Problem 1

Limited liability is about: 

A. Shareholders do not pay taxes. B. Shareholders are liable only for their capital in the corporation. C. Corporations do not pay taxes. D. Shareholders have more risk with limited liability.

Problem 2

Generally, a corporation is owned by its: I) Shareholders. II) Board of directors. III) Managers. 

A. I only B. II and III C. III only D. I, II, and III 

Problem 3

A corporation, potentially, has infinite life because it:

A. Has the same ownership and management. B. Has limited liability. C. Is not a real person. D. Is closely regulated. 

Problem 4

As a legal entity a corporation can perform the following functions:

I) Trade II) Lend money III) Marry IV) Sue and be sued 

A. I and II only B. IV only C. I, II, and III only D. I, II, and IV only 

Problem 5

Which of the following assets is tangible? 

A. Exxon-Mobil's patents. B. Apple Computer's trademark. C. Hewlett-Packard's most recent factory. D. Microsoft's technical expertise.

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Problem 6

The firm's purchase of real assets is also referred to as the:

A. Investment decision. B. Capital structure decision. C. CFO decision. D. Financing decision. 

Problem 7

Which of the following 

A. Industrial design. B. Patents. C. Programs. D. Computers. 

Problem 8

The sale of financial the:

types of assets are tangible? 

assets by a corporation is also referred to as

A. Financing decision. B. Capital budgeting decision. C. CFO decision. D. Investment decision. 

Problem 9

In the principal-agent framework, from the point of view of shareholders:

A. Shareholders are the principals. B. Managers are the principals. C. Managers are the agents. D. A and C. 

Problem 10

A corporation may incur agency costs because:

A. Shareholders may not attempt to maximize the value of the firm to shareholders.

B. Managers incur monitoring costs. C. Of the separation of ownership and management. D. All of the options.

Problem 11

Which of the following I) Employees II) Customers III) Shareholders 

IV) Suppliers 

A. I, II, and IV only B. III only C. I and II only D. I, II, III, and IV 

Problem 12

The ultimate financial 

groups are referred to as stakeholders? 

goal of a corporation is to: 

A. Minimize stockholder risk. B. Maximize profit. C. Maximize value of the corporation to the stockholders. D. Increase size of the firm.