finance 3110 final LCemson

Which of the following actions would be considered an agency problem?

A manager in a corporation makes online personal travel arrangements during work hours

Which one of the following is a use of cash?

Decrease in accounts payable

Which one of the following is an agency cost?

Hiring outside accountants to audit the company's financial statements

Which one of the following actions by a financial manager is most apt to create an agency problem?

Increasing current profits when doing so lowers the value of the company's equity

Abigail, Blake and Camila plan to launch a business. Abigail will fund the venture but wants to limit her liability to her initial investment. Shehas no interest in the daily operations. Blake will contribute his full efforts on a daily basis but has limited funds to invest in the business.Camila will be involved as a consultant and manager and will also contribute funds. Blake and Camila are willing to accept liability for the firm'sdebts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to minimize the initialcosts of organizing the business. Which form of business entity should these individuals adopt?

Limited partnership

Which one of the following statements related to market efficiency tends to be supported by current evidence?

Markets tend to respond quickly to new information.

You are aware that your neighbor trades stocks based on confidential information he overhears at his workplace. This information is notavailable to the general public. This neighbor often comments on the profits he earns on these trades. Given this, you would tend to arguethat the financial markets are at best _____ form efficient

Semistrong

A firm's mixture of debt and equity financing is the result of its ______ decisions

capital structure

Financial leverage:

increases the potential return to the stockholders.

Pietro sold 500 shares of Southpier Corporation stock on the New York Stock Exchange. This transaction:

occurred in the secondary market

Shareholders' equity:

represents the residual value of a firm

A common-size income statement is an accounting statement that expresses all of a firm's expenses as a percentage of

sales

Dominic's Custom Draperies has a fixed asset turnover rate of 1.13 and a total asset turnover rate of 0.94. Its competitor, Window Fashions,has a fixed asset turnover rate of 1.26 and a total asset turnover rate of 0.91. Both companies have similar operations. Based on thisinformation, Dominic's must be _____ than Window Fashions

using its total assets more efficiently