Chapter 1 Learn Smart

Corporations in other countries are often called:

- Joint stock companies - Public limited companies - LLC

What are auction markets in the U.S.?

- New York Stock Exchange - Chicago Stock Exchange

What companies were involved in corporate scandals that led to Sarbanes-Oxley?

Enron, Tyco, WorldCom

What is not one of the three main questions to be addressed when starting a business?

How many employees will I need?

Which of the 4 main areas of finance could really be considered a specialization under any one of the other three? - Investments - Corporate - International - Financial Institutions

International

Which of the following is not one of the basic areas of finance? - personal finance - international finance - investments - corporate finance

Personal finance

Who reports to the CFO?

Treasurer and Controller

A bad financial decision is defined as a decision that ____ shareholder wealth

decreases

When the owner or creditor sells to another, the transaction takes place in the ______ market

secondary

The owners of a corporation are called ______

shareholders

Who is considered non-owner stakeholders in a company?

suppliers, employees, gov't

What's the primary objective of an auction market?

to bring buyers and sellers together

The officer responsible for managing the firm's cash flows is the _____

treasurer

Ensuring that the firm has sufficient funds to continue operations on a day-to-day basis comes under the heading of _____ management

working capital

What are 3 reasons that the corporation is the most important form of business?

- can enter contracts - can sue and be sued - is a separate legal entity with the ability to acquire and exchange property

The Sarbanes-Oxley Act requires corporate officers to:

- confirm the validity of the financial statements - be responsible for errors in the annual report

What characteristics does a general partnership have?

- difficult to transfer ownership - each owner has unlimited liability for all firm debts

The controller is responsible for which of the following tasks?

- financial accounting - tax reporting and payments

A treasurer's responsibilities typically include: (3 of them)

- handling cash flows - managing capital expenditure decisions - making financial plans

Business finance is broadly concerned with what?

- how to finance long-term investments - which long-term investment to make - how to manage day-to-day finances

A____ is someone other than an owner or creditor who potentially has a claim on the cash flows of the firm

- stakeholder

What will a good financial decision do?

- increase the value of the firm's existing stock - increase market value of shareholder's equity

Which of the following are defining features of the primary market?

- its 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

When a corporation is formed, it is granted which rights?

- provincial citizenship for jurisdictional purposes - ability to issue stock -legal powers to sue

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

the existing shares of stock

If you hire a real estate company to sell your house, you are most apt to encounter which one of the following?

Agency problem

In large firms. financial activity is usually associated with which top officer?

CFO

In a shareholder-manager relationship, who is the agent?

Managers

A corporation receives cash from financial markets by selling ____ and _____

bonds and stocks

How is ownership transferred in a corporation?

by gifting or selling shares of stock

_______budgeting is the process of planning and managing a firm's long-term assets

capital

The officer responsible for corporate tax reporting is the _______

controller

What is included in working capital?

inventory, cash, short-term assets

A sole proprietorship is a business that_____

is owned by one person

Capital budgeting is concerned w/ making and managing expenditures on ________

long-term assets

What is included in a firm's capital structure?

long-term debt and equity

A business without separate legal authority formed by 2 or more people is known as ____

partnership