Chapter 1 HW

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

An increase in the market value per share

Which one of the following statements regarding corporations is correct?

Corporations can have an unlimited life.

Which one of the following is a disadvantage of the corporate form of business?

Distributed profits may experience double taxation.

Which one of the following is an agency cost?

Hiring outside accountants to audit the company's financial statements

Which one of the following questions involves a capital structure decision?

How much debt should the firm incur to fund a project?

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

How much inventory should the company keep on hand?

Which one of the following is least apt to help convince managers to work in the best interest of the stockholders? Assume there are no golden parachutes.

Increasing managers' base salaries

The controller, rather than the treasurer, is typically responsible for which one of the following functions?

Processing cost reports

Which of the following actions would be most likely to decrease agency costs for the firm?

Reward high performing employees with shares of stock

Which one of the following is a primary market transaction?

Sale of a new share of stock from a corporation to an individual investor

Public offerings of debt and equity must be registered with the:

Securities and Exchange Commission.

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 the following statements is correct?

Taxable income earned by a partnership is treated as individual income.

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

What is the maximum level of cash to be kept in the firm's bank account?

Corporate dividends represent:

aftertax income from the corporation which becomes taxable income for the recipient.

Deciding which long-term investment a firm should make is a ______ decision.

capital budgeting

A firm's mixture of debt and equity financing is the result of its ______ decisions.

capital structure

Determining the number of shares of stock to issue is an example of a ______ decision.

capital structure

Which of the following parties are not considered stakeholders of a firm?

competitors

A business that is a legal entity separate from the owners, yet treated as a legal person, is called a(n):

corporation

Which form of business would be the best choice if it were necessary to raise large amounts of capital?

corporation

Agency problems are most likely to be associated with:

corporations

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 partner in a firm knows that the maximum financial loss he or she will experience is the amount he or she invested in the firm. The partner is called a ______ partner.

limited

The Sarbanes-Oxley Act of 2002 is a governmental response to:

management greed and abuses

The Sarbanes-Oxley Act of 2002 holds a public company's ______ responsible for the accuracy of the company's financial statements.

managers

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

market value per share of outstanding stock

Which one of the following best states the primary goal of financial management?

maximize current value per share

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

occurred in the secondary market

Usually, the treasurer of a corporation reports directly to the:

vice president of finance.