e'e
de+%'%on' %n a 0ay t)at -a7%-%8e' t)e +$rrent 2a,$e o* t)e *%r-' 'to+5 1r%+e6
2* +denti$, the basic $or#s o$ b"siness or)ani-ation "sed in the .nited /tates and
re&iew their respecti&e stren)ths and weaknesses*
A b$'%ne'' +an or&an%8e %n t)ree ba'%+ 0ay': a' a 'o,e 1ro1r%etor')%1( a 1artner')%1( or a
+or1orat%on .1$b,%+ or 1r%2ate/6 Mo't ,ar&e *%r-' e,e+t to or&an%8e a' 1$b,%+ +or1orat%on' be+a$'e
o* t)e ea'e %n ra%'%n& -oney and tran'*err%n& o0ner')%19 t)e -a:or d%'ad2anta&e %' do$b,e
ta7at%on and e7ten'%2e re&$,at%on by t)e Se+$r%t%e' and E7+)an&e Co--%''%on .SEC/6 So-e
*%r-' o1erate a' 1r%2ate +or1orat%on' to e'+a1e -$+) o* t)e SEC re&$,at%on b$t -$'t &%2e $1
a++e'' to t)e 1$b,%+ +a1%ta, -ar5et'6 S-a,,er +o-1an%e' tend to or&an%8e a' 'o,e 1ro1r%etor')%1'
or 1artner')%1'6 T)e ad2anta&e' o* t)e'e *or-' o* or&an%8at%on %n+,$de ea'e o* *or-at%on and t)e
*a+t t)at t)e %n+o-e o* 1ro1r%etor')%1' and 1artner')%1' %' ta7ed at t)e 1er'ona, %n+o-e ta7 rate6
T)e -a:or d%'ad2anta&e %' $n,%-%ted 1er'ona, ,%ab%,%ty o* t)e o0ner'6 T)e o0ner' o* a *%r- 'e,e+t
3
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
t)e *or- o* or&an%8at%on t)at t)ey be,%e2e 0%,, be't a,,o0 -ana&e-ent to -a7%-%8e t)e 2a,$e o*
t)e *%r-6
0* 1escribe the t,pical or)ani-ation o$ the $inancial $"nction in a lar)e corporation*
T)e board o* d%re+tor' %' t)e -o't 1o0er*$, &o2ern%n& body 0%t)%n t)e *%r-6 T)ey are e,e+ted by
t)e o0ner'( and t)e%r -a:or re'1on'%b%,%ty %' to re1re'ent t)e be't %ntere't' o* t)e o0ner'6 To t)%'
end( t)e board %' re'1on'%b,e *or )%r%n& t)e CEO and( %* +%r+$-'tan+e' are 0arranted( +an *%re t)e
CEO6 T)e board a,'o ad2%'e' t)e CEO on a 0%de ran&e o* -atter'( -on%tor' t)e *%r-'
1er*or-an+e( and rat%*%e' 5ey -ana&e-ent de+%'%on'6 Cr%t%+' +)ar&e t)at board' %n ,ar&e 'to+5
+o-1an%e' ,a+5 %nde1enden+e *ro- -ana&e-ent and( a' a re'$,t( )a2e *a%,ed to -a5e )ard
de+%'%on' re&ard%n& -ana&e-ent 1er*or-an+e6 To o2er+o-e t)e'e and ot)er 1rob,e-'( t)e
Sarbane'4O7,ey A+t +a,,' *or &reater %nde1enden+e o* t)e board and t)e e7terna, a$d%tor( a' 0e,,
a' e71anded o2er'%&)t 1o0er' *or t)e board' a$d%t +o--%ttee6
4* 23plain wh, #a3i#i-in) the c"rrent &al"e o$ the $ir#4s stock price is the
appropriate )oal $or #ana)e#ent*
T)e &oa, o* t)e *%nan+%a, -ana&er %' to -a7%-%8e t)e +$rrent 2a,$e o* t)e *%r-' 'to+5 1r%+e6
Ma7%-%8%n& 'to+5 1r%+e 2a,$e %' an a11ro1r%ate &oa, be+a$'e %t *or+e' -ana&e-ent to *o+$' on
de+%'%on' t)at 0%,, &enerate t)e &reate't a-o$nt o* 0ea,t) *or ')are)o,der'6 S%n+e t)e 2a,$e o* a
')are o* 'to+5 .or any a''et/ %' deter-%ned by %t' +a') *,o0'( -ana&e-ent' de+%'%on' -$'t
+on'%der t)e '%8e o* t)e +a') *,o0 .,ar&er %' better/( t)e t%-%n& o* t)e +a') *,o0 .'ooner %' better/(
and t)e r%'5%ne'' o* t)e +a') *,o0 .&%2en e;$a, ret$rn'( ,o0er r%'5 %' better/6
