Which One of the Following Statements is Correct Concerning the Nyse

1. Which of the following is/are correct regarding agency costs? I. Indirect costs occur when managers, acting to minimize the risk of the firm, forego investments shareholders would prefer they take. II. Direct costs occur when shareholders must incur costs to monitor the manager's actions. III. Direct costs occur when managers buy assets considered unnecessary by the firm's owners. A. II only B. I and II only C. II and III only D. I, II, and III E. I only 2. Of the following, which statement regarding agency costs is false? A. If agency costs get too high in the eyes of shareholders, they can begin a proxy fight to replace existing management. B. An agency problem exists when there is a conflict of interest between the stockholders and management of a firm. C. A corporate expenditure that benefits stockholders but harms management is an agency cost. D. An agency problem exists when there is a conflict of interest between a principal and an agent. E. An indirect agency cost occurs when firm management avoids risky projects that would favourably affect the stock price because the managers are worried about keeping their jobs. 3. Which of the following help ensure managers act in the best interest of owners? I. A compensation package for managers that ties their salary to the firm's share price. II. Managers are promoted only if the firm prospers. III. The threat that if the firm does poorly, shareholders will use a proxy fight to replace the existing management. IV. There is a high degree of likelihood the firm will become a takeover candidate if the firm performs poorly. A. I, III, and IV only B. I and III only C. I, II, III, and IV D. I and II only E. II and III only 4. Which of the following is a true statement concerning the economics of ethical decision-making? I. The higher the probability of detection, the more likely that one will cheat. II. The higher the sanctions imposed if detected, the less likely one is to cheat. III. The expected costs of unethical behaviour are lower if information about cheating is rapidly and widely distributed. A. I only B. II only C. I and II only D. I, II, and III E. I and III only 5. Which of the following markets is considered a dealer market? A. The Ontario Securities Commission B. New York Stock Exchange C. The real estate market D. The over-the-counter (OTC) market E. The Toronto Stock Exchange 6. You are interested in purchasing 100 shares of stock in one of the largest corporations in the Canada. You would most likely purchase the shares in _______________. A. a secondary market operated as an auction market B. a secondary market operated as a money market C. a primary market operated as a dealer market D. a primary market operated as an auction market E. a secondary market operated as a dealer market 7. Which of the following does NOT correctly finish this sentence: In Canada, ____________. A. the OTC market does not have a central location B. over-the-counter markets are operated as auction markets C. new issues of securities occur in primary markets D. auction markets have a physical location E. financial markets function as both primary and secondary markets for debt and equity securities 8. Which of the following is NOT general criteria that must be met in order for a firm to be listed on the TSX? A. The firm must have a minimum number of shareholders owning at least 100 shares. B. The firm must have a minimum amount of assets. C. The firm must have a minimum number of directors. D. The firm must have a minimum number of shares outstanding. E. The firm must have a minimum market value. 9. Which of the following would be considered a primary market transaction? A. A buy order to a dealer for shares of a company OTC B. A sell order to a broker for a stock listed on the TSX C. A buy order to an investment banker for a new public stock offering D. A buy order to a broker for shares of a company on the Venture Exchange E. A buy order to a broker for shares of a company on the TSX 10. Which of the following is considered a "primary market" transaction? I. You buy shares in the public offering of a start-up company in the computer industry. II. Your mother sells you the shares she purchased in your uncle's latest business venture. III. You buy shares in Nortel Networks from your closest friend. A. I, II, and III B. I and II only C. I only D. II only E. I and III only 11. A(n) ______________ is a sale of securities which typically does not require registration with the OSC. A. secondary market transaction B. over-the-counter transaction C. private placement D. primary market transaction E. initial public offering 12. Which of the following would be considered a secondary market transaction? A. Buy or sell orders to a broker for shares listed on the TSX B. A, B & C C. Buy or sell orders for the purchase of bonds in the over-the-counter market D. Buy or sell orders to a broker for shares listed on the NYSE E. A & C 13. On a typical day in Canada, the largest dollar volume of shares are traded _______. A. on the TSX B. on the Venture Exchange C. over the counter D. on the NYSE E. in primary markets 14. Which of the following is considered a primary market transaction? A. An investor buys stock in Chrysler Canada from his buddy B. Chrysler Canada's stockholders sell some of their shares to Kirk Kirkorian, another investor C. On September 25, 1995, 30.8 million shares of stock changed hands on the TSX D. Labatt's just announced what their upcoming quarterly dividend payment will be E. A firm sells stock to the public for the first time in an IPO 15. By which of the following methods do chartered banks generate income? I. From the spread between interest paid on deposits and interest earned on loans. II. From selling life insurance through their branch networks. III. From services provided to corporate clients such as bank guarantees. A. I and II only B. II only C. I and III only D. I only E. I, II, and III 16. All of the following are examples of Canadian financial institutions EXCEPT A. Chartered banks B. Provincial governments C. Trust companies D. Mutual funds E. Investment dealers 17. The size, risk, and timing of future cash flows are the key elements evaluated in the: A. Capital structure decision. B. Analysis of working capital. C. Capital budgeting process. D. Cash management process. E. Analysis of current assets. 