Chapter 1

corporations.

Agency problems are most likely to be associated with: Multiple Choice sole proprietorships. general partnerships. limited partnerships. corporations. limited liability companies.

articles of incorporation

An organization must prepare ______ and bylaws when forming a corporation. Multiple choice question. a legal will an indenture agreement a partnership agreement articles of incorporation

Maximize profits Minimize costs Survival

Select all that apply Which of the following, according to the textbook, are possible financial goals for a company? Multiple select question. Survival Incur bankruptcy Maximize profits Minimize costs

Capital budgeting

the process of planning and managing a firm's long-term investments

corporation

A ______ has all the respective rights and privileges of a legal person. Multiple Choice sole proprietorship general partnership limited partnership corporation limited liability company

stakeholder

A ______ is someone other than an owner or a creditor who potentially has a claim of the cash flows of a firm. Multiple choice question. stakeholder bondholder shareholder mortgage holder

Benefit Corporation (B Corp)

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

transparency

A benefit corporation is for profit, and has the legal attributes of accountability, _____, and purpose. Multiple choice question. taxation transparency cooperation

corporation.

A business that is a legal entity separate from the owners, yet treated as a legal person, is called a(n): Multiple Choice corporation. sole proprietorship. general partnership. limited partnership. unlimited liability company.

partnershipzs

A business without separate legal authority formed by two or more people is known as a _____. Multiple choice question. sole proprietorship corporation partnership conglomerate

legal

A corporation is a distinct ______ entity and as such can have a name and take advantage of the legal powers of natural persons. Multiple choice question. retributive illegal patriotic legal

sole proprietorship.

A firm owned by a single person who has unlimited liability for the firm's debt is called a: Multiple Choice corporation. sole proprietorship. general partnership. limited partnership. limited liability company.

general partnership.

A firm owned by two or more people who each have unlimited liability for all of the firm's debts is called a: Multiple Choice corporation. sole proprietorship. general partnership. limited partnership. limited liability company.

capital structure

A firm's mixture of debt and equity financing is the result of its ______ decisions. Multiple Choice working capital management cash management cost analysis capital budgeting capital structure

must have at least one general partner.

A limited partnership: Multiple Choicehas a limited tax liability. can opt to be taxed as a corporation. is the newest form of business organization. must have at least one general partner. consists solely of limited partners.

is owned by one person

A sole proprietorship is a business that _______. Multiple choice question. is organized with bylaws is owned by one person is similar to a limited partnership provides limited personal liability to its owner

determine how a corporation regulates itself.

Corporate bylaws: Multiple Choice must be amended should a firm decide to increase the number of shares authorized. cannot be amended once adopted. define the name by which the firm will operate. describe the intended life and purpose of the organization. determine how a corporation regulates itself.

Ownership is transferred by gifting or selling shares of stock.

How is ownership transferred in a corporation? Multiple choice question. Ownership is transferred by gifting or selling shares of stock. Ownership in a corporation cannot be transferred. Ownership is transferred only with prior approval from the board of directors. Ownership can be transferred only if the firm is sold.

Processing cost reports

The controller, rather than the treasurer, is typically responsible for which one of the following functions? Multiple Choice Depositing cash receipts Processing cost reports Analyzing equipment purchases Approving credit for a customer Paying a vendor

the stock

The financial manager acts in the shareholders' best interests by making decisions that increase the value of _____. Multiple choice question. managers' salaries pensions the stock

maximize

The goal of a for-profit business is to Blank______ existing owners' equity. Multiple choice question. dilute maximize maintain minimize

owners' (stockholders') equity or shareholders

The goal of the for-profit business is to maximize ________ equity.

is unlimited

The life of a corporation ______. Multiple choice question. is unlimited ends when a founding shareholder wants to sell his shares is limited to 65 years ends when all of the original shareholders are deceased.

stockholders

The owners of a corporation are called ______. Multiple choice question. government agents partners bondholders stockholders

agency

The relationship between stockholders and management can best be described as a(n) ______ relationship. Multiple choice question. agency mentoring contradictory irrelevant

Blank 1: corporation

The__________________ is the most important form, in terms of size, of business organization in the United States.

False Reason: Ownership is readily transferred.

True or false: Ownership in the corporate form is difficult to transfer. True false question.TrueFalse

shareholders

Ultimately, the ______ control(s) the corporation. Multiple Choice chair of the board members of the board of directors chief executive officer chief operating officer shareholders

vice president of finance.

Usually, the treasurer of a corporation reports directly to the: Multiple Choice board of directors. chair of the board. chief executive officer. president. vice president of finance.

partnership

is similar to a proprietorship except that there are two or more owners. They share gains or losses have unlimited for all partnership debts.

requires the owner to be personally responsible for all of the company's debts.

A sole proprietorship: Multiple Choiceis designed to protect the personal assets of the owner.may earn profits that are subject to double taxation.requires the owner to be personally responsible for all of the company's debts.is the least represented type of firm in the U.S. today.provides the same benefits to owners that a limited liability company does.

bylaws

Forming a corporation involves preparing articles of incorporation and a set of ____________ .

Tyco WorldCom Enron

Select all that apply Which of the following companies were involved in corporate scandals that led to Sarbanes-Oxley? Multiple select question. Tyco WorldCom Enron Disney

organized auction markets

Most equity shares of large firms in the U.S. trade on: Multiple choice question. commodities markets options exchanges organized auction markets bond markets

the New York Stock Exchange Reason: The NASDAQ is a dealer market. Exchange traded funds are not organized auction market. Mutual funds are not organized auction market. They are entities that purchase portfolios of securities and sell shares that are issued separately.