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Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
5* 1isc"ss how a)enc, con$licts a$$ect the )oal o$ #a3i#i-in) stockholder wealth*
In -o't ,ar&e +or1orat%on'( t)ere %' a '%&n%*%+ant de&ree o* 'e1arat%on bet0een -ana&e-ent and
o0ner')%16 A' a re'$,t( t)ere %' +on+ern t)at ')are)o,der' )a2e ,%tt,e +ontro, o2er +or1orate
-ana&er' and t)at -ana&e-ent -ay t)$' be te-1ted to 1$r'$e %t' o0n 'e,*4%ntere't rat)er t)an
-a7%-%8%n& t)e 0ea,t) o* t)e o0ner'6 T)e re'$,t%n& 1rob,e-' are +a,,ed a&en+y +o't'6 O0ner'
try to red$+e a&en+y +o't' by de2e,o1%n& +o-1en'at%on a&ree-ent' t)at ,%n5 e-1,oyee
+o-1en'at%on to t)e *%r-' 1er*or-an+e and by )a2%n& %nde1endent board' o* d%re+tor' and
e7terna, a$d%tor' -on%tor -ana&e-ent6
6* 23plain wh, ethics is an appropriate topic in the st"d, o$ corporate $inance*
Et)%+a, be)a2%or %' %-1ortant %n b$'%ne''6 I* 0e ,%2ed %n a 0or,d 0)ere t)ere 0ere no et)%+a,
nor-'( 0e 0o$,d d%'+o2er t)at %t 0o$,d be d%**%+$,t to do b$'%ne''6 A' a 1ra+t%+a, -atter( t)e ,a0
and -ar5et *or+e' 1ro2%de %-1ortant %n+ent%2e' t)at *o'ter et)%+a, be)a2%or %n t)e b$'%ne''
+o--$n%ty b$t are not eno$&) to en'$re et)%+a, be)a2%or6 An et)%+a, +$,t$re -ean' t)at 1eo1,e
)a2e a 'et o* -ora, 1r%n+%1,e'=a -ora, +o-1a''( 'o to '1ea5=t)at )e,1' t)e- to %dent%*y
et)%+a, %''$e' and t)en to -a5e et)%+a, :$d&-ent' 0%t)o$t be%n& to,d 0)at to do6
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Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
?
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
+* Tr"e or False 7"estions
"6 T)e *%nan+%a, -ana&er %' re'1on'%b,e *or -a5%n& de+%'%on' t)at are %n t)e be't %ntere't o*
t)e *%r-' o0ner'6
a6 Tr$e
b6 Fa,'e
#6 T)e de-and *or a 1otent%a, b$'%ne'' 1rod$+t( a' 0e,, a' t)e %dent%*%+at%on o* 0)at 1rod$+t
or 'er2%+e' %' to be 1rod$+ed( are bot) +onta%ned %n a b$'%ne'' 1,an6
a6 Tr$e
b6 Fa,'e
36 T)e ,o+a, Re1$b,%+an @arty %' a 'ta5e)o,der %n a ,o+a, *%r- t)at -a5e' no 1o,%t%+a,
donat%on' to e%t)er 1arty6
a6 Tr$e
b6 Fa,'e
<6 A 1atent %' a 1rod$+t%2e a''et *or a te+)no,o&y4ba'ed *%r-6
A
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
a6 Tr$e
b6 Fa,'e
>6 Intan&%b,e a''et' &enerate -o't o* a *%r-' +a') *,o0'6
a6 Tr$e
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?6 T)e -o't *$nda-enta, 0ay t)at a b$'%ne'' +an &ro0 %n '%8e %' *ro- t)e re%n2e't-ent o*
+a') *,o0' or earn%n&'6
a6 Tr$e
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A6 B)en ban5r$1t+y o++$r'( t)e *%r- 0%,, a,0ay' be ,%;$%dated6
a6 Tr$e
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C6 Ca1%ta, a''et' are &enera,,y ')ort ter- %n nat$re6
a6 Tr$e
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C
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
D6 A &ood +a1%ta, b$d&et%n& de+%'%on %' one %n 0)%+) t)e bene*%t' are 0ort) -ore to t)e *%r-
