Finance 1.1

The TCJA established a flat corporate tax rate of:

21 percent

What is the definition of a fiduciary relationship?

A fiduciary relationship is a legal duty between two parties where one party must act in the interest of the other party.

What is the primary function of a financial institution?

A financial institution facilitates cash flows between investors and companies.

What is the definition of a general partnership?

A general partnership involves multiple business owners who are each personally responsible for all of the partnership's debts.

How is a public corporation defined?

A public corporation is a firm owned by a large number of stockholders from the general public.

What is the definition of a sole proprietorship?

A sole proprietorship is a business entity that is not legally separate from its owner.

Which of these provides the best description of the difference between accounting and finance?

Accounting records past activities of a firm while finance helps with decisions regarding the firm's future.

Which one of these relationships best fits the definition of a fiduciary relationship?

Al's retirement funds are managed by the trust department at the local bank.

What is the definition of an agency problem?

An agency problem is defined as the difficulties that arise when a principal hires an agent and cannot fully monitor the agent's actions.

Which of these best illustrates how funds flow in a financial system?

An individual invests in a bank savings account and the bank lends money to companies.

Which of these parties monitor corporate activities from outside as part of corporate governance? Select all that apply.

Auditors Credit analysts Investment analysts

Which of these features could accurately be included in the definition of a corporation? Select all that apply.

Double taxation Separate legal entity Division of ownership and control

Which one of the following is an advantage of a sole proprietorship?

Ease of formation

Which of these factors are credited for providing financial institutions with high profit margins?

Expertise and unique assets

Which of these is an example of how finance is used throughout a firm?

Finance can be used for cost/benefit analysis.

What role does a financial institution play in a financial system?

Financial institutions must distribute capital in an efficient manner.

Financial management relates to which one of the following?

Financial management relates to a firm's decisions regarding the acquisition and use of funds.

The subarea of finance known as financial management addresses which of these decisions? Select all that apply.

How can a firm attract more capital financing? Should a firm issue debt (bonds) or equity (stocks)? How can corporate taxes be minimized?

Which one of these features would be considered the most advantageous benefit of a general partnership?

Increased capital financing as compared to a sole proprietorship

Which one of the following statements correctly identifies a group that supplies money to the financial markets?

Individuals saving for retirement provide money to the financial markets.

Financial institutions contribute to the dynamics of which one of the following rates?

Interest rates

Which of these correctly defines a role of investments?

Investments address the timing of cash flows most desired by investors.

Which firm is a borrower of funds in the financial markets?

Ken's has a new product that it is ready to market to the public as soon as financing can be arranged.

Which one of these features is an advantage of a sole proprietorship?

Less regulation than other business forms

Which one of these is an example of a borrower in the financial markets?

Lester's wants to expand its operations but has insufficient cash to do so.

Which of the following are finance functions that fall under the supervision of the treasurer?

Managing cash Capital spending Interest rate hedging

Which one of these functions is a treasury function?

Managing the firm's pension plan

Which of the following are the well-developed viewpoints that have arisen regarding the goal of a firm?

Maximize shareholder wealth Emphasize social responsibility

The net impact of the lower individual income tax rates brought by TCJA is expected to be (choose all that apply):

More free cash for consumers to spend Downward pressure on housing sales in the high-value market More potential savings on the part of investors

The use of excess cash to do which of these is most apt to increase shareholder wealth?

Paying dividends to shareholders

Which group has individual investors as participants and is a lender of funds to the financial markets?

People with money and no ideas lend funds to the financial markets.

Which of these is a monitor of corporate governance? Select all that apply.

Securities and Exchange Commission Board of directors

Corporate governance is the set of laws, policies, incentives, and monitors designed to handle issues arising from which one of these?

Separation of ownership and control

Which one of these is an advantage of a general partnership?

Single taxation

What are the two key characteristics of a hybrid organization?

Single taxation and limited liability

Which one of these is an investments activity?

Sue has $200 a month deposited into a stock mutual fund.

How is the time value of money (TVM) theory best defined?

TVM is the theory and application of valuing cash flows at various points in time.

The current value of a financial asset is determined by which of the following cash flows?

The value of a financial asset is determined by the asset's expected future cash flows.

True or false: Managerial finance helps managers make decisions related to cash management, capital investments, and risk reduction.

True

What result should you expect from firms that make wise financial decisions?

You should expect the wealth of individuals to increase in the future.

A person who works for a firm, but is not necessarily an owner, is called

an agent