Financial management test 1 chapter 1
Which of the following show why a corporation show why a corporation is the most important form of business?
A corporation is a separate legal entity with the ability to acquire and exchange property, corporation can enter into contracts, corporations can sue and be sued
What are the two basic classifications under which most potential financial goals fall?
Controlling risk, earning or increasing profits
Which of the following are considered stakeholders in a company?
Employees, government, suppliers
Which of the following are considered stakeholders in a company?
Employees, government, supplies
T/F it is sometimes argues that, left to themselves, managers tend to minimize the amount of resources over which they have control
False
T/F the Sarbanes-oxley act provides incentives for companies to go public in US markets
False
When a corporation is formed, it is granted which of the following rights?
Legal powers to sue, the ability to issue stock, state citizenship for jurisdictional purposes
How is ownership transferred in a corporation?
Ownership is transferred by gifting or selling shares of stock
A limited liability company is taxed like a _____ and its owners have ____ liability
Partnership; limited
Which one of these is an important mechanism used by unhappy stockholders to replace current management?
Proxy fight
Which one would be the last party to receive payment if a firm were to close?
Shareholders
Which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley?
WorldCom, Encron, Tyco
Which of the following are true of a sole proprietorship?
a proprietorship has a limited life, it is the simplest type of a 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 financial report, list any deficiencies in internal controls
The relationship between stockholders and management can best be described as an ____ 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
The rules used by a corporation to regulate its existence are known as _____
bylaws
the possible goal of profit maximization _____
can be achieved by cost-cutting, would probably be the most common sighted goal for a business
long term investments
capital budgeting is concerned with planning and controlling a firms ____
working capital includes:
current(short-term) assets, accounts payable, accounts receivable
the need to monitor management actions is an example of ____ agency cost
direct
A good financial decision aims at which of the following?
increase the value of the firm's existing stock, increase market value of shareholders' equity
A sole proprietorship is a business that ___
is owned by one person
controller
officer responsible for corporate tax
inventory is a ___ and ____
part of working capital and current asset
a corporation receives cash form financial markets by selling ___ and ___
stocks, bonds
Which of the following are important when considering a partnership?
taxation of partnership income, fund raising limitations, personal liability for firm debts
The liability of a shareholder in a corporation is limited to which of these?
the amount the shareholder invested in the corporation
Which of the following are true of a sole proprietorship?
a proprietorship has a limited life, it the the simplest type of business to form
the mixture of debt and equity maintained by a firm
capital structure
a good financial decision aims at which of the following?
increase the value of the firms' existing stock, increase 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 firm debts
A corporation is a distinct ____ entity and as such can have a name and take advantages of the legal powers of natural persons
legal
When a corporation is formed, it is granted which of the following rights?
legal powers to sue, the ability to issue stock, state citizenship for jurisdictional purposes
in a limited partnership, a limited partner's liability for business debt is ____
limited t their cash contribution to the partnership
in a large corporation, the financial manager is primarily responsible for:
long term investment decisions, financial aspects of operations, such as collections of accounts receivables, and financing decisions
Since ___ and ownership are separated, a corporation's life is unlimited.
management
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
Corporations in other countries are often called:
public limited companies, joint stock companies
Because shareholders get paid after all other obligations are satisfied, they are often called:
residual owners
when one owner of a security tells the security to another person, the transaction takes place in the ____ market
secondary
a ____ is someone other than an owner or creditor who potentially has a claim of the cash flows of a firm
stakeholder
_____ are frequently used to encourage key managers to maximize the value of the firms stock
stock options
the owners of a corporation are called ____
stockholders
A corporation receives cash from financial markets by selling _____ and ___
stocks, bonds
main goal of financial management
to maximize current value per share of existing stock
CFO (chief financial officer)
top officer for financial activity
a partnership must have at least ____ owners
two
a sole proprietor has ____ personal liability for all businesses debts and obligations
unlimited
