Finance 201 - Online: Chapter 1 (LearnSmart)
Which of the following are true of a sole proprietorship?
-A proprietorship has a limited life -it is the simplest type of business to form
The Sarbanes-Oxley Act requires corporate officers to do which of the following?
-Accept responsibility for material errors in the annual report -Confirm the validity of the annual report -List any deficiencies in internal controls
Which of the following positional generally report to the CFO?
-Controller -Treasurer
Which of the following show why a corporation is the most important form of business?
-Corporations can enter into contracts -Corporations can sue and be sued -A corporation is a separate legal entity with the ability to acquire/exchange property
Which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley
-Enron -WorldCom -Tyco
The controller is responsible for which of the following tasks?
-Financial Accounting -Tax Reporting
Which of the following are important when considering a partnership
-Fund raising limitations -Personal liability for firm debts -Taxation of partnership income
Which of the following, according to the textbook, are possible financial goals for a company?
-Survival -Minimize Costs -Maximize Profits
Capital
Budgeting is the process of making and managing expenditures on long-term assets
It is sometimes argued that, left to themselves, managers tend to minimize he amount of resources over which they have control
False
The Sarbanes-Oxley Act provides incentives for companies to go public in the US markets.
False
Corporations in other countries are often called:
Joint stock companies Public limited companies
__________ are frequently used to encourage key managers to maximize the value of the firm's stock.
Stock Options
The relationship between stockholders and management can best be described as a _____ relationship
agency
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
some of the cash flow generated by a firm goes back to the financial markets in the form of
divided and debt payments
Businesses are motivated to organize as corporations because stockholders in a corporation have _____ liability for corporate debts
limited
In a limited partnership, a limited partner's ability for business debts is____
limited to their cash contribution to the partnership
What is the main goal of financial management?
maximize the current value per share of the existing stock
A Sole Proprietorship is a business owned by ____ person(s)
one
Indirect agency costs are often due to lost __________.
opportunities
Most equity shares of large firms in the US trade on
organized auction markets
A limited liability company is taxed like a ______ and its owners have _____ liability
partnership; limited
The liability of a shareholder in a corporation is limited to which of these?
the amount the shareholder invested in the corporation
The primarily responsibility of financial managers is to increase the value of
the existing shares of stock
Which one of these motivates managers to make good decisions?
-Threat of a hostile takeover -stock options
The owners of a corporation are called:
shareholders
The officer responsible for managing the firm's cash flows is the
treasurer
A partnership must have at least ____ owners
two
A corporation receives cash from financial markets by selling ________ and _________.
bonds and stocks
The rules used by a corporation to regulate its existence are known as ___________.
bylaws
Since ownership in a corporation can be dispersed over a huge number of stockholders, it can be argued that ______ effectively controls the firm.
management
When a corporation raises funds in the financial markets, the transaction occurs on the
primary market
Which one of these 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
Which of the following are considered stakeholders in a company?
-Government -Employees -Suppliers *Stakeholder is someone other than a stockholder/creditor who potentially has a claim on the cash flows of the firm*
A good financial decision will do which of the following?
-Increase the value of the firm's existing sock -Increase the market value of shareholders' equity
A general partnership has which of the following characteristics
-It is difficult to transfer ownership -Each owner has unlimited liability for all firms debts
When a corporation is formed, it is granted which of the following rights?
-State citizenship for jurisdictional purposes -legal powers to sue -the ability to issue stock
Which of the following is included in working capital?
-accounts payable -current (short-term) assets -accounts receivable
Which of the following can be used to encourage managers to act in the best interests of shareholders?
-better prospects of promotion -stock options and bonuses -managerial compensation tied to performance
The possible goal of profit maximization
-can be achieved by cost-cutting -would probably be the most commonly sighted goal for a business
What are the two basic classifications under which most potential financial goals fall?
-controlling risk -earning or increasing profits
The federal government taxes which of the following
-corporate earnings and -shareholder dividends
Inventory is a:
-current asset -part of working capital
In a large corporation, the financial manager is primarily responsible for
-financial aspects of operations, (collections of AR) -long-term investment decisions -financing decisions
Hoe is ownership transferred in a corporation?
-ownership is transferred by gifting or selling shares of stock
Which one of the following parties would be the last arty to receive payment if a firm were to close? Assume all parties have a legitimate claim on the firms assets
Shareholders
The goal of a for-profit business is to _______ existing owners' equity.
maximize