FNAN 300: Chapter 1

limited to their cash contribution to the partnership

In a limited partnership, a limited partner's liability for business debt is _____

management

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

maximize

The goal of a "for profit" business is to ____ the value of shareholder wealth.

Controller

The officer responsible for corporate tax reporting is ____

Shareholders

The owners of a corporation are called ____

the existing shares of stock

The primary responsibility of financial managers is to increase the value of ______

Agency

The relationship between stockholders and management can be best described as an _____ relationship.

a hostile takeover

The threat of _____ motivates managers to make good decisions,

False

True or False: Profit maximization is the best goal for management of a corporation.

Long term debt Equity

What are included in the firm's capital structure?

To bring buyers and sellers together

What is the primary objective of an auction market?

secondary

When one owner or creditor sells to another, the transaction takes place in the _____

Treasurer & controller

Which of the positions generally report to the CFO? 1. Controller 2. Director of Mktg 3. CEO 4. Treasurer

1. Capital budgeting 2. Capital structure 3. Working Capital Management

Which three questions are financial managers concerned with?

Government Employees Suppliers

Who are considered non-owner stakeholders in a company?

Capital

_____ budgeting is the process of planning and managing a firm's long-term assets.

Stock options

_______ can be used to encourage managers to maximize the value of the stock.

decreases

A bad financial decision is defined as a decision that ____ shareholder wealth.

partnership

A business without separate legal authority formed by two or more people is known as a ______

stocks and bonds

A corporation receives cash from financial markets by selling _____ and _____

1. All partners have to share in gains or losses. 2. Each owner has unlimited liability for all firm debts

A general partnership has which of the following characteristics?

limited (duh)

A limited liability company's owners have ____ liability.

1. Managing capital expenditure decisions 2. Handling cash flows 3. Making financial plans

A treasurer's responsibilities typically include:

Chief financial officer

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

False

T or F: The Sarbanes-Oxley Act provides incentives for companies to go public in US Markets.

1. Confirm the validity of the financial statements 2. Be responsible for errors in the annual report

The Sarbanes-Oxley Act requires corporate officers to

Shareholder

A ____ gets paid after employees, suppliers and creditors.

Stakeholder

A ____ is someone other than an owner or a creditor who potentially has a claim on the cash flows of the firm.

Shareholder

A _____ gets paid after employees, suppliers and creditors.

two

A partnership must have at least ___owners

Enron WorldCom Tyco

Which of the foll companies were involved in corporate scandals that led to the Sarbanes-Oxley?

By gifting or selling of shares of stock

How is ownership transferred in a corporation?

Agency Problem

If you hire a real estate company to sell your house, you are most apt to encounter which problem?

1. Simplest types of business to form: Requires no formal charter and few govt regulations must be satisfied. 2. It has limited life: limited to the life of the proprietor.

Which of the foll are true of sole proprietorship?

agency

The costs incurred due to a conflict of interest between stockholders and management are called _____ costs.

Corporate earnings and shareholder dividends

The federal government taxes which of the following?

Treasurer

Which corporate officer is responsible for managing the firm's cash?

Proxy fight

Which is an important mechanism used by unhappy stockholders to replace current management?

1. How many employees will I need?

According to the text, which of the following is NOT one of the three main ques to be addressed if you want to start your own business? 1. How will everyday financial activities be handled? 2. How many employees will I need? 3. Where will long term financing be obtained to pay for investments? 4. What long-term investments should be made?

articles of incorporation

An organization must prepare _______ and bylaws when forming a corporation.

1. Which long-term investment to make 2. How to finance long-term investments 3. How to mange day-to-day finances of the firm

Business finance is broadly concerned with which of the following?

limited

Businesses are motivated to organize as corporations because stockholders have _____ liability for corporate debts.

Limited liability company Public limited company Joint stock company

Corporations in other countries are often called ________

1. Initial public offerings are made 2. Proceeds from the sale of securities goes to the issuing firm

Defining features of the primary market

Difficulty in transferring ownership

Disadvantage of sole proprietorship and partnership:

working capital

Ensuring that the firm has sufficient funds to continue operations on a day to day basis come under the heading of ____management.

1. Tax reporting 2. Financial accounting

The controller is responsible for which of the following tasks?

Paid to shareholders and creditors Reinvested in the firm Pay corporate taxes

Where does the cash generated by a corporation usually go?

Capital structure

Which term applies to the mixture of debt and equity maintained by a firm?