Foundations of Accounting and Finance

Which of the following actions would be considered an agency problem?

A manager in a corporation makes online personal travel arrangements during work hours

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

Distributed profits may experience double taxation.

Which one of the following is an agency cost?

Hiring outside accountants to audit the company's financial statements

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

How much inventory should the company keep on hand?

Which one of the following statements is correct?

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

Limited partners benefit from which of the primary advantages?

Their maximum loss cannot exceed the amount of their capital investment.

Deciding which long-term investment a firm should make is a ______ decision.

capital budgeting

A firm's mixture of debt and equity financing is the result of its ______ decisions.

capital structure

A business that is a legal entity separate from the owners, yet treated as a legal person, is called a(n):

corporation.

Agency problems are most likely to be associated with:

corporations

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.

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

inability to raise cash.

A general partner:

is personally responsible for 100 percent of the debts of the partnership.

A limited liability company:

is taxed similarly to a partnership.

The Sarbanes-Oxley Act of 2002 holds a public company's ______ responsible for the accuracy of the company's financial statements.

managers

Decisions made by financial managers should primarily focus on increasing the:

market value per share of outstanding stock.

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

occurred in the secondary market.

A sole proprietorship:

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

A firm owned by a single person who has unlimited liability for the firm's debt is called a:

sole proprietorship.

In a typical corporate organizational structure:

the controller reports to the chief financial officer.