t)an t)e +o't o* t)e a''et6
a6 Tr$e
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a6 Tr$e
b6 Fa,'e
""6 T)e do,,ar d%**eren+e bet0een +$rrent a''et' and ,%ab%,%t%e' %' +a,,ed 0or5%n& +a1%ta,6
a6 Tr$e
b6 Fa,'e
"#6 A 'o,e 1ro1r%etor')%1 %' an o0ner' on,y b$'%ne''6
a6 Tr$e
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"36 T)e &reate't n$-ber o* b$'%ne''e' %n t)e Un%ted State' are +or1orat%on'6
D
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
a6 Tr$e
b6 Fa,'e
"<6 Un,%-%ted ,%ab%,%ty -ean' t)at t)e o0ner o* a *%r- %' re'1on'%b,e *or 1ay%n& a,, t)e *%r-'
b%,,'6
a6 Tr$e
b6 Fa,'e
">6 T)e 1ro+e'' o* tran'*err%n& o0ner')%1 o* a 'o,e 1ro1r%etor')%1 %' re,at%2e,y ea'y6
a6 Tr$e
b6 Fa,'e
"?6 Genera, 1artner' %n a b$'%ne'' )a2e ,%-%ted ,%ab%,%ty 0%t) re&ard to t)e%r *%r-'
ob,%&at%on'6
a6 Tr$e
b6 Fa,'e
"A6 Mo't ,ar&e +or1orat%on' are %n+or1orated %n Ne0 Yor5 be+a$'e o* %t' *a2orab,e ta7
treat-ent o* +or1orate %n+o-e and %t' 'tat$te' 1rote+t%n& t)e r%&)t' o* %t' o0ner'6
"E
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
a6 Tr$e
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"C6 Cor1orat%on' do not )a2e t)e%r %n+o-e '$b:e+t to do$b,e ta7at%on6
a6 Tr$e
b6 Fa,'e
"D6 @r%2ate,y )e,d +or1orat%on' are a,,o0ed to )a2e ')are)o,der'6
a6 Tr$e
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#E6 T)e trea'$rer o* a +or1orat%on $'$a,,y re1ort' to t)e CFO o* t)e *%r-6
a6 Tr$e
b6 Fa,'e
#"6 T)e e7terna, a$d%tor' o* t)e *%r- re1ort t)e%r *%nd%n&' d%re+t,y to t)e CFO o* t)e *%r-6
a6 Tr$e
b6 Fa,'e
""
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
##6 Ma7%-%8%n& re2en$e ')o$,d be t)e &oa, o* t)e *%r-6
a6 Tr$e
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a6 Tr$e
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#<6 T)e o0ner' o* a *%r- are $na**e+ted by a&en+y +o't'6
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#>6 Corr$1t%on %n b$'%ne'' doe' not a**e+t t)e *$n+t%on%n& o* t)e *%nan+%a, -ar5et'6
a6 Tr$e
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"#
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
++* ("ltiple8Choice 7"estions
#?6 To 'tart a b$'%ne''( t)e o0ner' need
a6 a -ar5et 0)ere t)ere %' de-and *or t)e%r 1rod$+t6
b6 a +,ear 2%'%on o* 0)at 1rod$+t' or 'er2%+e' t)ey 0ant to 1rod$+e6
+6 t)e 5no04)o0 to '$++e''*$,,y -ar5et t)e%r 1rod$+t6
d6 a,, o* t)e abo2e6
#A6 A 'ta5e)o,der %'
a6 anyone &eo&ra1)%+a,,y +,o'e to t)e *%r-' )ead;$arter'6
b6 anyone 0%t) a +,a%- on t)e +a') *,o0' o* t)e *%r-6
+6 any &o2ern-enta, a&en+y6
d6 a,, o* t)e abo2e6
#C6 I* yo$ )a2e ,oaned +a1%ta, to a *%r-( t)en yo$ +o$,d be
a6 a ')are)o,der6
b6 a 'ta5e)o,der6
+6 a 1artner6
d6 a,, o* t)e abo2e6
"3
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
#D6 B)%+) o* t)e *o,,o0%n& are 'ta5e)o,der'F
