FIN 3320 CHAPTER 1

Corporations in other countries are often called:

Joint stock companies Public limited companies

Organized auction markets include:

New York Stock Exchange

which of the following companies were involved in corporate scandals that led to Sarbanes-oxley?

Tyco Enron WorldCom

the costs incurred due to a conflict of interest between stockholders and management are called _____.

agency costs

an organization must prepare _____ and bylaws when forming a corporation.

articles of incorporation

which of the following can be used to encourage managers to act in the best interests of shareholders?

better prospects of promotion managerial compensation tied to performance

A corporation receives cash from financial markets by selling ________ and _________.

bonds stocks

the possible goal of profit maximization _____.

can be achieved by cost-cutting would probably be the most commonly sighted goal for a business

a general partnership has which of the following characteristics?

each owner has unlimited liability for all firm debts it is difficult to transfer ownership

what are the two basic classifications under which most potential financial goals fall?

earning or increasing profits controlling risk

it is sometimes argued that, left to themselves, managers tend to minimize the amount of resources over which they have control

false

a corporation is a distinct ______ entity and as such can have a name and take advantage of the legal powers of natural persons.

legal

the sarbanes-oxley act requires corporate officers to do which of the following

list any deficiencies in internal controls confirm the validity of the annual financial report accept responsibility for material errors in the annual report

Since ownership in a corporation can be dispersed over a huge number of stockholders, it can be argued that ______ effectively controls the firm.

management

In a shareholder-manager relationship, who is the agent?

managers

which of the following, according to the textbook, are possible financial goals for a company?

minimize costs maximize profits survival

a sole proprietorship is a business owned by ______ person(s).

one

when a corporation raises funds in the financial markets , the transaction occurs on the:

primary market

when a corporation raises funds in the financial markets, the transaction occurs on the:

primary market

which of the following provides a manager an incentive to perform well?

promotions

which one of these is an important mechanism used by unhappy stockholders to replace current management?

proxy fight

when one owner of a security sells the security to another person, the transaction takes place in the ______ market

secondary

a ______ is someone other than an owner or a creditor who potentially has a claim of the cash flows of a firm

stakeholder

when a corporation is formed , it is granted which of the following rights?

state citizenship for jurisdictional purposes the ability to issue stock legal powers to sue

the liability of a shareholder in a corporation is limited to which of these?

the amount the shareholder invested in the corporation

which one of these motivates managers to make good decisions?

threat of a hostile takeover

from the stockholder's perspective, what is the primary purpose of awarding stock options to managers?

to increase shareholders' wealth