1) Which of the following categories of owners have limited liability? A. General partners B. Sole proprietors C. Shareholders of a corporation D. Both a and b

2) The true owners of the corporation are the: A. holders of debt issues of the firm. B. preferred stockholders. C. board of directors of the firm. D. common stockholders.

3) In terms of organizational costs, which of the following sequences is correct, moving from lowest to highest cost? A. General partnership, sole proprietorship, limited partnership, corporation B. Sole proprietorship, general partnership, limited partnership, corporation C. Corporation, limited partnership, general partnership, sole proprietorship D. Sole proprietorship, general partnership, corporation, limited partnership

4) Which of the following would increase the need for external equity? A. Inadequate investment opportunities B. A slow-down in economic growth C. A reduction in corporate profits D. A seasonal reduction in sales revenues

5) When public corporations decide to raise cash in the capital markets, what type of financing vehicle is most favored? A. Retained earnings B. Preferred stock C. Common stock D. Corporate bonds

6) __________ is a method of offering securities to a limited number of investors. A. Public offering B. Initial public offering C. Syndicated underwriting D. Private placement

7) According to the agency problem, _________ represent the principals of a corporation. A. employees B. shareholders C. suppliers D. managers

8) Which of the following is NOT a principle of basic financial management? A. Efficient capital markets B. Risk/return tradeoff C. Profit is king D. Incremental cash flow counts

9) Difficulty in finding profitable projects is due to: A. ethical dilemmas. B. social responsibility. C. opportunity costs. D. competitive markets.

10) Another name for the acid test ratio is