a6 a ')are)o,der
b6 a ,ender
+6 t)e IRS
d6 a,, o* t)e abo2e
3E6 A trade-ar5 %' an e7a-1,e o*
a6 a 1rod$+t%2e a''et6
b6 an %ntan&%b,e a''et6
+6 a neb$,o$' a''et6
d6 none o* t)e abo2e6
3"6 B)%+) o* t)e *o,,o0%n& a''et 1$r+)a'e de+%'%on' are t)e -o't %-1ortant to t)e *%r-F
a6 an %ntan&%b,e a''et
b6 a tan&%b,e a''et
+6 a *%nan+%n& de+%'%on
d6 a,, o* t)e abo2e
3#6 B)%+) o* t)e *o,,o0%n& %' a ba'%+ 'o$r+e o* *$nd' *or t)e *%r-F
"<
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
a6 debt
b6 e;$%ty
+6 a''et ,%;$%dat%on'
d6 a and b abo2e
336 T)e +a') re-a%n%n& a*ter t)e *%r- )a' -et %t' o1erat%n& e71en'e'( 1ay-ent' to +red%tor'(
and ta7e' %' +a,,ed
a6 earn%n&' 1er ')are6
b6 +a1%ta, +ontr%b$ted %n e7+e'' o* 1ar6
+6 re'%d$a, +a')6
d6 a''et'6
3<6 Ca') d%2%dend' are 1a%d o$t o*
a6 re'%d$a, +a')6
b6 ,%;$%dated a''et'6
+6 ,on&4ter- debt6
d6 a,, o* t)e abo2e6
3>6 C$rrent ,%ab%,%t%e' are ,%ab%,%t%e' t)at
">
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
a6 0%,, be +on2erted to +a') 0%t)%n a year6
b6 -$'t be 1a%d 0%t)%n a year6
+6 0%,, be +on2erted to e;$%ty 0%t)%n a year6
d6 none o* t)e abo2e
3?6 Ca1%ta, b$d&et%n& %n2o,2e'
a6 )o0 a *%r-' day4to4day *%nan+%a, -atter' ')o$,d be -ana&ed6
b6 )o0 t)e *%r- ')o$,d *%nan+e %t' a''et'6
+6 0)%+) 1rod$+t%2e a''et' t)e *%r- ')o$,d e-1,oy6
d6 a,, o* t)e abo2e6
3A6 Bor5%n& +a1%ta, -ana&e-ent de+%'%on' %n2o,2e
a6 )o0 a *%r-' day4to4day *%nan+%a, -atter' ')o$,d be -ana&ed6
b6 )o0 t)e *%r- ')o$,d *%nan+e %t' a''et'6
+6 0)%+) 1rod$+t%2e a''et' t)e *%r- ')o$,d e-1,oy6
d6 a,, o* t)e abo2e6
3C6 Ca1%ta, b$d&et%n& de+%'%on' &enera,,y %n2o,2e
a6 t)e *%7ed a''et 1ort%on o* t)e ba,an+e ')eet6
b6 t)e ')ort4ter- 1ort%on o* t)e ba,an+e ')eet6
"?
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
+6 t)e +$rrent ,%ab%,%ty 1ort%on o* t)e ba,an+e ')eet6
d6 a,, o* t)e abo2e6
3D6 A &ood +a1%ta, b$d&et%n& de+%'%on %'
a6 one %n 0)%+) t)e bene*%t' o* t)e 1ro:e+t are e;$a, to t)e +o't o* t)e a''et6
b6 one %n 0)%+) t)e bene*%t' o* t)e 1ro:e+t are ,e'' t)an t)e +o't o* t)e a''et6
+6 one %n 0)%+) t)e bene*%t' o* t)e 1ro:e+t are -ore t)an t)e +o't o* t)e a''et6
d6 a,, o* t)e abo2e6
<E6 F%nan+%a, -ar5et' %n 0)%+) e;$%ty and debt %n'tr$-ent' 0%t) -at$r%t%e' &reater t)an one
year are traded are +a,,ed
a6 -oney -ar5et'6
b6 +a1%ta, -ar5et'6
+6 'to+5 -ar5et'6
d6 none o* t)e abo2e6
<"6 @ro*%tab%,%ty o* a *%r- +an be ne&at%2e,y a**e+ted by
a6 too -$+) %n2entory6
b6 too ,%tt,e %n2entory6
+6 e%t)er a or b6
"A
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
d6 ne%t)er a nor b6
<#6 Abo$t A> 1er+ent o* a,, b$'%ne''e' %n t)e Un%ted State' are
a6 'o,e 1ro1r%etor')%1'6
b6 1artner')%1'6
+6 +or1orat%on'6
d6 ,%-%ted ,%ab%,%ty 1artner')%1'6
<36 B)%+) o* t)e *o,,o0%n& b$'%ne'' or&an%8at%ona, *or-' '$b:e+t' t)e o0ner.'/ to $n,%-%ted
,%ab%,%tyF
