1.An example of a firms investment (or capital budgeting) decision would include:

Issue common stock

A.Repurchase common stock

B.Increase the common stock dividend

C.Increase inventories ahead of holiday season

D.Agree to bank loan collateralized by inventories

2.Which of the following statements best distinguishes the difference between real assets and financial assets?

A.Financial assets are always purchased; real assets are always sold.

B.Real assets are tangible; financial assets are not.

C.Financial assets are tangible, real assets are not.

D.Real assets have less value than financial assets.

E.Financial assets represent claims to the cash flows that are generated by real assets.

3.The typical business organization for large companies is the C corporation. Which of the following are advantages in separating ownership and management in large corporations?

1. Managers no longer have the incentive to act in their own interests.
2. Corporations, unlike sole proprietorships, do not pay tax; instead shareholders are taxed on any dividends they receive.
3. The corporation survives even if managers are dismissed.
4. Shareholders can sell their shares without disrupting the business.

A.1 only

B.1 and 2 only

C.2 and 3 only

D.2 and 4 only

E.3 and 4 only

4.A board of directors is elected as a representative of the corporations:

A.top management.

B.shareholders.

C.employees

D.customers

E.debholders