IAI CB1 Practice Questions - IAI Subject CB1 Business Finance Exam - IAI CB1 Practice Questions

Question 1

Under the agency theory of corporate governance, the relationship between shareholders and the directors of a company is best described as which of the following?

A principal-agent relationship in which directors act as agents for the shareholders A creditor-debtor relationship in which shareholders lend funds to directors A partnership of equals with unlimited mutual liability A trustee-beneficiary relationship governed solely by tax law

Correct Answer:

A principal-agent relationship in which directors act as agents for the shareholders

Question 2

A company's board separates the roles of Chair and Chief Executive Officer. From a corporate governance perspective, the PRIMARY reason for this separation is to:

Reduce the company's corporation tax liability Avoid the concentration of unfettered decision-making power in one individual Eliminate the need for non-executive directors Guarantee a higher dividend payout to shareholders

Correct Answer:

Avoid the concentration of unfettered decision-making power in one individual

Question 3

Which of the following is the MAIN function of independent non-executive directors (NEDs) on a company's board?

To manage day-to-day operations of the business To act as the company's external auditors To provide independent oversight and challenge to executive management To personally guarantee the company's bank loans

Correct Answer:

To provide independent oversight and challenge to executive management

Question 4

A key feature distinguishing a public limited company from a private limited company is that a public limited company:

Cannot issue shares to raise capital Has unlimited liability for its shareholders Is exempt from preparing audited financial statements May offer its shares to the general public and be listed on a stock exchange

Correct Answer:

May offer its shares to the general public and be listed on a stock exchange

Question 5

The principal financial objective of a company is usually stated as the maximisation of shareholder wealth. In practice this is most directly reflected by maximising:

The total market value of the company's equity over the long term Reported accounting profit in the current year The number of employees on the payroll The book value of total assets on the balance sheet

Correct Answer:

The total market value of the company's equity over the long term

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About this Exam

Prepare with the IAI CB1 Practice Questions - IAI Subject CB1 Business Finance Exam practice quiz. This question bank includes 100 questions covering company, because, project, shares, and cost. Use it to review important concepts, identify knowledge gaps, and build confidence for the related exam, course, or assessment.

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IAI CB1 Practice Questions - IAI Subject CB1 Business Finance Exam

This practice set contains 100 questions from the matching question bank and focuses on company, because, project, shares, and cost. Work through each question carefully, review the provided solutions, and revisit topics that need more study before your next attempt.

This is an independent study resource intended for practice and review; it is not an official examination or an endorsement by any organization named in the title.

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IAI CB1 Practice Questions - IAI Subject CB1 Business Finance Exam

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