Organized auction markets include: Multiple choice question. exchange traded funds mutual funds the NASDAQ the New York Stock Exchange

Securities and Exchange Commission

Public offerings of debt and equity must be registered with the: Multiple Choice New York Board of Governors. Federal Reserve. NYSE Registration Office. Securities and Exchange Commission. Market Dealers Exchange.

SOX

The aim of the act known as Blank______ is to protect investors from corporate abuse. Multiple choice question. TiMid STEM SOX EXON

capital budgeting

Deciding which long-term investment a firm should make is a ______ decision. Multiple Choice working capital management capital constraints cost of capital capital budgeting capital structure

The Sarbanes-Oxley Act of 2002 is a governmental response to: Multiple Choice decreasing corporate profits. the terrorist attacks on 9/11/2001. the harm caused to stock markets by SARS, MERS, COVID-19, and other pandemics. deregulation of the stock exchanges. management greed and abuses.

Financial managers should primarily focus on the interests of: Multiple Choicethemselves.the vice president of finance. their immediate supervisor. shareholders. the board of directors.

Agency problem

If you hire a real estate company to sell your house, you are most apt to encounter which one of the following? Multiple choice question. Securities Exchange Act of 1934 violation Capital structure problem Securities Act of 1933 violation Agency problem

the board of directors

In a corporation, the stockholders elect _____, who then select the managers. Multiple choice question. the CFO the board of directors finance directors the CEO

the controller reports to the chief financial officer.

In a typical corporate organizational structure: Multiple Choice the vice president of finance reports to the chair of the board. the chief executive officer reports to the president. the controller reports to the chief financial officer. the treasurer reports to the president. the chief operations officer reports to the vice president of production.

Blank 1: equity or equities

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

corporate

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.

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

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

State citizenship for jurisdictional purposes Legal powers to sue The ability to issue stock

Select all that apply When a corporation is formed, it is granted which of the following rights? Multiple select question. State citizenship for jurisdictional purposes Legal powers to sue Corporate life of up to 100 years The ability to issue stock

Blank 1: corporation or corporations

Joint stock company is another name for what is referred to as a _________ in the United States.

Government Employees Suppliers Reason: A stakeholder is someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm.

Select all that apply Which of the following are considered stakeholders in a company? Multiple select question. Competitor Government Employees Suppliers

public limited companies. joint stock companies.

Select all that apply Corporations in other countries are often called: Multiple select question. re-calibrated partnerships. public limited companies. joint stock companies. autonomous entities.

can be achieved by cost-cutting. would probably be the most commonly cited goal for a business. Reason: The financial goal of profit maximization can cause managers to make myopic decisions.

Select all that apply The possible goal of profit maximization: Multiple select question. avoids maximizing the sales. should always be a short-term goal. would probably be the most commonly cited goal for a business. can be achieved by cost-cutting.

Managerial compensation tied to performance Better prospects of promotion

Select all that apply Which of the following can be used to encourage managers to act in the best interests of shareholders? Multiple select question. Managerial compensation tied to performance Better prospects of promotion Executive perks A larger organization and more employees

Corporations can sue and be sued. A corporation is a separate legal entity with the ability to acquire and exchange property. Corporations can enter into contracts.

Select all that apply Which of the following show why a corporation is the most important form of business? Multiple select question. Corporations can vote in general elections. Corporations can sue and be sued. A corporation is a separate legal entity with the ability to acquire and exchange property. Corporations can enter into contracts.

a proxy fight.

Shareholders can replace company management by implementing: Multiple Choice stock options. promotions. the Sarbanes-Oxley Act. an agency play. a proxy fight.

management

Since ________ and ownership are separated, a corporation's life is unlimited. Multiple choice question. taxation management debt profitability

dividends and debt payments

Some of the cash flow generated by a firm goes back to the financial markets in the form of ______. Multiple choice question. products and services taxes and other payments to the government reinvested cash flows dividends and debt payments

management greed and abuses.

The Sarbanes-Oxley Act of 2002 is a governmental response to: Multiple Choice decreasing corporate profits. the terrorist attacks on 9/11/2001. the harm caused to stock markets by SARS, MERS, COVID-19, and other pandemics. deregulation of the stock exchanges. management greed and abuses.

describe the purpose of the firm and set forth the number of shares of stock that can be issued.

The articles of incorporation: Multiple Choice describe the purpose of the firm and set forth the number of shares of stock that can be issued. are amended periodically especially prior to corporate elections. explain how corporate directors are to be elected and the length of their terms. set forth the procedures by which a firm regulates itself. include only the corporation's name and intended life.

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

What are the two factors that impact whether managers will act in the best interest of stockholders? Multiple choice question. How closely management is micromanaged and the way managers are compensated How managers are compensated and how much vacation is provided to employees How closely management goals align with stockholder goals and the way managers are compensated Whether SOX is used and to what extent poor employee conduct is reprimanded

To maximize current value per share of existing stock Reason: The goal of financial management is to maximize current value per share of existing stock, because shareholders provide the capital for the business to be productive.

What is the main goal of financial management? Multiple choice question. To maximize profits To minimize expenses To maximize share of the stock holdings of managers of the company To maximize current value per share of existing stock

Both general partners and sole proprietors

______ are personally responsible for 100 percent of the firm's debts. Multiple ChoiceGeneral Partners but not sole proprietersSole prorprieters but not general partnersAll business owners Both limited and general partners Both general partners and sole proprietors

Capital

______ budgeting is the process of making and managing expenditures on long-term assets. Multiple choice question. Optional Conventional Performance-based Capital