FNAN 300 Ch.1
Corporations in other countries are often called
-joint-stock companies -limited liability companies -public limited companies
When a corporation is formed, it is granted which of the following rights?
-the ability to issue stock -provincial citizenship for jurisdictional purposes -legal powers to sue
The relationship between stockholders and management can best be describes as a(n) ______ relationship
Agency
If you hire a real estate company to sell your house, you are most apt to encounter which of the following?
Agency problem
Which of the following are true of a sole proprietorship?
- a proprietorship has a limited life -It is one of the simplest types of businesses to form
Which corporate officer is responsible for accurate financial accounting of the firm's activities?
Controller
What is the primary objective of an auction market?
To bring buyers and sellers together
Which of the following areas of finance is concerned with asset allocation?
investments
A corporation receives cash from financial markets by selling _____ and _____
stocks and bonds
The primary responsibility of financial managers is to increase the value of:
the existing shares of stock
What is the main goal of financial management?
to maximize current share value
The Sarbanes Oxley Act requires corporate officers to:
- be responsible for errors in the annual report -confirm the validity of the financial statements
Which of the following positions generally report to the chief financial officer (CFO)?
-Controller -Treasurer
A federal government taxes which of the following?
-Corporate earnings -Shareholder dividends
A general partnership has which of the following characteristics?
-Each owner has unlimited liability for all firm debts -It is difficult to transfer ownership
The 4 basic areas of FNAN are:
-Financial institutions -Corporate finance -Internation finance -Investments
Which of the following are defining features of the primary market?
-It is the market where initial public offerings are made -Proceeds from the sale of securities goes to the issuing firm
In an over-the-counter market, which of the following is true?
-Participants buy and sell from their own inventory of securities -participants are called dealers
Where does cash generated by a corporation typically go?
-Reinvested in the firm -Paid to shareholders and creditors -To pay corporate taxes
Which of the following are auction markets in the U.S?
-The NY Stock Exchange -The Chicago Stock Exchange
Which of the following are true of a sole proprietorship
-a proprietorship has a limited life -it is one of the simplest types of businesses to form
What three questions are the financial manager concerned with?
-capital structure -capital budgeting -working capital management
Which of the following are reasons that the corporation is the most important form of business?
-corporations can enter contracts -corporations can sue and be sued -corporations are separate legal entities
Which of the following are included in a firms capital structure?
-equity -long-term debt
The controller is responsible for which of the following tasks?
-financial accounting -tax reporting an payments
Working capital includes which of the following?
-inventory -short-term assets -cash
_____ budgeting is the process of planning and managing a firm's long-term assets
Capital
Which term applies to the mixture of debt and equity maintained by a firm?
Capital structure
Maximization of shareholder/stakeholder wealth is known as:
Corporate finance
True/False Profit maximization is the best goal for the management of a corporation
False
True/False The Sarbanes-Oxley Act provides incentives for companies to go public in US markets
False
What corporate officer is responsible for managing the firm's cash?
Treasurer
The threat of _____ motivates managers to make good decisions
a hostile takeover
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
In a shareholder-manager relationship, who is the agent?
Manager
_____ can be used to encourage managers to maximize the value of stock
Stock options
"increasing shareholder wealth" means increasing the:
current common stock value
A bad financial decision is defined as a decision that ______ shareholder wealth
decreases
A corporation is a distinct ____ entity and such can have a name and take advantage of the legal powers of natural persons
legal
Which of the following is a disadvantage of sole proprietorship and partnerships?
limited ability to grow
Capital budgeting is concerned with making and managing expenditures on _____.
long-term assets
How is ownership transferred in a corporation?
ownership is transferred by gifting or selling shares of stock
A business without separate legal authority formed by two or more people is known as a:
partnership
Which one of these is an important mechanism used by unhappy stockholders to replace current management?
proxy fight
When one owner or creditor sells to another, the transaction takes place in the _____ market
secondary
A _____ gets paid after the employees, suppliers, and creditors
shareholder
A sole proprietor has _____ liability for all business debts and obligations
unlimited
