Financial Management: Ch.1

Which one of the following applies to a general partnership?

Any one of the partners can be held solely liable for all of the partnership's debt.

The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict?

Agency

Which one of the following situations is most apt to create an agency conflict?

Basing management bonuses on the length of employment

The Sarbanes-Oxley Act in 2002 was primarily prompted by which one of the following from the 1990s?

Corporate accounting and financial fraud

Which one of the following is an advantage of being a limited partner?

Losses limited to capital invested

What is the primary goal of financial management for a sole proprietorship?

Maximize the market value of the equity

Jordan and Carmen created a firm that is a separate legal entity and will share ownership of that firm on a 75/25 basis. Which type of entity did they create if they have no personal liability for the firm's debts?

Corporation

Nishaa has been promoted and is now in charge of all external financing. In other words, she is in charge of:

capital structure management.

Corporate shareholders:

have the ability to change the corporation's bylaws.

The issuer of a security must be involved in all _____ transactions involving that security.

primary market

Raleigh BBQ has $48,000 in current assets and $39,000 in current liabilities. Decisions related to these accounts are referred to as:

Working Capital Management

One advantage of the corporate form of organization is the:

ability to raise larger sums of equity capital than other organizational forms.

The shareholders of Weil's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:

an agency conflict.

The Sarbanes-Oxley Act:

requires the corporate officers to personally attest that the financial statements are a fair representation of the company's financial results.

One example of a primary market transaction would be the:

sale of 1,000 shares of newly issued stock by Alt Company to Miquel.

An agency issue is most apt to develop when:

the control of a firm is separated from the firm's ownership.

In a general partnership, each partner is personally liable for:

the total debts of the partnership, even if he or she was unaware of those debts.

Maria is the sole proprietor of an antique store that is located in a rented warehouse. The store has an outstanding loan with the local bank but no other debt obligations. There are no specific assets pledged as security for the loan. Due to a sudden and unexpected downturn in the economy, the store is unable to generate sufficient funds to pay the loan payments due to the bank. Which of the following options does the bank have to collect the money it is owed? I. Sell the inventory and apply the proceeds to the debt II. Sell the lighting fixtures from the building and apply the proceeds to the debt III. Withdraw funds from Maria's personal account at the bank to pay the store's debt IV. Sell any assets Maria personally owns and apply the proceeds to the store's debt

I, III, and IV only

Which one of the following parties can sell shares of ABC stock in the primary market?

ABC company

The daily financial operations of a firm are primarily controlled by managing the:

working capital

Uptown Markets is financed with 45 percent debt and 55 percent equity. This mixture of debt and equity is referred to as the firm's:

Capital Structure

Which one of the following best describes the primary intent of the Sarbanes-Oxley Act of 2002?

Increase the protections against corporate fraud

If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which one of the following financial areas?

Investments

Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners?

Limited partnership

The Sarbanes-Oxley Act of 2002 has:

essentially made officers of publicly traded firms personally responsible for the firm's financial statements.