Finance Homework : Chapter 1 Review

Determining the number of shares of stock to issue is an example of a ________ decision.

Capital structure

Which of the following questions involves a capital structure decision?

How much debt should the firm incur to fund a project?

Working Capital Management

A firm's short term assets and liabilities

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

Best represent the interests of the owners of the firm

Which form of business would be the best choice if it were necessary to raise large amounts of capital?

Corporation

Agency problems are most likely to be associated with:

Corporations

Which one of the following is a disadvantage of the corporate form of business?

Distributed profits may experience double taxation

A limited liability company:

Is taxed similarly to a partnership

Eduardo sold 500 shares of Northcutt Corporation stock on the New York Stock Exchange. This transaction:

Occurred in the secondary market

Which one of the following would cause a cash outflow from a corporation?

Paying dividends

Capital Budgeting

Process of planning and managing a firm's long-term investments - Evaluating size, timing and risk of future cash flows is the essence of capital budgeting

The controller rather than the treasurer is typically responsible for which one of the following functions?

Processing cost reports

Which of the following questions involves a capital budgeting decision?

Should the firm purchase a new machine for the production line

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

Should the firm require immediate payment from customers or offer credit terms?

Capital Structure

The mixture of debt and equity maintained by a firm - How much should the firm borrow (ie what mixture of debt and equity is best?)

A firm owned by two or more people who each have unlimited liability for all of the firm's debts is called a:

general partnership

A partner in a firm knows that the maximum financial loss he or she will experience is the amount he or she invested in the firm. The partner is called a ______ partner.

limited

______ are personally responsible for 100 percent of the firm's debts.

Both general partners and sole proprietors

Financial managers should primarily focus on the interests of:

Shareholders

Which one of the following statements is correct?

Taxable income earned by a partnership is treated as individual income

Which one of the following questions is least likely to be addressed by financial managers?

In which region of the country should a new product be launched?

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

Symone sold shares of Naraghi Corporation stock to Aleena. The stock is listed on the NYSE. This trade occurred in which one of the following?

Secondary, auction market,