FNAN 300 CH.1 Quiz

What is the primary goal of financial management for a sole proprietorship?

Maximize the market value of equity

Which one of the following statements correctly applies to a sole proprietorship?

Obtaining additional equity is dependent on the owner's personal finances

Which one of the following statements about a limited partnership is correct?

There must be at least one general partner.

The Sarbanes-Oxley Act of 2002 has:

essentially made officers of publicly traded firms personally responsible for the firm's financial statements.

When conducting a financial analysis of a firm, financial analysts:

frequently use accounting information.

Corporate shareholders:

have the ability to change the corporation's bylaws.

A corporation:

is a legal entity separate from its owners

The Sarbanes-Oxley Act:

requires the corporate officers to personally attest that the financial statements are a fair representation of the company's financial results.

You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. The sale will occur in the:

secondary market.

Levi had an unexpected surprise when he returned home this morning. He found that a chemical spill from a local manufacturer had spilled over onto his property. The potential claim that he has against this manufacturer is that of a(n):

stakeholder

An employee has a claim on cash flows of Martin's Machines. This claim is defined as a claim by one of the firm's:

stakeholders

The daily financial operations of a firm are primarily controlled by managing the:

Working capital.

One advantage of the corporate form of organization is the:

ability to raise larger sums of equity capital than other organizational forms

The shareholders of Weil's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:

agency conflict

Probably the least effective means of aligning management goals with shareholder interests is:

automatically increasing management salaries on an annual basis

The goal of financial management is to increase the:

current market value per share

An agency issue is most apt to develop when:

the control of a firm is separated from the firm's ownership.

Which one of the following parties can sell shares of ABC stock in the primary market?

ABC Company

Matt and Alicia created a firm that is a separate legal entity and will share ownership of that firm on a 72/25 basis. Which type of entity did they create if they have no personal liability for the firm's debt?

Corporation

Which one of the following situations is most apt to create an agency conflict?

Basing management bonuses on the length of employment.

Which one of the following functions is generally a responsibility assigned to the corporate treasurer?

Capital expenditures.

Uptown Market is financed with 45% debt and 55% equity. this mixture of debt and equity is referred to as the firms:

Capital structure

Which one of the following occupations best fits into the corporate area of finance?

Chief Financial Officer

Working capital management includes which one of the following?

Determining which customers will be granted credit

Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?

Increase protection against corporate fraud

Jamie is employed as a currency trader in the Japanese yen market. Her job falls into which one of the following areas of finance?

International finance

Which one of the following is an advantage of being a limited partner?

Losses limited to capital invested.

Capital budgeting includes the evaluation of which of the following?

Size, timing, and risk of future cash flows.

Which one of the following is most apt to align management's priorities with shareholders' interests?

Compensating managers with shares of stock that must be held for three years before the shares can be sold

Will and Bill both enjoy sunshine, water, and surfboards. Thus, the two friends decided to create a business together renting surfboards, paddle boats, and inflatable devices in California. Will and Bill will equally share in the decision making and in the business profits or losses. Which type of business did they create if they both have full personal liability for the firm's debts?

General partnership

Which one of the following is a working capital decision?

How much cash should the firm keep in reserve?

The primary goal of financial management is to maximize:

the current value on existing stock.