FRL Module 1

Inventory is a:

- part of working capital - current asset

Which one of the following statements is generally correct?

Auction markets match buy and sell orders.

The federal government taxes which of the following?

Corporate earnings and shareholder dividends

______ buy and sell for themselves, at their own risk.

Dealers

It is sometimes argued that, left to themselves, managers tend to minimize the amount of resources over which they have control.

False

True or false: The Sarbanes-Oxley Act provides incentives for companies to go public in US markets.

False

Which of the following are considered stakeholders in a company?

Government Employees Suppliers

What are the two factors that impact whether managers will act in the best interest of stockholders?

How closely management goals align with stockholder goals and the way managers are compensated

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

Which of the following, according to the textbook, are possible financial goals for a company?

Minimize costs Survival Maximize profits

The two types of secondary markets include _________- markets and dealer markets.

auction

In financial markets, debt and __________ securities are bought and sold.

equity

In a limited partnership, a limited partner's liability for business debts is ______.

limited to his/her cash contribution to the partnership

In a ____________ partnership, one or more general partners will run the business and have unlimited liability, but there will be one or more _________ partners who will not actively participate in the business.

limited, limited

When a corporation raises funds in the financial markets, the transaction occurs on the _____.

primary market

When one owner of a security sells the security to another person, the transaction takes place in the _________ market

secondary

Organized auction markets include:

the New York Stock Exchange

Which one of the following parties would be the last party to receive payment if a firm were to close? Assume all parties have a legitimate claim on the firm's assets.

Shareholders

A firm owned by two or more people who each have unlimited liability for all of the firm's debts is called a:

general partnership.

A sole proprietorship:

has a limited life

A benefit corporation is for profit, and has the legal attributes of accountability, _____, and purpose.

transparency

A sole proprietor has ______ personal liability for all business debts and obligations.

unlimited

Shareholders can replace company management by implementing:

a proxy fight.

Which term applies to the mixture of debt and equity maintained by a firm?

capital structure

It is argued that, left to themselves, managers would tend to maximize the amount of resources over which they have control or, more generally, _________ power or wealth.

corporate

In a large corporation, the _____ would be responsible for answering the three main questions that must be asked when starting a firm.

financial manager

In a ______________- partnership, all the partners share in gains or losses, and all have unlimited liability for all partnership debts, not just some particular share.

general

The five main areas of finance are corporate finance, _____, financial institutions, international finance, and fintech. Multiple choice question.

investments

Because ownership in a corporate is spread over a huge number of shareholders, it can be argued that ______ effectively controls the firm.

management

Decisions made by financial managers should primarily focus on increasing the:

market value per share of outstanding stock.

The primary responsibility of financial managers is to increase the value of:

the existing shares of stock.

A general partnership has which of the following characteristics?

It is difficult to transfer ownership. Each owner has unlimited liability for all firm debts.

Which of the following are true of a sole proprietorship?

It is the simplest type of business to form. A proprietorship has a limited life.

How is ownership transferred in a corporation?

Ownership is transferred by gifting or selling shares of stock.

Which one of the following is a working capital management decision?

Should the firm require immediate payment from customers or offer credit terms?

Which one of these motivates managers to make good decisions?

Threat of a hostile takeover

The term ________ costs refers to the costs of the conflict of interest between stockholders and management.

agency

A ________ corporation is for profit, and has the legal attributes of accountability, transparency, and purpose.

benefit

Since ownership in a corporation can be dispersed over a huge number of stockholders, it can be argued that ______ effectively controls the firm. Multiple choice question.

management

A limited partnership:

must have at least one general partner.

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

occurred in the secondary market.

When evaluating the timing of a project's projected cash flows, a financial manager is analyzing:

when each cash flow is expected to occur.

Which of the following are among the most important questions to be asked when a business is started?

How will everyday financial activities be handled? Where will long-term financing be obtained to pay for investments? What long-term investments should be made?

The possible goal of profit maximization:

can be achieved by cost-cutting. \would probably be the most commonly cited goal for a business.

A firm that opts to "go dark" in response to the Sarbanes-Oxley Act:

can provide less information to its shareholders than it did prior to "going dark".

Due to the extreme costs of SOX, hundreds of public firms have chosen to "go. ______ ," meaning their shares are no longer traded on the major stock exchanges.

dark

A bad financial decision is defined as a decision that ______ owners' equity.

decreases

Corporate bylaws:

determine how a corporation regulates itself.

Some of the cash flow generated by a firm goes back to the financial markets in the form of ______.

dividends and debt payments