a6 'o,e 1ro1r%etor')%1
b6 1artner')%1
+6 +or1orat%on
d6 a and b
<<6 B)%+) o* t)e *o,,o0%n& b$'%ne'' or&an%8at%ona, *or-' +reate' a ta7 ,%ab%,%ty on %n+o-e at
t)e 1er'ona, %n+o-e ta7 rateF
a6 'o,e 1ro1r%etor')%1
b6 1artner')%1
+6 +or1orat%on
"C
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
d6 a and b
<>6 B)%+) o* t)e *o,,o0%n& b$'%ne'' or&an%8at%ona, *or-' %' ea'%e't to ra%'e +a1%ta,F
a6 'o,e 1ro1r%etor')%1
b6 1artner')%1
+6 +or1orat%on
d6 a and b
<?6 B)%+) o* t)e *o,,o0%n& o0ner' %' 1rote+ted by ,%-%ted ,%ab%,%tyF
a6 a 'o,e 1ro1r%etor
b6 a &enera, 1artner
+6 a ,%-%ted 1artner
d6 none o* t)e abo2e
<A6 B)%+) o* t)e *o,,o0%n& +annot be en&a&ed %n -ana&%n& t)e b$'%ne''F
a6 a 'o,e 1ro1r%etor
b6 a &enera, 1artner
+6 a ,%-%ted 1artner
d6 none o* t)e abo2e
"D
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
<C6 Mo't ,ar&e +or1orat%on' are %n+or1orated %n 0)at 'tateF
a6 Ca,%*orn%a
b6 De,a0are
+6 Ma''a+)$'ett'
d6 Ne0 Yor5
<D6 B)%+) or&an%8at%ona, *or- a++o$nt' *or DE 1er+ent o* t)e re2en$e' o* a,, *%r-' %n t)e
Un%ted State'F
a6 'o,e 1ro1r%etor')%1
b6 1artner')%1
+6 +or1orat%on
d6 a and b
>E6 B)%+) or&an%8at%ona, *or- be't enab,e' a *%r- to 'e,, %t' 'e+$r%t%e' to t)e -ar5etF
a6 'o,e 1ro1r%etor')%1
b6 1artner')%1
+6 1r%2ate +or1orat%on
d6 1$b,%+ +or1orat%on
#E
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
>"6 B)%+) o* t)e *o,,o0%n& or&an%8at%ona, *or-' %' '$b:e+t to t)e -o't SEC re&$,at%on'F
a6 'o,e 1ro1r%etor')%1
b6 1artner')%1
+6 1r%2ate +or1orat%on
d6 1$b,%+ +or1orat%on
>#6 B)%+) or&an%8at%ona, *or- be't enab,e' t)e o0ner' o* t)e *%r- to -on%tor t)e a+t%on' o*
ot)er o0ner' o* t)e 'a-e *%r-F
a6 'o,e 1ro1r%etor')%1
b6 1artner')%1
+6 1r%2ate +or1orat%on
d6 1$b,%+ +or1orat%on
>36 B)%+) o* t)e *o,,o0%n& %' +on'%dered a )ybr%d or&an%8at%ona, *or-F
a6 'o,e 1ro1r%etor')%1
b6 1artner')%1
+6 +or1orat%on
d6 ,%-%ted ,%ab%,%ty 1artner')%1
#"
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
><6 B)%+) o* t)e *o,,o0%n& re1ort' d%re+t,y to t)e o0ner' o* t)e *%r- .a''$-e t)e *%r- %' a
1$b,%+ +or1orat%on/
a6 CFO
b6 CEO
+6 board o* d%re+tor'
d6 a$d%t +o--%ttee
>>6 B)%+) o* t)e *o,,o0%n& %' re'1on'%b,e *or 'ee%n& t)at t)e be't 1o''%b,e *%nan+%a, ana,y'%'
%' 1re'entedF
a6 CFO
b6 CEO
+6 board o* d%re+tor'
d6 a$d%t +o--%ttee
>?6 B)%+) o* t)e *o,,o0%n& %' re'1on'%b,e *or 1er*or-%n& an %nde1endent a$d%t o* t)e *%r-'
*%nan+%a, 'tate-ent'F
a6 CFO
b6 CEO
+6 C@A *%r-
d6 a$d%t +o--%ttee
##
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
>A6 Go0 %' t)e C@A *%r- %n'$,ated *ro- be%n& 1re''$red by -ana&e-entF
a6 T)e a$d%t +o--%ttee a11ro2e' t)e e7terna, a$d%tor' *ee' a' 0e,, a' t)e
en&a&e-ent ,etter6
b6 T)e +)a%r-an o* t)e board a11ro2e' t)e e7terna, a$d%tor' *ee' a' 0e,, a' t)e
en&a&e-ent ,etter6
+6 T)e IRS a11ro2e' t)e e7terna, a$d%tor' *ee' a' 0e,, a' t)e en&a&e-ent ,etter6
