FIN 3403 Exam 1
A corporation receives cash from financial markets by selling ________ and _________.
Bonds Stocks
___________ budgeting is the process of making and managing expenditures on long-term assets.
Capital
Which term applies to the mixture of debt and equity maintained by a firm?
Capital structure
In large firms, financial activity is usually associated with which top officer?
Chief financial officer
Which does not directly affect cash flow?
Depreciation
the following are included in a firm's capital structure
Equity Long-term debt
A good financial decision will
Increase the value of the firm's existing stock
What is a primary concern for a bank lending funds to a business for the short term?
Liquidity
The owners of a corporation are called ________.
Shareholders
Who is entitled to the residual value of a firm's cash flows?
Shareholders
The NYSE differs from the NASDAQ primarily because the NYSE has:
Specialists An auction market A physical location
The controller is responsible for which of the following tasks?
Tax reporting Financial accounting
A shareholders' liability is limited to which of these?
The amount the shareholder invested in the corporation.
What is the purpose of the income statement?
To measure performance over a set period of time.
The rules used by a corporation to regulate its existence are known as ___________.
bylaws
investment activities include
changes in fixed assets
Sources of cash are
decreases: in AR, Inventory, net FA Increases in: AP, CL, common stock
Depreciation is the accountant's estimate of the cost of _________ used up in the production process
equipment
The trading of existing shares occurs in the ________ market.
secondary
When one owner or creditor sells to another, the transaction takes place in the _________ market.
secondary
The officer responsible for managing the firm's cash flows is the ________.
treasurer
Which corporate officer is responsible for accurate financial reporting of the firm's activities?
Controller
Which positions generally report to the CFO?
Controller Treasurer
The federal government taxes which of the following?
Corporate earnings and shareholders dividends.
How is ownership transferred in a corporation?
Ownership is transferred by gifting or selling stocks.
Which one of these is an important mechanism used by unhappy stockholders to replace current management?
Proxy fight
According to GAAP, when is income reported?
When it is earned or accrued
a feature of the NASDAQ is
a computer network of securities dealers.
Some of the cash flow generated by a firm goes back to the financial markets in the form of _____________?
dividends and debt payments
The life of a corporation __________.
is unlimited.
A corporation is a distinct ________ entity and as such can have a name and take advantage of the legal powers of natural persons
legal
The price at which willing buyers and sellers would trade is called ________ value.
market
The goal of a for-profit business is to _______ existing owners' equity.
maximize
A limited liability company is taxed like a _________ and its owners have _________ liability.
partnership; limited
Initial public offerings of stock occur in the _______ market.
primary
The relationship between stockholders and management can best be described as a _________ relationship.
Agency
The costs incurred due to a conflict of interest between stockholders and management are called __________.
Agency costs
uses of cash are
Increases in: cash and CA Decreases in: notes payable and long term debt
Why is positive net working capital important?
It means the firm should have sufficient cash to meet its current obligations.
Corporations in other countries are often called:
Joint stock companies Public limited companies
In a shareholder-manager relationship, who is the agent?
Managers
financing activities include
changes in notes payable, LT debt, equity accounts and dividends
Operating activities include
net income and changes in most current accounts