Question 1

In a limited partnership, the liability protection does not protect partners from their individual actsof malpractice.

Accepted Answer

In a limited partnership, limited partners are protected from the debts and liabilities of the partnership, but they are still personally liable for their own wrongful acts, such as malpractice.

Question 2

Financing decisions deal with the left-hand side of the firm's balance sheet and involve the mostappropriate mix of current and fixed assets.

Accepted Answer

Financing decisions deal with the right-hand side of the firm's balance sheet, which includes the most appropriate mix of debt and equity to fund the assets on the left-hand side of the balance sheet.

Question 3

An agency problem is the acquisition of a firm by another firm or group that is not supported by management.

Accepted Answer

An agency problem is typically when there is a conflict of interest between the actions or motivations of a company's management and the interests of its shareholders or owners. The acquisition of a firm by another firm or group may or may not be supported by management, but it is not necessarily an example of an agency problem.

Question 4

Financial managers actively manage the financial affairs of many types of business-- financial and non-financial, private and public, for-profit and not-for-profit.

Accepted Answer

Financial managers work across various sectors and types of organizations, including those that are financial or non-financial, private or public, for-profit or not-for-profit.

Question 5

Marginal analysis states that financial decisions should be made and actions taken only when added benefits exceeds added costs.

Accepted Answer

Marginal analysis is based on the principle that decision-making and action-taking should occur only when the added benefits exceed added costs. This means that decisions should be made only when the marginal benefit of an action is greater than the marginal cost.

Question 6

Financial analysis and planning is concerned with analyzing the mix of assets and liabilities.

Accepted Answer

The answer of Financial analysis and planning is concerned with...

Question 7

In a partnership, a partner can readily transfer his/her wealth to other partners.

Accepted Answer

In a partnership, partners cannot transfer their wealth to other partners without a formal agreement or consent from all partners. Partners can only distribute profits and losses according to the partnership agreement.

Question 8

The financial manager places primary emphasis on cash flows, the inflow and outflow of cash.

Accepted Answer

The financial manager's primary focus is on managing cash flows, including ensuring adequate cash inflows to meet cash outflows, managing cash surpluses, and optimizing cash balances.

Question 9

Agents of corporate owners are themselves owners of the firm and have been elected by all the corporate owners to represent them in decision-making and management of the firm.

Accepted Answer

Agents of corporate owners, often referred to as managers or executives, are not themselves owners of the firm but are hired or appointed to represent the interests of the owners (shareholders) in the decision-making and management of the firm.

Question 10

The goal of ethics is to motivate business and market participants to adhere to both the letter and the spirit of laws and regulations in all aspects of business and professional practice.

Accepted Answer

Ethics is concerned with not just legal compliance, but also with ensuring that businesses and market participants act in accordance with ethical principles and values. Adhering to ethical standards can help promote trust and confidence in the marketplace, which can lead to improved business performance and public perceptions of business.

Question 11

Some of Canada's largest corporations include Nortel Networks, Bombardier, and the Royal Bank.

Accepted Answer

Nortel Networks, Bombardier, and the Royal Bank are among Canada's largest corporations.

Question 12

When considering each financial decision alternative or possible action in terms of its impact on the share price of the firm's stock, financial managers should accept only those actions that areexpected to increase share price.

Accepted Answer

Maximizing shareholder wealth is a primary goal of financial management. Therefore, financial managers should only accept those actions that are expected to increase the firm's share price, as it directly reflects the value of the firm to its shareholders.

Question 13

Using certain standardized and generally accepted accounting principles, the accountant prepares financial statements that recognize revenue at the point of sale and expenses when incurred.

Accepted Answer

This statement is true. The accountant follows accounting principles such as the accrual basis of accounting to recognize revenue and expenses in the appropriate period, regardless of when cash is received or paid. Revenue is recognized at the point of sale, which is when the performance obligation is satisfied and the customer has obtained control of the product or service. Expenses are recognized when they are incurred, which is when the goods or services are received or the obligation is owed. Together, these principles ensure accurate and informative financial statements.

Question 14

The president or chief executive officer is elected by the firm's stockholders and has ultimate authority to guide corporate affairs and make general policy.

Accepted Answer

The answer of The president or chief executive officer is...

Question 15

In large companies, the project finance manager is responsible for coordinating the assets and liabilities of the employees' pension fund.

Accepted Answer

The answer of In large companies, the project finance manager...

Question 16

In a limited partnership, only one partner may assume limited liability, all other partners have to have unlimited liability.

Accepted Answer

In a limited partnership, all partners may assume limited liability. This is one of the main advantages of a limited partnership structure.

Question 17

Economic value added is calculated by subtracting the cost of funds used to finance an investment from its after-tax operating profits.

Accepted Answer

Economic value added (EVA) is calculated by subtracting the cost of capital (not just cost of funds) from after-tax operating profits. This measure is used to determine the value created by a business by comparing its return on investment with the cost of financing that investment.

Question 18

A firm's articles of incorporation and bylaws, along with government legislation, provide shareholders with a framework on how their firm will be governed.

Accepted Answer

This statement is true. The articles of incorporation and bylaws outline the basic structure and rules of a company's governance, while government legislation provides additional regulations and guidance.

Question 19

Joe Tootoosis and Frank Inn were working partners in a partnership that failed; at failure, the partnership debt was $100,000. If Frank Inn has no assets, Joe Tootoosis could be held liable for the entire $100,000.

Accepted Answer

In a general partnership, each partner is personally liable for the debts and obligations of the partnership, regardless of which partner incurred the debt or obligation. Therefore, if one partner has no assets to contribute, the other partner may be held liable for the entire amount of the debt.

Question 20

In Canada, corporate boards seem to be drawn from a large subset of people representing the cultural differences of Canadians.

Accepted Answer

Corporate boards in Canada have historically been criticized for lacking diversity and not fully representing the cultural differences of Canadians.

Quiz 1: Overview of Corporate Finance