d6 T)e C@A *%r- %' not %n'$,ated *ro- -ana&e-ent6
>C6 B)%+) o* t)e *o,,o0%n& %' an a11ro1r%ate &oa, *or t)e *%r-F
a6 1ro*%t -a7%-%8at%on
b6 re2en$e -a7%-%8at%on
+6 ')are)o,der 0ea,t) -a7%-%8at%on
d6 ta7 -%n%-%8at%on
>D6 B)en ana,y't' and %n2e'tor' deter-%ne t)e 2a,$e o* a *%r-' 'to+5( t)ey ')o$,d +on'%der
a6 t)e '%8e o* t)e e71e+ted +a') *,o0' a''o+%ated 0%t) o0n%n& t)e 'to+56
b6 t)e t%-%n& o* t)e +a') *,o0'6
+6 t)e r%'5%ne'' o* t)e +a') *,o0'6
d6 a,, o* t)e abo2e6
#3
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
?E6 One rea'on *or t)e e7%'ten+e o* a&en+y 1rob,e-' bet0een -ana&er' and ')are )o,der' %'
t)at
a6 t)ere %' a 'e1arat%on o* o0ner')%1 and +ontro, o* t)e *%r-6
b6 -ana&er' 5no0 )o0 to -ana&e t)e *%r- better t)an ')are)o,der'6
+6 ')are)o,der' )a2e $nrea'onab,e e71e+tat%on' abo$t -ana&er%a, 1er*or-an+e6
d6 none o* t)e abo2e
?"6 B)%+) o* t)e *o,,o0%n& %' a 1r%n+%1a, 0%t)%n t)e a&en+y re,at%on')%1F
a6 a +o-1any en&%neer
b6 t)e CEO o* t)e *%r-
+6 a ')are)o,der
d6 t)e board o* d%re+tor'
?#6 S)are)o,der' e,e+t HHHHHHHHHHHHHH to re1re'ent t)e%r %ntere't %n t)e *%r-6
a6 a +)a%r-an
b6 CEO
+6 a board o* d%re+tor'
d6 a,, o* t)e abo2e
#<
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
?36 An e7a-1,e o* a d%re+t a&en+y +o't %'
a6 a -ana&er t$rn%n& do0n a 2a,$e4+ontr%b$t%n& 1ro:e+t be+a$'e o* %t' r%'5'6
b6 a -ana&er e71en'%n& a ,ar&e d%nner on t)e +o-1any e71en'e re1ort6
+6 a -ana&er $'%n& too ,%tt,e debt 0%t)%n t)e *%r-' +a1%ta, 'tr$+t$re be+a$'e o* t)e
add%t%ona, r%'5 a''o+%ated 0%t) debt6
d6 a,, o* t)e abo2e
?<6 B)%+) o* t)e *o,,o0%n& +an )e,1 a,%&n t)e be)a2%or o* -ana&er' 0%t) t)e &oa,' o*
')are)o,der'F
a6 -ana&e-ent +o-1en'at%on
b6 -ana&er%a, ,abor -ar5et'
+6 an %nde1endent board o* d%re+tor'
d6 a,, o* t)e abo2e
?>6 T)e 1o%nt %n t%-e 0)en o0ner')%1 o* a +o-1en'at%on4re,ated o1t%on or ')are o* 'to+5
1a''e' to t)e -ana&er re*er' to
a6 t)e a&en+y date6
b6 t)e +o-1en'at%on 1ay-ent date6
+6 &rant%n&6
#>
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
d6 2e't%n&6
??6 I* a *%r- )a' )ad an a&en+y 1rob,e- t)at %' re*,e+ted %n a 1oor 1er*or-%n& 'to+5 *or a ,on&
1er%od o* t%-e( t)en t)e *%r- -ay be+o-e a tar&et o* HHHHHHHHHHHHHHHHH6
a6 an SEC %n2e't%&at%on6
b6 a +or1orate ra%der6
+6 an IRS %n2e't%&at%on6
d6 a ban5r$1t+y ,a0yer6
?A6 E7e+$t%2e' t)at re1eated,y 1$t t)e%r o0n %ntere't' be*ore t)at o* t)e *%r- -ay *%nd t)at
t)ey )a2e d%**%+$,ty *%nd%n& anot)er :ob a*ter t)e%r +$rrent one6 T)%' %' an e7a-1,e o*
a6 t)e -ana&er%a, ,abor -ar5et d%'+%1,%n%n& -ana&er'6
b6 t)e -ar5et *or +or1orate +ontro,6
+6 t)e board o* d%re+tor' a**e+t%n& t)e 1ro'1e+t' o* a -ana&er6
d6 none o* t)e abo2e6
?C6 B)o or 0)at %' re'1on'%b,e *or 'ett%n& t)e a&enda at -eet%n&' o* t)e board o* d%re+tor'F
a6 +)a%r-an o* t)e board o* d%re+tor'
b6 1re'%dent
#?
