FIN 3010 CH 1

Which one of the following terms is defined as the mixture of a firm's debt and equity financing?

Capital structure

Which one of the following statements is correct?

Corporations can have an unlimited life.

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 a working capital management decision?

How much inventory should be on hand for immediate sale?

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

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

Payment of dividends

Which one of the following is a cash flow from a corporation into the financial markets?

Payment of loan interest

Which one of the following is a means by which shareholders can replace company management?

Proxy fight

Which one of the following is a primary market transaction?

Sale of a new share of stock to an individual investor

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?

Which one of the following statements is correct concerning the NYSE?

The listing requirements for the NYSE are more stringent than those of NASDAQ.

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.

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

corporation

Agency problems are most associated with:

corporations.

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

inability to raise cash

Which one of the following actions by a financial manager is most apt to create an agency problem?

increasing current profits when doing so lowers the value of the company's equity

A general partner:

is personally responsible for all partnership debts.

A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called a:

limited partner.

A partnership with four general partners:

must distribute 25 percent of the profits to each partner.

Corporate dividends are:

taxable income of the recipient even though that income was previously taxed.

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.

Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction:

was facilitated in the secondary market.

A firm's short-term assets and its short-term liabilities are referred to as the firm's:

working capital