1- Limited partnerships are not as prevalent as corporations because

1.    limited partners can lose up to three times the amount they invested in the partnership if the business goes bankrupt.
2.    limited partnerships have the disadvantage of double taxation.
3.    the general partner has no liability, making it difficult for the partnership to borrow money.
4.    it is easier to transfer ownership by selling common stock than it is to sell partnership.

2- Capital budgeting is concerned with

1.    whether a company's assets should be financed with debt or equity.
2.    managing a firms cash budgeting procedures.
3.    what long-term investments a firm should undertake.
4.    planning sales of a corporation's equity capital.

3 - Which of the following forms of organizations have earnings that are taxed twice, once as business income and once as personal income as the earnings are distributed to the owners in the form of dividends?

1.    corporations
2.    general partnerships
3.    limited partnerships
4.    both A and C

4- The true owners of the corporation are the

1.    holders of debt issues of the firm.
2.    preferred stockholders.
3.    board of directors of the firm.
4.    common stockholders.

5-All of the following business organizations provide limited liability to their owners except:

1.    general partnership.
2.    S-type corporation.
3.    corporation.
4.    limited liability company.

6- A corporate manager decides to build a new store on a lot owned by the corporation that could be sold to a local developer for $250,000. The lot was purchased for $50,000 twenty years ago. When determining the value of the new store project,

1.    the cost of the lot is zero since the corporation already owns it.
2.    the opportunity cost of the lot is $250,000 and should be included in calculating the value of the project.
3.    the cost of the lot for valuation purposes is $50,000 because land does not depreciate.
4.    the incremental cash flow should be the $50,000 original cost less accumulated amortization.

7- Investors are generally risk averse. Therefore, a typical investor

1.    will not be induced to take on any risk.
2.    will only take on the least risk possible.
3.    will only take on additional risk if he expects to be compensated in the form of additional return.
4.    will only accept a zero return if the risk is zero.

8- Determining the best way to raise money to fund a firm's long-term investments is called

1.    the capital budgeting decision.
2.    the portfolio decision.
3.    the money flow processing decision.
4.    the capital structure decision.

9- All of the following statements about agency problems are true except:

1.    Agency problems interfere with the goal of maximizing shareholder value.
2.    Agency costs are paid by the managers who do not act in the shareholders' best interest.
3.    Agency problems result from the separation of management and the ownership of a firm.
4.    The root cause of agency problems is conflicts of interest.

10- Working capital management is concerned with

1.    how a firm can best manage its cash flows as they arise in its day-to-day operations.
2.    how a firm should raise money to fund its investments.
3.    what long-term investments a firm should undertake.
4.    managing a firms capital stock.