FINC 300 CH 1

Select all that apply When a corporation is formed, it is granted which of the following rights? (Numbered are correct)

(1)Legal powers to sue

Which one of the following statements is generally correct?

Auction markets match buy and sell orders.

A ______ corporation is for profit and has the legal attributes of accountability, transparency, and purpose.

BENEFIT CORP.

______ budgeting is the process of making and managing expenditures on long-term assets.

Capital Budgeting

In large firms, financial activity is usually associated with which top officer?

Chief financial officer

The _____ is the most important form, in terms of size, of business organization in the United States.

Corporation

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

Distributed profits may experience double taxation.

In financial markets, debt and ______ securities are bought and sold.

Equity securities

It is sometimes argued that, left to themselves, managers tend to minimize the amount of resources over which they have control.

False (It is sometimes argued that, left to themselves, managers tend to maximize the amount of resources over which they have control.)

True or false: Ownership in the corporate form is difficult to transfer.

False (Ownership is readily transferable)

Which one of the following is an agency cost?

Hiring outside accountants to audit the company's financial statements

What are the two factors that impact whether managers will act in the best interest of stockholders?

How closely management goals align with stockholder goals and the way managers are compensated

Which one of the following questions involves a capital structure decision?

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

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

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

A corporation is a distinct ______ entity and as such can have a name and take advantage of the legal powers of natural persons.

Legal

Marissa and Raj are equal general partners in a business. They are content with their current management and tax situation but are uncomfortable with the idea of unlimited liability. If they wish to remain as the only two owners of the business, which form of business entity should they consider to replace their current arrangement?

Limited liability company

In a shareholder-manager relationship, who is the agent?

Managers

The goal of the for-profit business is to maximize ______ equity.

Owners

How is ownership transferred in a corporation?

Ownership is transferred by gifting or selling shares of stock.

Which one of the following grants an individual the right to vote on behalf of a shareholder?

Proxy

The aim of the act known as ______ is to protect investors from corporate abuse.

SOX (Sarbanes-Oxley Act)

In addition to the importance of finance for marketing, accounting, and management careers, finance is also now considered a ______ discipline, especially at the graduate level.

STEM

The financial manager acts in the shareholders' best interests by making decisions that increase the value of _____.

The stock

What is the main goal of financial management?

To maximize current value per share of existing stock

A partnership must have at least _______ owners.

Two

The relationship between stockholders and management can best be described as a(n) ______ relationship.

agency (relationship)

Since ________ and ownership are separated, a corporation's life is unlimited.

management

The Sarbanes-Oxley Act of 2002 is a governmental response to:

management greed and abuses.

The goal of a for-profit business is to ______ existing owners' equity

maximize

Which of the following positions generally report to the chief financial officer (CFO)? (Numbered are correct)

(1) Controller

Which of the following shows why a corporation is the most important form of business? (Numbered are correct)

(1) Corporations can enter into contracts.

Which of the following can be used to encourage managers to act in the best interests of shareholders? (Numbered are correct)

(1) Managerial compensation tied to performance

Select all that apply Which of the following, according to the textbook, are possible financial goals for a company? (numbered are correct)

(1) Maximize profits

Select all that apply Which of the following are considered stakeholders in a company? (Numbered is correct)

(1) Suppliers

Select all that apply Which of the following are among the most important questions to be asked when a business is started? (Numbered are correct)

(1) Where will long-term financing be obtained to pay for investments?

Select all that apply Corporations in other countries are often called: (numbered are correct)

(1) public limited companies.

Select all that apply The possible goal of profit maximization: (Numbered are correct)

(1) would probably be the most commonly cited goal for a business.

Which one of the following statements concerning stock exchanges is correct?

Some large companies are listed on Nasdaq.

Which one of the following statements is correct?

Taxable income earned by a partnership is treated as individual income.

The five main areas of finance are corporate finance, _____, financial institutions, international finance, and fintech.

investments

A sole proprietorship is a business that _______.

is owned by one person

Capital budgeting is concerned with planning and managing a firm's _____.

long-term investments

Because ownership in a corporation is spread over a huge number of shareholders, it can be argued that ______ effectively controls the firm.

management

A limited partnership:

must have at least one general partner.

Most equity shares of large firms in the U.S. trade on:

organized auction markets

A sole proprietorship:

requires the owner to be personally responsible for all of the company's debts.

Organized auction markets include:

the New York Stock Exchange

In a corporation, the stockholders elect _____, who then select the managers.

the board of directors

Usually, the treasurer of a corporation reports directly to the:

vice president of finance.

Which one of the following is a primary market transaction?

Sale of a new share of stock from a corporation to an individual investor

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

inability to raise cash.

It is argued that, left to themselves, managers would tend to maximize the amount of resources over which they have control or, more generally, ______ power or wealth.

corporate (power)

Some of the cash flow generated by a firm goes back to the financial markets in the form of ______.

dividends and debt payments