Which of the following statements is CORRECT?

a. Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization.

b. Although the stockholders of the corporation are insulated by limited legal liability, the legal status of the corporation does not protect the firm's managers in the same way, i.e., bondholders can sue the firm's managers if the firm defaults on its debt.

c. A corporation is a legal entity created by a state, and it has a life and existence that is separate from the lives and existence of its owners and managers.

d. Limited liability is an advantage of the corporate form of organization to its owners (stockholders), but corporations have more trouble raising money in financial markets because of the complexity of this form of organization.

e. A hostile takeover is the main method of transferring ownership interest in a corporation.

Which of the following statements is CORRECT?

a. The CFO is responsible for raising capital and for making sure that capital expenditures are desirable, but he or she is not responsible for the validity of the financial statements, as the controller and the auditors have that responsibility.

b. In most corporations, the CFO ranks above the CEO.

c. The CFO generally reports to the firm's chief accounting officer, who is normally the controller.

d. The board of directors is the highest ranking body in a corporation, and the chairman of the board is the highest ranking individual. The CEO generally works under the board and its chairman, and the board generally has the authority to remove the CEO under certain conditions. The CEO, however, cannot remove the board, but he or she can endeavor to have the board voted out and a new board voted in should a conflict arise. It is possible for a person to simultaneously serve as CEO and chairman of the board, though many corporate control experts believe it is bad to vest both offices in the same person.

e. By law in most states, the chairman of the board must also be the CEO.

Which of the following statements is CORRECT?

a. The managers of established, stable companies sometimes attempt to get their state legislatures to remove rules that make it more difficult for raiders to succeed with hostile takeovers.

b. In general, it is more in bondholders' interests than stockholders' interests for a firm to shift its investment focus away from safe, stable investments and into risky investments, especially those that primarily involve research and development.

c. The efficiency of the U.S. economy would probably be increased if hostile takeovers were absolutely forbidden.

d. Stockholders in general would be better off if managers never disclosed favorable events and therefore caused the price of the firm's stock to sell at a price below its intrinsic value.

e. Hostile takeovers are most likely to occur when a firm's stock is selling below its intrinsic value as a result of poor management.

Which of the following statements is CORRECT?

a. If General Electric were to issue new stock this year, this would be considered a secondary market transaction since the company already has stock outstanding.

b. Both NASDAQ dealers and "specialists" on the NYSE hold inventories of stocks.

c. Capital market transactions involve only preferred stock or common stock.

d. Money market transactions do not involve securities denominated in currencies other than the U.S. dollar.

e. The most important difference between spot markets versus futures markets is the maturity of the instruments that are traded. Spot market transactions involve securities that have maturities of less than one year whereas futures markets transactions involve securities with maturities greater than one year.

Which of the following statements is CORRECT?

a. While the distinctions are blurring, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties.

b. Capital markets deal only with common stocks and other equity securities.

c. Home mortgage loans are traded in the money market.

d. The New York Stock Exchange is an auction market, and it has a physical location.

e. If an investor sells shares of stock through a broker, then it would be a primary market transaction.

Which of the following statements is CORRECT?

a. The corporate tax system favors equity financing, as dividends paid are deductible from corporate taxes.

b. 50% of the dividends received by corporations is excluded from taxable income.

c. 50% of the interest received by corporations is excluded from taxable income.

d. Retained earnings, as reported on the balance sheet, represent the amount of cash a company has available to pay out as dividends to shareholders.

e. Because taxes on long-term capital gains are not paid until the gain is realized, investors must pay the top individual tax rate on that gain.