18. Capital structure refers to which of the following issues? I. From whom should the firm borrow funds? II. How much debt should the firm have in relation to its level of equity? III. What level of current assets is required to maintain the firm's operational level? IV. How much risk is associated with the future cash flows of a project? A. III only B. I, II, and IV only C. I, II, and III only D. II only E. I and II only 19. Working capital management is concerned with which balance sheet accounts? A. Current assets only B. Current and long-term assets only C. Current assets, long-term assets and current liabilities only D. Long-term assets only E. Current assets and current liabilities only 20. Which one of the following statements concerning a proprietorship is true? A. A proprietorship can be a business jointly owned by two family members. B. A partial transfer of ownership is easier with a proprietorship than with a corporation. C. Income from a proprietorship is taxed at a lower rate than other personal income. D. A proprietor is personally responsible for 100% of the firm's liabilities. E. Income from a proprietorship is taxed as a separate entity. 21. Which one of the following statements concerning a partnership is true? A. Under a general partnership, only the key partner is personally liable for the business debts. B. Limited partners in a limited partnership should be actively involved in management decisions. C. A primary advantage of a partnership is the ease of transferring ownership. D. Income from a limited partnership is taxed as corporate income. E. A partnership terminates at the death of any partner. 22. It is easiest to raise capital for a project under which form of business organization? A. Corporation B. General partnership C. Sole proprietorship D. The form of business organization does NOT affect the ability to raise capital. E. Limited partnership 23. The ultimate responsibility for a corporation rests with: A. The stockholders. B. The Board of Directors. C. The stakeholders. D. The Chief Operations Officer. E. The Chairman of the Board. 24. When a corporation issues additional shares of common stock, they do so: A. Only through the OTC market. B. Only through the private markets. C. Through a dealer in the secondary market. D. Through a broker in the secondary market. E. In the primary market. 25. Which one of the following statements is true concerning stock exchanges? A. The Tokyo Stock Exchange is not a very actively traded upon exchange. B. The total value of NASDAQ listed stocks is less than the total value of NYSE listed stocks. C. The Toronto Stock Exchange is the largest exchange in the world. D. The OTC market is physically located in Toronto. E. NASDAQ listed stocks trade more actively than those listed on the NYSE. 26. Which of the following statements concerning dealers are true? I. Dealers usually buy and sell only for themselves. II. Dealers accept the risks of owning shares of stock. III. The OTC market is a dealer market. IV. Most debt securities trade in dealer markets. A. I, II, and III only B. I and II only C. II and IV only D. I and III only E. I, II, III, and IV 27. Which of the following statements concerning auction markets are true? I. The TSX is an auction market. II. The OTC is an auction market. III. The NYSE is an auction market. IV. Auction markets have a physical location. A. I and II only B. II and III only C. I, II, and IV only D. I, II, and III only E. I, III, and IV only 28. Which one of the following statements is correct concerning the listing of stock on an exchange? A. Any firm can list their stock on any exchange they desire. B. The TSX has the most stringent listing requirements of any Canadian stock exchange. C. All exchanges have the same listing requirements. D. Listing requirements are established by the Ontario Securities Commission. E. The number of shareholders is NOT a listing consideration for a stock. 29. Which of the following is a disadvantage of the corporate form of ownership? A. Taxation B. The life of the corporation C. Ease of transfer of ownership D. Limited liability E. Ability to raise capital 30. Which of the following are capital structure decisions? I. Determining the amount of money to borrow in order to finance a 10-year project II. Determining the number of shares of common stock to issue III. Determining when a supplier should be paid IV. Establishing the accounts receivable policies A. I and III only B. III and IV only C. I, III, and IV only D. II and III only E. I and II only 31. Which of the following are working capital decisions? I. Determining the level of inventory to be kept on hand II. Determining if a supplier's credit terms are acceptable III. Establishing the accounts receivable payment terms IV. Deciding if a new project should be accepted A. II and IV only B. III and IV only C. I, II, and III only D. II and III only E. I and II only 32. The Treasurer: A. Is responsible for overseeing the data processing functions within a firm. B. Reports directly to the Chief Executive Officer of a corporation. C. Must file quarterly financial statements in a timely manner. D. Has the responsibility for managing the cash for an organization. E. Must keep current on tax laws since he/she is responsible for managing the taxes for a firm. 33. Financial managers must be concerned with which of the following aspects of cash flows? I. Amount of the cash flow II. Timing of the cash flow III. Likelihood of the cash flow being received IV. Possibility that only a portion of the expected cash flow will be received A. II, III, and IV only B. II and IV only C. I, II, III, and IV D. I, II, and III only E. I and II only 34. Ensuring that a firm has sufficient cash available on a daily basis is part of: A. Business organization. B. Capital budgeting. C. Organizational structure. D. Capital structure. E. Working capital management. 