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Unit 4 Midterm Exam (Version 2) FI 360 Financial Management. Latest Update.
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Unit 4 Midterm Exam (Version 2) FI 360 Financial Management. Latest Update.
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Unit 4: Midterm ExamInstructions
Directions
The midterm exam covers material from week one through week three (Chapters 1 through 5).
The exam consists of 30 multiple choice questions.
You will have 90 minutes to complete the midterm exam.
You are only able to take the exam once.
The exam is open textbook and open notes.
The exam is not proctored.
Due Date:
Submit the exam by:
Attempt History
Attempt Time Score
LATEST Attempt 1 61 minutes 116 out of 120
Score for this quiz: 116 out of 120
Submitted
pts
Question 1
Which of the following statements is CORRECT?
, Most business in the U.S. is conducted by corporations, and corporations'
popularity results primarily from their favorable tax treatment.
Corporations and partnerships have an advantage over proprietorships
because a proprietor is exposed to unlimited liability, but the liability of
all investors in the other types of businesses is more limited.
For a stock to be in equilibrium, its intrinsic value must be greater than
the actual market price.
A good goal for a firm's management is the maximization of expected EPS.
Conflicts can exist between stockholders and managers, but
potential conflicts are reduced by the possibility of hostile takeovers.
pts
Question 2
Which of the following statements is CORRECT?
Ethical behavior is not influenced by training and auditing procedures.
People are either ethical or they are not, and this is what determines
ethical behavior in business.
If a lower level person in a firm does something illegal, like "cooking the
books," to understate costs and thereby artificially increase profits because
he or she was ordered to do so by a superior, the lower level person
cannot be prosecuted but the superior can be prosecuted.
, There are many types of unethical business behavior. One example is
where executives provide information that they know is incorrect to
outsiders. It is illegal to provide such information to federally regulated
banks, but it is not illegal to provide it to stockholders because they are
the owners of the firm.
Ethics is not an important consideration in business and in business
schools.
If someone deliberately understates costs and thereby causes reported
profits to increase, this can cause the stock price to rise above its intrinsic
value. The stock will probably fall in the future. Both those who
participated in the fraud and the firm itself can be prosecuted.
pts
Question 3
Which of the following statements is CORRECT?
Stockholders should generally be happier than bondholders to have
managers invest in risky projects with high potential returns as opposed to
safe projects with lower expected returns.
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.
There is no good reason to expect a firm's stockholders and bondholders
to react differently to the types of assets in which it invests.
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