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
+6 no-%nat%n& +o--%ttee
d6 a$d%t +o--%ttee
?D6 A d%re+tor 0)o %' not an e-1,oyee o* t)e *%r- %' +a,,ed
a6 an e7e+$t%2e d%re+tor6
b6 an %n'%de d%re+tor6
+6 an %nde1endent d%re+tor6
d6 an o**%+%a, d%re+tor6
AE6 B)%+) o* t)e *o,,o0%n& %' 9OT one o* t)e 'trate&%e' %n+or1orated %n t)e Sarbane'4O7,ey
A+t o* #EE#F
a6 atta%n &reater board %nde1enden+e
b6 e'tab,%') +o-1,%an+e 1ro&ra-'
+6 e'tab,%') et)%+' 1ro&ra-'
d6 d%+tate -a7%-$- +o-1en'at%on ,e2e,'
A"6 B)%+) o* t)e *o,,o0%n& 1o0er' doe' t)e a$d%t +o--%ttee )a2e t)e a$t)or%ty to doF
a6 a$d%t t)e 1er'ona, ban5 a++o$nt o* t)e CEO
b6 ;$e't%on any 1er'on e-1,oyed by t)e *%r-
#A
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
+6 a$d%t t)e +o-1en'at%on *%,e' o* *%r-' %n t)e 'a-e %nd$'try
d6 none o* t)e abo2e
A#6 B)at %' t)e -a:or +o-1,a%nt +on+ern%n& t)e Sarbane'4O7,ey A+t o* #EE# bt *%r-'F
a6 t)e ,e&%',at%2e -a7%-$- a,,o0ab,e +o-1en'at%on *or a CEO
b6 t)e ,e&a, re;$%re-ent to d%'+,o'e 1ro:e+t %n*or-at%on
+6 t)e +o't o* +o-1,%an+e
d6 t)e +o't o* -a%nta%n%n& an SEC4e-1,oyed o**%+er at t)e *%r-' 1re-%'e'
A36 A 'o+%ety' %dea' abo$t 0)at a+t%on' are r%&)t and 0ron& are
a6 -ora,'6
b6 et)%+'6
+6 ,a0'6
d6 $n0r%tten ,a0'6
A<6 T)e &o,den r$,e %' an e7a-1,e o*
a6 a +$rrent ,a06
b6 an )%'tor%+a, ,a06
+6 an $n0or5ab,e r$,e %n *%nan+%a, -ar5et'6
#C
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
d6 an et)%+a, nor-6
A>6 An e7a-1,e o* an e+ono-y t)at )ad tro$b,e e'tab,%')%n& a 'to+5 -ar5et and attra+t%n&
*ore%&n %n2e't-ent %'
a6 R$''%a6
b6 C)%na6
+6 t)e C8e+) Re1$b,%+6
d6 Ja1an6
A?6 Corr$1t%on %n b$'%ne''
a6 +reate' %ne**%+%en+%e' %n an e+ono-y6
b6 %n)%b%t' &ro0t) %n an e+ono-y6
+6 ',o0' t)e rate o* e+ono-%+ &ro0t) %n a +o$ntry6
d6 a,, o* t)e abo2e
AA6 B)%+) +or1orate o**%+er( 0)en )e or ')e %' &$%,ty o* 'er%o$' -%'+ond$+t( +an '$b:e+t t)e
*%r- to t)e -o't 'er%o$' ,o''e' %n *%nan+%a, 0ea,t)F
a6 CEO
b6 CFO
#D
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
+6 C)%e* Te+)no,o&y O**%+er
d6 C)%e* R%'5 O**%+er
AC6 An o**%+er o* a *%r- t)at %' a -a:or%ty o0ner %n a +o-1et%n& *%r- 0%,, 1robab,y be '$b:e+t
to
a6 an IRS a$d%t6
b6 a +on*,%+t o* %ntere't 0%t) )%' ')are )o,der'6
+6 arb%tra&e 1ro*%t ret$rn' to t)e SEC6
d6 an FBI %n2e't%&at%on6
AD6 HHHHHHHHHHHHHo++$r.'/ 0)en one 1arty %n a b$'%ne'' tran'a+t%on )a' %n*or-at%on t)at %'
$na2a%,ab,e to t)e ot)er 1art%e' %n t)e tran'a+t%on6
a6 @ro*%t'
b6 In*or-at%on a'y--etry
+6 In*or-at%on e**%+%en+y
d6 None o* t)e abo2e
CE6 B%t) re&ard to %n*or-at%on( a +entra, %dea o* *a%rne'' '$&&e't' t)at
a6 de+%'%on' ')o$,d be -ade on an e2en 1,ay%n& *%e,d6
3E
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
b6 %n'%der' ')o$,d be ab,e to trade 0)ene2er t)ey 0ant6
+6 %n'%der' ')o$,d ne2er be ab,e to trade6
d6 o$t'%der' ')o$,d not be a,,o0ed to trade '%n+e( by de*%n%t%on( t)ey are at a