35. Two of the primary advantages of a sole proprietorship are the: A. Ease of ownership transfer and ease of company formation. B. Ease of company formation and less regulation. C. Ability to raise capital and less regulation. D. Ease of ownership transfer and less regulation. E. Ease of company formation and limited liability. 36. In a limited partnership: A. The income earned is taxed like a corporation. B. Only the limited partners are involved in the daily management of the firm. C. Both general and limited partners are involved in the daily management of the firm. D. A general partner is liable only for the amount he/she contributed to the partnership. E. A limited partner is liable only for the amount he/she contributed to the partnership. 37. In a general partnership: A. Each partner is liable only for the portion of the total debt he/she agreed in writing to pay. B. Each partner is personally responsible for all of the firm's debt. C. None of the partners are personally liable for the firm's debt. D. Each partner is responsible only for his/her portion of the firm's debt based on ownership percentage. E. Only the general partner is liable for the firm's debt. 38. Which of the following are disadvantages of the partnership form of ownership? A. Double taxation and limited firm life B. Personal liability and double taxation C. Ease of formation and ease of ownership transfer D. Ease of formation and unlimited firm life E. Personal liability and limited firm life 39. Which of the following are advantages of the corporate form of ownership? A. Simplicity of company formation and the ability to raise capital B. Ease of ownership transfer and simplicity of company formation C. Limited personal liability and limited firm life D. Limited personal liability and ability to raise capital E. Ability to raise capital and limited firm life 40. Which one of the following actions best meets the goal of financial management? A. Issuing additional shares of stock to increase the total cash on hand B. Delaying cash payments in order to increase the total cash on hand C. Deciding a firm should be 100% equity financed D. Easing the accounts receivable policies in order to increase current sales E. Accepting a project that enhances the current market value of the firm's stock 41. Which one of the following actions is the best example of an agency problem? A. Accepting a project that enhances both management salaries and the market value of the firm's stock B. Requiring stockholders approval of all management compensation decisions C. Paying management bonuses based on the number of store locations opened during the year D. Basing management bonuses on the attainment of specific financial goals E. Paying management bonuses based on the current market value of the firm's stock 42. Which one of the following means of management compensation is designed to help eliminate the agency problem? A. Offering stock options B. Providing annual raises C. Providing a corporate jet D. Providing cost of living adjustments E. Increasing health care benefits 43. The primary purpose of an auction market is to: A. Provide electronic trading for dealers. B. Match buyers with sellers. C. Handle private placements of shares of stock. D. Offer new shares of stock to the general public. E. Provide a market place for dealers. 44. The primary purpose of capital budgeting is to: A. Determine the amount of cash and inventory to keep on hand. B. Estimate the initial cost of a project. C. Identify projects that produce cash flows that exceed the cost of the project. D. Determine the risk level of a project. E. Distinguish projects that have at least a five-year life from those that don't. 45. An individual who places an order to buy 1000 shares of IBM stock: A. Must have hired a dealer to perform this transaction. B. Is most likely involved in an IPO. C. Has to be listed as a private dealer. D. Is most likely participating in the secondary market. E. Is involved in a private placement of securities. 46. Stockholders elect: A. The Corporate Directors. B. The President. C. All senior managers. D. The Chief Executive Officer. E. The Chairman of the Board. 47. Which one of the following questions would most likely be the responsibility of the financial manager? A. Which employees should work overtime? B. Where should a new store be located? C. How should the firm finance a new distribution center? D. What price should be charged for a new product? E. Which product markets should be expanded? 48. The treasurer of a firm is most apt to report to the: A. president. B. controller. C. vice president of finance. D. chief executive officer. E. chief operating officer. 49. Which one of the following is a capital budgeting decision? A. evaluating the minimal amount of cash which the firm should keep on hand B. deciding whether or not the firm should open another retail outlet C. establishing the length of time for which store credit will be offered D. determining which bank has the best loan terms E. ascertaining the optimal level of inventory 50. Which of the following should be considered when making a capital budgeting decision? I. the amount of cash flows which will be required or obtained II. the timing of all cash inflows and outflows III. the amount of debt versus the amount of equity which should be obtained IV. the risk associated with the expected cash inflows A. I and III only B. II and IV only C. II and III only D. I and II only E. I, II, and IV only