ACCOUNTING 333 CHAPTER 1 PRACTICE QUIZ | VERIFIED GUIDE

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ACCOUNTING 333 CHAPTER 1 PRACTICE QUIZ The treasurer and the controller of a corporation generally report to the: o president. o board of directors. o chief executive officer. o chief financial o... fficer. o chairman of the board. 2. Which one of these best describes the key difference between the duties of the controller and those of the treasurer? o Separation of duties related to assets versus those related to debt and equity o Separation of authority over tax records versus accounting records o Separation of reporting to the Boards of Directors versus directly to investors. o Separation of duties related to production versus marketing o Separation of cash control from accounting records 3. Which position is generally directly responsible for financial planning and capital expenditures? o Controller o Treasurer o Director o Chairman of the board o Chief operations officer 4. Which form(s) of business is a treated as a distinct legal entity separate from its owners? o Limited partnership o Sole proprietorship o General partnership o Corporation o Both a limited partnership and a corporation 5. Which one of these is a corporate document that sets forth the intended life of the firm? o Federal charter o Articles of incorporation o Corporate bylaws o Indenture contract o State charter 6. A general partner: o cannot lose more than the amount of his/her equity investment. o has less legal liability than a limited partner. o faces double taxation whereas a limited partner does not. o has more management responsibility than a limited partner. o is the term applied only to corporations which invest in partnerships.   7. A limited partnership generally: o has less of an ability to raise capital than a proprietorship. o has ten or more limited partners and no general partners. o permits limited partners to sell their ownership interest without the partnership terminating. o is taxed the same as a corporation. o provides for the transfer of a general partner's ownership interest to any outside party. 8. Which of the following are disadvantages of a general partnership? I. Limited life of the firm II. Personal liability for firm debt III. Greater ability to raise capital than a sole proprietorship IV. Lack of ability to transfer partnership interest I and II only o III and IV only o II and III only o I, II, and IV only o I, III, and IV only 9. Art purchased 2,500 shares of Delta stock. His purchase represents ten percent ownership in the firm. His shares have increased in value from the $12 a share he originally paid to today's market value of $23 share. Assume Delta goes bankrupt and owes $450,000 more in debts than the firm can pay after liquidating all of its assets. What is the maximum loss per share Art will incur on this investment? o $0 a share o $12 a share o $17.50 a share, computed as ($12 + 23)/2 o $23 a share o $18 share, computed as (10% × $450,000)/2,500 shares 10. Which one of the following statements is correct? o All types of business formations have limited lives. o Partnerships are the most complicated type of business to form. o Both sole proprietorships and partnerships are taxed in a similar fashion. o Both partnerships and corporations have limited liability for general partners and shareholders. o Both partnerships and corporations incur double taxation. 11. The articles of incorporation: o can be used to remove company management. o are amended annually by the company stockholders. o set forth the number of shares of stock that can be issued. o set forth the rules by which the corporation regulates its existence. o can set forth the conditions under which the firm can avoid double taxation. 12. The articles of incorporation: o establish the rights of the shareholders. o are rules which apply only to limited liability companies. o address only those issues related to a corporation's managers and directors. o establish the compensation to be granted to senior managers. o include only the name, purpose, and intended life of the corporation. 13. Which one of the following business types is best suited to raising large amounts of capital? o Sole proprietorship o Limited liability company o Limited partnership o General partnership o Corporation 14. Which type of business organization has all the respective rights and privileges of a legal person? o Sole proprietorship o Corporation o General partnership o Limited partnership o Limited liability company 15. A business entity operated and taxed like a partnership, but with limited liability for the owners, is called a: o limited liability company. o general partnership. o limited proprietorship. o sole proprietorship. o corporation. 16. The issuance of new equity shares is a cash flow from: o long-term creditors to a firm. o a firm to its shareholders. o a firm's suppliers to the firm. o the financial markets to a firm. o any one of a firm's stakeholders to the firm. 17. Which one of these terms refers to a conflict of interest between the stockholders and managers of a corporation? o Stakeholder claim o Corporate activism o Legal liability o Breach of indemnity o Agency problem 18. A stakeholder is best described as: o any person or entity owning shares of corporate stock. o any person or entity having voting rights based on stock ownership. o a person who founded a firm and currently controls that firm based on his/her current ownership of company stock. o a creditor to whom the firm currently owes money and who consequently has a claim on the cash flows of the firm. o any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm. 19. Financial managers should strive to maximize the current value per share of the existing stock because: o doing so guarantees the company will grow in size at the maximum possible rate. o doing so increases the salaries of all the employees. o the current stockholders are the owners of the corporation. o doing so means the firm is growing in size faster than its competitors. o the managers often receive shares of stock as part of their compensation. 20. Which one of the following actions by a financial manager least meets the goal of financial management? o Increasing current costs in order to increase the market value of the stockholders' equity o Agreeing to expand the company at the expense of stockholders' value o Refusing to lower selling prices if doing so will reduce the net profits o Agreeing to pay bonuses based on the market value of the company stock o Refusing to borrow money when doing so will create losses for the firm 21. Which of the following help convince managers to work in the best interest of the stockholders? I. Compensation based on the value of the stock II. Stock option plans III. Threat of a proxy fight IV. Threat of conversion to a partnership I and II only o II and III only o I, II, and III only o I and III only o I, II, III, and IV 22. Which form of business structure faces the greatest agency problems? o Sole proprietorship o General partnership o Limited partnership o Limited liability company o Corporation 23. Which one of the following parties is considered a stakeholder of a firm? o Long-term creditor o Short-term creditor o Employee o Preferred stockholder o Common stockholder 24. Insider trading is: o illegal. o impossible to have in our efficient market. o legal. o discouraged, but legal. o defined as the trading of stock by a corporate director based on publicly-available information. 25. The basic regulatory framework for public trading of securities within the United States is provided by: o the Securities Act of 1933 and the Securities Exchange Act of 1934. o state governments. o the Federal Reserve Bank. o the Sarbanes Oxley Act of 2002. o NASDAQ. [Show More]

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