Fin351 Essay

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Midterm Exam 1 1. Businesses can be organized as A) sole proprietorships B) partnerships C) corporations D) any of the above E) None of the above Answer: D 2. Which of the following would be considered an advantage of the sole proprietorship form of organization? A) Wide access to capital markets B) Unlimited liability C) A pool of expertise D) Profits taxed at one level E) None of the above D) 3. One common reason for partnerships to convert to a corporate form of organization is that the partnership: A) faces rapidly growing financing requirements. B) wishes to avoid double taxation of profits. C) has issued all of its allotted shares. D) agreement expires after ten years of use. E) None of the above A) 4. A firm's investment decision is also called the: A) Financing decision B) Capital budgeting decision C) Liquidity decision D) None of the above Answer: B 5. The goal of a financial manager is to: A) Maximize sales B) Maximize profits C) Maximize the wealth of all the firm’s security holders, including debt and stock holders D) Maximize the wealth of the share holders E) None of the above Answer: D Financial managers are to maximize the wealth of shareholders. This is because shareholders are the owners and managers are hired by them. 6. Which of the following is the function of a financial market A) provide liquidity B) risk management C) efficient allocation of money D) provide information. E) all of the above Answer: E 7.

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