Wk 1 - Practice: Ch. 1, Introduction to Financial Management [due Day 5]

The TCJA established a flat corporate tax rate of:

21 percent

One change brought by TCJA is that only the interest on the first $ _____ of mortgage debt is deductible.

750,000

Which one of these best defines a general partnership?

A brother and sister form a business. Both share jointly unlimited personal liability for the debts of the firm.

What is the definition of a general partnership?

A general partnership involves multiple business owners who are each personally responsible for all of the partnership's debts.

Which is the best definition of a hybrid organization?

A hybrid organization is a business form that has some attributes of a corporation and some of proprietorships/partnerships.

How is a public corporation defined?

A public corporation is a firm owned by a large number of stockholders from the general public.

What is the definition of a sole proprietorship?

A sole proprietorship is a business entity that is not legally separate from its owner.

Which of these provides the best description of the difference between accounting and finance?

Accounting records past activities of a firm while finance helps with decisions regarding the firm's future.

What is the definition of an agency problem?

An agency problem is defined as the difficulties that arise when a principal hires an agent and cannot fully monitor the agent's actions.

Which one of these best defines corporate governance?

Corporate governance is the ongoing process of monitoring managers and aligning their incentives with shareholder goals.

Which of these features could accurately be included in the definition of a corporation?

Double taxation Division of ownership and control Separate legal entity

Which of these best defines ethics?

Ethics is the study of values, morals, and morality.

Which of these factors are credited for providing financial institutions with high profit margins?

Expertise and unique assets

True or false: Finance is more concerned about the past while accounting is more concerned about the future. True false question.

False

Which one of the following statements correctly identifies a group that supplies money to the financial markets?

Individuals saving for retirement provide money to the financial markets.

Which of the following are finance functions that fall under the supervision of the treasurer?

Interest rate hedging Capital spending Managing cash

Which of these correctly defines a role of investments?

Investments address the timing of cash flows most desired by investors.

Which of these are personal financial decisions?

Kendyll moved money from her checking account to her savings account to earn interest. Samantha financed her mortgage for 20 rather than 30 years to save on interest. Marie decided that leasing a car was cheaper for her than buying a car.

Which of the following are the well-developed viewpoints that have arisen regarding the goal of a firm?

Maximize shareholder wealth Emphasize social responsibility

The net impact of the lower individual income tax rates brought by TCJA is expected to be

More free cash for consumers to spend. Downward pressure on housing sales in the high-value market. More potential savings on the part of investors

Which group has individual investors as participants and is a lender of funds to the financial markets?

People with money and no ideas lend funds to the financial markets.

How is risk defined?

Risk is a potential future negative impact to value and/or cash flows

A discussion of risk in which of the following terms best serves as an overall definition of risk?

Risk is best defined in terms of the probability of a loss and the expected magnitude of that loss.

Corporate governance is the set of laws, policies, incentives, and monitors designed to handle issues arising from which one of these?

Separation of ownership and control

An agency problem is defined as a situation where a firm's managers fail to put the interests of which one of these parties first when making decisions?

Shareholder

Putting the interests of which party first should be the primary goal of a corporation?

Shareholders

What are the two key characteristics of a hybrid organization?

Single taxation and limited liability

The profitability of financial market intermediaries depends upon which of these?

Successful execution of unique professional services

Which one of these is an investments activity?

Sue has $200 a month deposited into a stock mutual fund

Which of these is an example of a personal financial decision?

Sue opted to increase her company retirement plan contribution to 6 percent of her salary.

Which one of the following best illustrates the definition of a sole proprietorship?

Ted was forced to sell his personal home in order to pay the debts of a business he owned in entirety.

Travis owns a bakery and Mia is a baker. How could an agency relationship exist between these two individuals?

Travis could hire Mia to work for him. Travis would be the principal and Mia would be the agent.

True or false: After TCJA, U.S. companies are more likely to "bring home" foreign profits due to the new flat tax rate.

True

What result should you expect from firms that make wise financial decisions?

You should expect the wealth of individuals to increase in the future.

A person who works for a firm, but is not necessarily an owner, is called

agent

True or false: Ethics is the study of values, morals, and business judgments.

false