d%'ad2anta&e6
3"
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
+++* 2ssa, 7"estions
C"6 E71,a%n 0)at ')o$,d be t)e &oa, o* t)e *%r-6
:nswer: T)e &oa, o* t)e *%r- ')o$,d be to -a7%-%8e ')are)o,der 0ea,t)( 0)%+) %n -o't
+a'e' %' e;$%2a,ent to -a7%-%8%n& t)e 1r%+e o* t)e ')are' o* t)e *%r-6 Note t)at t)%' %' not
t)e 'a-e a' -a7%-%8%n& 1ro*%t' '%n+e -a7%-%8%n& 1ro*%t' +an o++$r 0)%,e ta5%n& on too
-$+) r%'5 .0)%+) +an ,o0er t)e 2a,$e o* t)e ')are)o,der' %n2e't-ent/6 Ma7%-%8%n&
1ro*%t' a,'o doe' not ta5e t)e t%-%n& o* t)e 1ro*%t' %nto a++o$nt6 @ro*%t'( -oreo2er( ')o$,d
not be +on*$'ed 0%t) +a')6 Ma7%-%8%n& ')are)o,der 0ea,t) %' a,'o not t)e 'a-e a'
-%n%-%8%n& r%'5( 0)%+) +an o++$r 0%t)o$t ta5%n& any r%'5'6
C#6 E71,a%n )o0 a&en+y +o't' -%&)t be *o$nd 0%t)%n a *%r- 0)o'e CEO o0n' no ')are' %n
t)e *%r- and 0)o'e +o-1en'at%on 1a+5a&e %' $na**e+ted by t)e 1ro*%t' .+a') or
a++o$nt%n& 1ro*%t'/ o* t)e *%r-6
:nswer: S%n+e t)e -ana&er )a' no o0ner')%1 %ntere't %n t)e *%r-( ')e )a' no %n+ent%2e to
-a5e t)e +a') 1ro*%t' o* t)e *%r- a' )%&) a' 1o''%b,e6 In *a+t( ')e )a' a 1er'ona, %n+ent%2e
to )a2e t)e *%r- 1ay *or a' -any 1er'ona, ,$7$r%e' a' 1o''%b,e '%n+e )er +o-1en'at%on
1a+5a&e 0%,, be +o-1,ete,y $na**e+ted by )er de+%'%on to 1$r+)a'e t)e ,$7$r%e'6 In a *%r-
,%5e t)e abo2e( 0e -%&)t e71e+t t)e *%r- to e71end a -ater%a, a-o$nt o* re'o$r+e' on
%te-' t)at t)e -ana&er ')o$,d 1robab,y 1ay *or )er'e,*6
3#
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
C36 Yo$ )a2e a *r%end 0)o te,,' yo$ t)at et)%+' are +o-1,ete,y $n%-1ortant %n b$'%ne'' '%n+e
a n$-ber o* ,a0' )a2e been 'et $1 *or $' to 5no0 t)e r$,e' o* t)e &a-e6
:nswer: De'1%te )ea2y re&$,at%on( t)e *%nan+%a, 'e+tor )a' a ,on& and r%+) )%'tory o*
*%nan+%a, '+anda,'6 B)%,e a &ood -any o* t)e '+anda,' are d$e to ,a0' t)at )a2e been
d%'re&arded( -any o* t)e '+anda,' be&an a' et)%+a, ,a1'e'6 T)%' '$&&e't' t)at ,a0' are not
eno$&) to 1re+,$de be)a2%or t)at %' detr%-enta, to t)e 0e,,4*$n+t%on%n& o* t)e -ar5et'6
+V* :nswers to Tr"e or False 7"estions
"6 a
#6 a
36 b
<6 b
>6 b
?6 a
A6 b
C6 b
D6 a
"E6 a
""6 b
"#6 b
33
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
"36 b
"<6 a
">6 b
"?6 b
"A6 b
"C6 b
"D6 a
#E6 a
#"6 b
##6 b
#36 b
#<6 b
#>6 b
3<
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
;* :nswers to ("ltiple8Choice 7"estions
#?6 d
#A6 b
#C6 b
#D6 d
3E6 b
3"6 b
3#6 d
336 +
3<6 a
3>6 b
3?6 +
3A6 a
3C6 a
3D6 +
<E6 b
<"6 +
<#6 a
<36 d
<<6 d
<>6 +
<?6 +
3>
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
<A6 +
<C6 b
<D6 +
>E6 d
>"6 d
>#6 b
>36 d
><6 +
>>6 a
>?6 +
>A6 a
>C6 +
>D6 d
?E6 a
?"6 +
?#6 +
?36 b
?<6 d
?>6 d
??6 b
?A6 b
?C6 a
?D6 +
3?
Created by: Wendell Licon Test Bank Created on: October 14, 2014
Chapter 1
For: Kidwell !arrino F"nda#entals o$ Corporate Finance %e&ised TB ' 01
AE6 d
A"6 b
A#6 +
A36 b
A<6 d
A>6 a
A?6 d
AA6 b
AC6 b
AD6 b
CE6 a
;+*
3A