Finance > EXAM > FI 360 MIDTERM EXAM, COMPLETE WITH QUESTIONS AND ANSWERS (All)

FI 360 MIDTERM EXAM, COMPLETE WITH QUESTIONS AND ANSWERS

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FI 360 MIDTERM EXAM, COMPLETE WITH QUESTIONS AND ANSWERS.Question 1 4 / 4 pts Which of the following statements is CORRECT? In most corporations, the CFO ranks above the CEO. By law in most states, the chairman of the board must also be the CEO. The CFO generally reports to the firm's chief accounting officer, who is normally the controller. The board of directors is the highest ranking body in a corporation, and the chairman of the board is the highest ranking individual. The CEO generally works under the board and its chairman, and the board generally has the authority to remove the CEO under certain conditions. The CEO, however, cannot remove the board, but he or she can endeavor to have the board voted out and a new board voted in should a conflict arise. It is possible for a person to simultaneously serve as CEO and chairman of the board, though many corporate control experts believe it is bad to vest both offices in the same person. The CFO is responsible for raising capital and for making sure that capital expenditures are desirable, but he or she is not responsible for the validity of the financial statements, as the controller and the auditors have that responsibility. Question 2 4 / 4 pts Which of the following statements is CORRECT? There are many types of unethical business behavior. One example is where executives provide information that they know is incorrect to outsiders. It is illegal to provide such information to federally regulated banks, but it is not illegal to provide it to stockholders because they are the owners of the firm. If a lower level person in a firm does something illegal, like "cooking the books," to understate costs and thereby artificially increase profits because he or she was ordered to do so by a superior, the lower level person cannot be prosecuted but the superior can be prosecuted. If someone deliberately understates costs and thereby causes reported profits to increase, this can cause the stock price to rise above its intrinsic value. The stock will probably fall in the future. Both those who participated in the fraud and the firm itself can be prosecuted. Ethical behavior is not influenced by training and auditing procedures. People are either ethical or they are not, and this is what determines ethical behavior in business. Ethics is not an important consideration in business and in business schools. Question 3 4 / 4 pts Which of the following statements is CORRECT? Corporations and partnerships have an advantage over proprietorships because a proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited. Most business in the U.S. is conducted by corporations, and corporations' popularity results primarily from their favorable tax treatment. For a stock to be in equilibrium, its intrinsic value must be greater than the actual market price. A good goal for a firm's management is the maximization of expected EPS. Conflicts can exist between stockholders and managers, but potential conflicts are reduced by the possibility of hostile takeovers.

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