Corporate Finance Chapter 1
In an over-the counter market, which of the following is true?
1. Participants buy and sell from their own inventory of securities 2. participants are called dealers
The Sarbanes-Oxley Act requires corporate officers to:
1. be responsible for errors in the annual report 2. confirm validity of the financial statements (makes management personally responsible for accuracy of a company's financial statements
Which of the following are reasons that the corporation is the most important form of business?
1. corps can sue and be sued 2. corps are separate legal entities 3. corps can enter contracts
a general partnership has which characteristics?
1. each owner has unlimited liability for all firm debts 2. it is difficult to transfer ownership
Which of the following are important when considering a partnership?
1. external capital raising limitations 2. limited life of the business 3. unlimited liability
A treasurer's responsibilities typically include:
1. handling cash flows 2. managing capital expenditure decisions 3. making financial plans
Business finance is broadly concerned with:
1. how to finance long-term investments 2. which long-term investment to make 3. how to manage day-to-day finances of the firm
A good financial decision will do which of the following?
1. increase the value of the firm's existing stock 2. increase market value of shareholder's equity
which are true of a sole proprietorship?
1. it is one of the simplest types of businesses to form 2. it has a limited life
In an over-the-counter market, which is true?
1. participants are called dealers 2. participants buy and sell from their own inventory of securities
Which of the following are defining features of the primary market?
1. proceeds from the sale of securities goes to the issuing firm 2. it is the market where initial public offerings are made
When a corporation is formed, it is granted which of the following rights?
1. provincial citizenship for jurisdiction purposes 2. legal powers to sue 3. ability to issue stock
The controller is responsible for which tasks?
1. tax reporting and payments 2. financial accounting
How is ownership transferred in a corporation?
By gifting or selling shares of stock
In large firms, financial activity is usually associated with which top officer?
Chief financial officer
corporations in other countries are often called:
Public limited companies, limited liability company, joint stock companies
Which of the following are auction markets in the U.S.?
The Chicago Stock Exchange, The New York Stock Exchange
A shareholders' liability is limited to which of these?
The amount the shareholder invested in the corporation
The relationship between stockholders and management can best be described as a _______ relationship
agency
Costs incurred due to a conflict of interest between stockholders and management are called _________.
agency costs
If you hire a real estate company to sell your house, you are most apt to encounter which one of the following?
agency problem
An organization must prepare ______ and bylaws when forming a corporation
articles of incorporation
Working capital includes which of the following?
cash, short-term assets, inventory
The officer responsible for corporate tax reporting is the _______.
controller
Which corporate officer is responsible for accurate financial accounting of the firm's activities?
controller
Which of the following positions generally report to the chief financial officer (CFO)?
controller, treasurer
federal government taxes which?
corporate earnings and shareholder dividends
"increasing shareholder's wealth" means increasing the ______.
current common stock value
A sole proprietorship is a business that ______.
is owned by one person
in a limited partnership, a limited partner's liability for business debts is _______.
limited to their cash contribution to the partnership
Capital budgeting is concerned with making and managing expenditures on _______.
long-term assets
Which of the following are included in a firm's capital structure?
long-term debt, equity
since _____ and ownership are separated, a corporation's life is unlimited
management
Which of the following is NOT one of the basic areas of finance?
personal finance
mechanism used by unhappy stockholders to replace current management
proxy fight
a ______ gets paid after the employees, suppliers, and creditors
shareholder
Which are considered non-owners stakeholders in a corporation?
suppliers, employees, government
The primary responsibility of financial managers is to increase the value of _________
the existing shares of stocks
What is the primary objective of an auction market?
to bring buyers and sellers together
What is the main goal of financial management?
to maximize current share value
Ensuring that the firm has sufficient funds to continue operations on a day-to-day basis comes under the heading of _____ management
working capital