FRL 3000 Chapter 1 Homework

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

An increase in the market value per share

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

Distributed profits may experience double taxation.

Which one of the following questions involved capital structure decision?

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

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

How much inventory should the the company keep on hand?

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.

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 to replace their current arrangement?

Limited liability company

Which one of the following is a cash flow from a corporation into the financial markets?

Payment of loan interest

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

Proxy

Which one of the following is a primary market transaction?

Sale of new share of stock from a corporation to an individual investor. In a primary market transactions, the corporation is the seller, and the transactions raises money for the corporation.

Public offerings of debt and equity must be registered with the:

Securities and Exchange Commission

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.

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

What is the maximum level of cash to be kept in the firm's bank account?

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

capital structure

Agency problems are most likely to be associated with:

corporations

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

managers

Financial managers should primarily focus on the interests of:

shareholders

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

sole proprietorship.

A sole proprietorship:

- has a limited life - owned by one person - difficult to transfer - unlimited liability