Greah Fay B.

Mordeno November 11, 2021

BS Accountancy – 1 ACCBP 100 (5279)

Let’s Check

Activity 1 (Adapted. Brigham & Houston. (2015). Fundamentals of

Financial Management). Now that you know the most essential
knowledge in the nature and purpose of financial management, let us try
to check your understanding. In the space provided, write the letter of
the correct answer.

1. Which of the following statements is FALSE?

a. In most corporations, the CFO ranks under the CEO.

b. 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.
c. Partnerships and proprietorships generally have a tax advantage over
corporations.
d. A disadvantage of the corporate form of organization is that
corporate stockholders are more exposed to personal liabilities in
the event of bankruptcy than are investors in a typical partnership.
2. Choose the INCORRECT statement/s.

I. An advantage of the corporate form of organization is that

corporations are generally less highly regulated than
proprietorships and partnerships.
II. One advantage of the corporate form of organization is that it
avoids double taxation.
III. It is generally harder to transfer one's ownership interest in a
partnership than in a corporation.

a. Statement I only
b. Statement I and II
c. All statements are correct.
d. None of the statements are correct.

3. Choose the CORRECT statement/s.

I. It is generally less expensive to form a corporation than a

proprietorship because, with a proprietorship, extensive legal
documents are required.
II. The more capital a firm is likely to require, the greater the
 probability that it will be organized as a corporation.
III. One disadvantage of forming a corporation rather than a
partnership is that this makes it more difficult for the firm's
investors to transfer their ownership interests.

a. Statement I only
b. Statement II only
c. Statement I, II and III
d. All of the statements are incorrect.

4. Choose the INCORRECT statement/s.

I. Organizing as a corporation makes it easier for the firm to raise

capital. This is because corporations' stockholders are not
subject to personal liabilities if the firm goes bankrupt and
because it is easier to transfer shares of stock than partnership
interests.
II. Maximizing firm’s profit is not equivalent to maximizing
shareholders’ wealth.
a. Statement I only
b. Statement II only
c. Neither statements are incorrect.
d. Both statements are incorrect.

5. Which of the following statements is CORRECT?

a. One of the disadvantages of incorporating your business is that you could

become subject to the firm’s liabilities in the event of bankruptcy.
b. Having sole proprietorship or partnership as a form of business is
advantageous in terms of taxes in comparison with corporations.
c. Corporations are subject to lesser regulations than sole proprietorship.
d. Partners have equal rights, privileges, and liabilities in all types of
partnership.

6. He/she is in-charge of the firm’s accounting activities such as corporate

accounting, tax management, financial accounting, and cost accounting.

a. Controller
b. Treasurer
c. Chief Financial Officer
d. Chairman of the Board

7. He/she is responsible for the firm’s financial activities including financial

 planning, raising funds, making capital budgeting decisions, and managing
the firm’s working capital.

a. Controller
b. Treasurer
c. Chief Financial Officer
d. Chairman of the Board

8. It involves determination of the best capital structure.

a. Investing Decision
b. Financing Decision
c. Dividend Decision
d. Safekeeping Decision

9. It involves allocation of cash to be distributed to shareholders.

a. Investing Decision
b. Financing Decision
c. Dividend Decision
d. Safekeeping Decision
10. It involves provision of capital to proposals whose benefits are to be realized
in the future.

a. Investing Decision
b. Financing Decision
c. Dividend Decision
d. Safekeeping Decision