Chapter 1 Quiz

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

How much inventory should be on hand for immediate sale?

Which one of the following statements is correct?

Income from both sole proprietorships and partnerships that is taxable is treated as individual income.

A general partner:

is personally responsible for all partnership debts.

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

Securities and Exchange Commission.

Which one of the following parties has ultimate control of a corporation?

Shareholders

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

Should the firm pay cash for a purchase or use the credit offered by the supplier?

A _____ has all the respective rights and privileges of a legal person.

corporation

A business created as a distinct legal entity and treated as a legal "person" is called a(n):

corporation.

Which one of the following terms is defined as the management of a firm's long-term investments?

Capital budgeting

Which of the following parties are considered stakeholders of a firm?

Employees and the government

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 is least likely to be addressed by financial managers?

How should a product be marketed?

Which one of the following represents a cash outflow from a corporation?

Payment of dividends

Which one of the following grants an individual the right to vote on behalf of a shareholder?

Proxy

Which one of the following is a primary market transaction?

Sale of a new share of stock to an individual investor

Shareholder A sold shares of Maplewood Cabinets stock to Shareholder B. The stock is listed on the NYSE. This trade occurred in which one of the following?

Secondary, auction market

Which one of the following statements concerning a sole proprietorship is correct?

The owner of a sole proprietorship is personally responsible for all of the company's debts.

The decision to issue additional shares of stock is an example of:

a capital structure decision.

Financial managers should strive to maximize the current value per share of the existing stock to:

best represent the interests of the current shareholders.

Capital structure decisions include determining:

how much debt should be assumed to fund a project.

The growth of both sole proprietorships and partnerships is frequently limited by the firm's:

inability to raise cash.

A limited liability company:

is taxed similar to a partnership.

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

management greed and abuses.

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

market value per share of outstanding stock

A partnership with four general partners:

must distribute 25 percent of the profits to each partner.

A business owned by a solitary individual who has unlimited liability for the firm's debt is called a:

sole proprietorship.

Working capital management decisions include determining:

the minimum level of cash to be kept in a checking account.

The primary advantage of being a limited partner is:

the partner's maximum loss is limited to their capital investment.

The treasurer of a corporation generally reports directly to the:

vice president of finance.

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

when each cash flow is expected to occur.